How It Works: This page explains the typical workflow for transferring (selling) eligible clean energy/manufacturing tax credits under IRC §6418, in plain English. This is general educational information — not tax or legal advice.

In short (60 seconds)

  • Transferability allows an eligible taxpayer to transfer all or part of certain eligible credits to an unrelated buyer for cash.
  • The seller generally completes IRS pre-filing registration and gets registration numbers (as applicable) before making the transfer election.
  • The transfer election is made on the seller’s return for the year the credit is determined (timing rules apply).
  • The buyer claims the transferred credit on its return (subject to the rules and potential risks if the credit is later challenged).

Pick your next page

  • Start Here — definitions and orientation.
  • Eligible Credits — the 11 transferable credits + links to each credit page.
  • Registration Filing — pre-filing registration, registration numbers, election timing.
  • Risk Compliance — due diligence, excessive transfer concept, recapture basics (high-level).
  • Glossary — key terms and FAQs.
  • Updates — what changed + what we updated.

1) The basic idea (plain English)

In a transferability transaction, a credit that is determined with respect to a project (or property) can be transferred to an unrelated taxpayer. The buyer then uses that credit to offset its federal income tax liability (subject to rules). The payment must be cash, and the election is made on the seller’s return for the year the credit is determined.

Key terms you’ll see

  • Transferor = the seller (eligible taxpayer).
  • Transferee = the buyer (unrelated taxpayer that claims the credit).
  • Eligible credit = one of the specific transferable credits listed in the rules.
  • Eligible credit property = the property/unit tied to the credit determination (conceptual).
  • Specified credit portion = the portion of the credit being transferred (conceptual).

See definitions in the Glossary.

2) Step-by-step workflow (high level)

  1. Identify the credit type
    Confirm which credit category applies and whether it is among the transferable credits. Use: Eligible Credits.
  2. Gather core project and credit documentation
    Collect basic facts and documentation needed to support the credit determination (project-specific). This step typically overlaps with buyer due diligence.
  3. Complete IRS pre-filing registration (as required)
    Transferability rules include a mandatory pre-filing registration process and registration numbers for eligible credit property (as applicable). Use: Registration Filing.
  4. Negotiate the transfer with an unrelated buyer
    Pricing and terms are negotiated privately. Avoid assuming “standard” terms; they vary by credit type, risk profile, and timing.
  5. Confirm the “cash payment” requirement
    Consideration must be paid in cash. Avoid structuring non-cash value as consideration for the transferred credit.
  6. Make the transfer election on the seller’s return
    The transfer election is generally made on the seller’s original return for the year the credit is determined (subject to timing rules).
  7. Buyer claims the credit on its return
    The buyer claims the transferred credit on its return under the applicable rules. Buyer risk exists if the credit is later determined to be excessive or otherwise not allowable.

Quick checklist (starter)

  • Know which credit you have (and confirm it’s transferable): Eligible Credits.
  • Prepare documentation that supports the credit determination (project-specific).
  • Plan for IRS pre-filing registration early: Registration Filing.
  • Document payment mechanics (cash-only requirement) and timeline coordination.
  • Review risk basics (excessive transfer / recapture concepts): Risk Compliance.

3) Common deal questions (educational)

Can a seller transfer only part of a credit?

Transferability rules allow transferring all or a specified portion of an eligible credit, subject to how the credit is determined and how the election rules apply.

Can one credit be sold to multiple buyers?

In practice, some transactions may be structured to transfer portions (subject to the rules), but the mechanics can be complex. Consult qualified professionals for transaction structuring.

Can the buyer re-sell the credit?

Under §6418 rules, a transferred credit generally cannot be transferred again by the buyer.

Does the seller pay tax on the cash payment?

The rules address the treatment of the transfer payment (educational overview only). See official guidance and consult professionals for your facts.

4) Risk points to understand (high level)

Risk concepts (plain English)

  • Credit eligibility risk: If the credit is later disallowed, the buyer may face tax consequences under the rules.
  • Excessive credit transfer concept: Rules address situations where the transferee claims more than is allowable.
  • Recapture concept (certain credits): Some ITC-like credits can involve recapture concepts if conditions change (fact-specific).

Go deeper: Risk Compliance.

FAQs

1) Do I need IRS pre-filing registration?

Transferability rules include a mandatory pre-filing registration process and registration numbers for eligible credit property (as applicable). See Registration Filing.

2) Is “cash-only” strict?

The rules require consideration be paid in cash. Avoid assuming non-cash consideration will be treated the same way.

3) Is transferability the same as “direct pay”?

No. Transferability and elective pay (“direct pay”) are different mechanisms. This site focuses on transferability; consult official IRS sources for both.

4) Is this page tax advice?

No. This is general educational information only. See the Disclaimer.

Sources (official first)

  • Federal Register: Treasury/IRS final regulations for transfer of certain credits (T.D. 9993).
  • IRS: Transferability FAQs (based on final regulations).
  • eCFR: 26 CFR §1.6418-4 (pre-filing registration and registration number requirements).
  • IRS: News release on final guidance for credit transfers under the IRA.

Last updated: February 2026

Note: Educational content only — not tax or legal advice. See Disclaimer.