The Inflation Reduction Act of 2022 (“IRA”) created a transferability option by which taxpaying entities may sell all or a portion of certain applicable credits to unrelated third parties. This transferability option must be a one-time irrevocable tax-free transaction. The buyer and seller are able to negotiate the price and terms of the transaction, and the credit is not included in the income of the recipient taxpayer nor deducted by the selling taxpayer. Importantly, the transferability option is NOT available for all IRA energy credits, only those applicable credits shown on the next page. One caution for Individual buyers of the credits is that the tax credits are subject to passive activity rules. Therefore, the buyers are only able to offset passive income and a passive income tax liability, potential buyers should consult with their tax professional prior to purchasing eligible credits.
One of the most popular applicable credits with transferability available are:
30C: Alternative Fuel Vehicle Refueling Property Credit
- This credit would include charging stations for electric vehicles (“EVs”).
- Importantly, this credit is only available if the refueling property – likely an EV charger – is located in specifically designated low-income or rural areas.
- The credit amount starts at 6% of the costof the property and may go up to 30% if certain wage and apprenticeship requirements are met.
- For businesses, the credit is limited to $100,000 per item of property.
- 48E: Clean Electricity Investment Tax Credit
- This credit is for energy property (i.e., solar, wind, geothermal, fuel cell, etc.) that is installed after 2025
- The type of technology used does not matter, as long as the anticipated greenhouse gas emissions rate is zero.
- The credit amount starts at 6% of the cost of the property and may go up to 30% if certain wage and apprenticeship requirements are met.
The other IRA applicable credits, for which transferability is available, are:
- Production Tax Credit for Electricity from Renewables (§ 45, pre-2025)
- Investment Tax Credit for Energy Property (§ 48, pre-2025)
- Clean Electricity Production Tax Credit (§ 45Y, 2025 and forward)
- Credit for Carbon Oxide Sequestration (§ 45Q)
- Zero-Emission Nuclear Power Production Credit (§ 45U)
- Advanced Energy Project Credit (§ 48C)
- Advanced Manufacturing Production Credit (§ 45X)
- Clean Hydrogen Production Tax Credit (§ 45V)
- Clean Fuel Production Credit (§ 45Z, 2025 and forward)
- Qualified Advanced Energy Project Credit (48C)
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation. We look forward to helping you through the process of identifying and securing these lucrative credits!
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
