Yes, there are restrictions on which tax credits can be transferred. The Inflation Reduction Act and related regulations allow the transfer of specific tax credits, known as “eligible credits,” under Section 6418 of the Internal Revenue Code. These include:
- Energy Credit (48)
- Clean Electricity Investment Credit (48E)
- Renewable Electricity Production Credit (45)
- Clean Electricity Production Credit (45Y)
- Zero-emission Nuclear Power Production Credit (45U)
- Advanced Manufacturing Production Credit (45X)
- Clean Hydrogen Production Credit (45V)
- Clean Fuel Production Credit (45Z)
- Carbon Oxide Sequestration Credit (45Q)
- Credit for Alternative Fuel Vehicle Refueling/Recharging Property (30C)
- Qualified Advanced Energy Project Credit (48C)
Transferable tax credits must be sold for cash consideration, and the transaction is subject to an IRS pre-filing registration process. Additionally, the transfer of only a portion of an eligible credit is allowed, but not specifically for bonus credit amounts. The transferee bears financial responsibility for any recapture events related to these credits.
Moreover, individuals purchasing tax credits face restrictions under passive activity rules, which limit the use of credits to offset passive income. Tax-exempt organizations are generally ineligible to participate in these transfers.
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