Glossary: Definitions for the key terms used across this site's coverage of IRC §6418 transferability, pre-filing registration, and credit transfers. Plain English, with links to the pages where each term appears in context. Educational only — see Disclaimer.
60-second version
- Transferability = selling certain eligible credits to an unrelated buyer for cash.
- Registration numbers are the practical gate — missing them can make an election ineffective.
- Most deal risk sits in eligibility, amount computation, and filing/election mechanics.
- Use this glossary when a term is unfamiliar, then click through for context.
Navigation
- Start Here — first-time orientation.
- How It Works — end-to-end workflow.
- Eligible Credits — the credits within §6418's scope (date-dependent post-OBBBA).
- Registration Filing — pre-filing registration and registration numbers.
- Risk & Compliance — diligence, excessive transfer, recapture, FEOC.
Quick jump
A–Z core terms
Transferability (IRC §6418)
The framework allowing an eligible taxpayer to transfer (sell) all or a portion of an eligible credit to an unrelated transferee for cash. See How It Works.
Eligible credit
A credit within §6418's defined scope. The transferable set is date-dependent post-OBBBA — several credits are sunsetting. See Eligible Credits.
Eligible taxpayer
The taxpayer allowed to transfer credits under §6418 — the seller/transferor in deal language. See How It Works.
Transferee taxpayer
The unrelated taxpayer that receives the transferred credit and claims it on its return — the buyer. See How It Works.
Transferor
The seller in a §6418 transaction. Makes the transfer election on its return. See How It Works.
Unrelated (unrelated person / unrelated taxpayer)
Transfers must be to an unrelated transferee — defined under tax law attribution rules. A core eligibility condition. See How It Works.
Cash consideration
§6418 is structured around cash-only consideration. Deals emphasize "cash payment" and avoid non-cash substitutes. See How It Works.
Eligible credit property
The facility, property, or unit a credit is determined with respect to. Registration numbers are issued per eligible credit property. See Registration Filing.
Specified credit portion
The portion of an eligible credit that is actually transferred (all or part), as specified in the transfer election. Partial transfers are possible. See How It Works.
Transfer election
The election filed with the transferor's return for the year the credit is determined. See How It Works.
Elective pay (direct pay) — IRC §6417
A separate mechanism (not transferability) where certain entities treat the credit as a payment of tax. Registration concepts overlap. See Registration Filing.
Applicable entity
An entity category associated with elective pay rules. Whether you're an "applicable entity" affects whether §6417 or §6418 applies. See Start Here.
Foreign entity of concern (FEOC)
Post-OBBBA, §6418 transfers to prohibited/"specified" foreign entities are barred, and FEOC eligibility rules apply to several credits. Ties to China, Russia, North Korea, and Iran are in scope. FEOC due diligence is now standard. See Risk & Compliance.
OBBBA (One Big Beautiful Bill Act)
Signed July 4, 2025. Preserved §6418 transferability but accelerated several credit phase-outs (§30C, §45Y/§48E wind & solar, §45X wind components, §45V) and added foreign-entity restrictions. See Eligible Credits and Updates.
Deal & filing terms
Pre-filing registration
An IRS process completed before making a transfer or elective pay election. The IRS portal issues registration numbers after review. See Registration Filing.
Registration number
IRS-issued identifier tied to a registered credit property. Must be included on the return and related forms for the election to be effective. See Registration Filing.
Energy Credits Online (ECO)
The IRS portal for pre-filing registration. See Registration Filing.
Source credit form
The IRS form where the credit is calculated — for example Form 3468 (ITC credits), Form 7210 (§45V), Form 7207 (§45X), Form 7211 (§45Y), Form 7218 (§45Z). Each credit page lists its form.
Form 3800 (General Business Credit)
The aggregation/limitation form for general business credits. Many taxpayers report through it depending on how their credit flows.
Transfer election statement
The document(s) filed with the return to make the election effective. Seller and buyer coordinate this to match registration numbers and the specified credit portion.
Placed in service
The date property is ready and available for its intended use — determines eligibility year for most ITCs. See Section 48 and Section 48E.
Beginning of construction
A timing concept used in bonus rules and, post-OBBBA, as the key deadline for wind/solar (July 4, 2026 cutoff under Notice 2025-42). See Section 45Y and Section 48E.
Prevailing wage & apprenticeship (PWA)
Compliance requirements that determine base vs increased credit rate across multiple credits. Documentation-heavy.
Bonus credit amounts / "adders"
Domestic content, energy community, low-income allocations — these increase the credit amount but require solid documentation and often drive diligence. See Risk & Compliance.
Risk terms
Excessive credit transfer
If the transferred amount exceeds what was properly allowable, the buyer can face a tax increase plus a potential 20% add-on (reasonable cause may reduce the add-on). See Risk & Compliance.
Reasonable cause
Can reduce or eliminate the 20% add-on in excessive-transfer situations. Buyers document diligence to support this position. See Risk & Compliance.
Recapture
Most relevant for ITCs — certain post-placed-in-service changes can require partial payback of the credit. Deal agreements typically allocate this risk. See Risk & Compliance and Section 48.
Ineffective transfer election
When the election doesn't meet required conditions — typically missing registration numbers or incorrect reporting. See Registration Filing.
Diligence
The documentation and verification work both sides perform to reduce risk. See Risk & Compliance.
Common confusions
#1: "Registration number = IRS approval"
No. Registration is administrative. The IRS can still examine eligibility and credit amounts. Build an audit-ready binder for each property.
#2: "My credit is transferable because it's an energy credit"
Transferability is limited to the defined set within §6418 — and that set is shrinking post-OBBBA. Check Eligible Credits.
#3: "§45 vs §45Y" and "§48 vs §48E"
Generally pre-2025 vs post-2024 frameworks. Open both pages and check placed-in-service timing: §45 vs §45Y, and §48 vs §48E.
#4: "Transferability = direct pay"
Different mechanisms (§6418 vs §6417). See Start Here.
Official sources
For authoritative rules and definitions, use these sources and the curated library at Sources.
- Final §6418 transfer regulations (T.D. 9993): Federal Register
- IRS transferability FAQs: IRS
- Pre-filing registration (26 CFR §1.6418-4): eCFR
- Special rules — excessive transfer & recapture (26 CFR §1.6418-5): eCFR
- IRS registration portal (ECO): IRS
- Publication 5884 (registration tool guide): IRS (PDF)
Last updated: June 2026
Educational content only — not tax or legal advice. See Disclaimer.