Transferable tax credits allow eligible taxpayers—typically renewable-energy developers—to sell certain clean-energy credits for cash to unrelated taxpayers under §6418 of the Internal Revenue Code. This transferability, created by the Inflation Reduction Act of 2022, lets project owners monetize credits immediately instead of carrying them forward to offset future tax liability.

Eleven credits qualify for transfer, including the §45 Renewable Electricity Production Credit, §48 Investment Tax Credit, §45Q Carbon Sequestration Credit, §45V Clean Hydrogen Credit, §45X Advanced Manufacturing Credit, and §48C Advanced Energy Project Credit.
For projects placed in service after 2024, the new §45Y and §48E technology-neutral credits replace the legacy PTC and ITC programs—these, too, can be transferred.

Before the IRA, developers relied on tax-equity partnerships or lease structures to monetize credits. Transferable credits now permit a direct sale for cash without changing project ownership or forming a partnership. While tax-equity remains useful for depreciation or multi-year credit streams, transferability offers simpler execution, lower transaction costs and broader investor access.

Sellers of transferable renewable energy tax credits must pre-register each credit with the IRS through the Energy Credits Online portal, obtain a registration number, and execute a Transfer Election Statement with the buyer. The transaction—documented in a Tax Credit Purchase Agreement (TCPA)—is filed with both parties’ tax returns and can occur only once per credit.

Buyers must be unrelated taxpayers—commonly large C-corporations, insurers, and financial institutions with predictable tax liabilities. Individuals, closely held C-corps, and personal-service companies remain restricted by the passive-activity loss rules. Tax-exempt entities instead use elective pay (§6417) rather than transferability.

Principal risks include credit disallowance, recapture (for ITCs under §50), and excessive-credit transfer penalties. Treasury’s final regulations impose a 20 percent penalty for excessive transfers, though it can be waived for “reasonable cause.” Buyers typically mitigate risk through diligence, seller indemnities, and tax-credit insurance.

For federal tax purposes, neither the seller’s proceeds nor the buyer’s discount is recognized as income. Buyers cannot deduct the purchase price and generally record a deferred-tax asset and deferred-credit under ASC 740. State treatment may vary.

Yes. Projects meeting domestic-content, energy-community, or low-income bonus criteria can transfer the enhanced credit values. IRS Notice 2024-41 provides updated domestic-content safe harbors, ensuring these bonus amounts remain valid when transferred.

Under the IRA, transferable credits carry back three years and forward twenty-two years. Buyers claim the credit in the first taxable year ending with or after the seller’s credit year—important for fiscal-year alignment.