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Start Here: This page explains (in plain English) what “tax credit transferability” means in the U.S., who can use it, what credits are eligible, and what to read next.

What is “Tax Credit Transferability” (IRC §6418)?

In U.S. federal tax law, “transferability” refers to a rule under IRC §6418 that allows an eligible taxpayer to transfer (sell) all or part of certain clean energy and manufacturing tax credits to an unrelated taxpayer. The transfer must be for cash, and the buyer then claims the credit on its return (subject to specific rules).

Why does it matter?

Many clean energy credits are valuable but historically were difficult to use unless the project owner had enough tax liability or used specialized financing. Transferability created a more direct path to monetize eligible credits by transferring them to taxpayers that can use them.

Who can transfer credits (and who can’t)?

Eligible taxpayer (seller)

Generally, an “eligible taxpayer” can transfer eligible credits unless it is an “applicable entity” in the direct-pay rules. (This site uses plain-English explanations; always check the official definitions and your facts.)

Unrelated transferee (buyer)

The buyer must be an unrelated taxpayer. The buyer is treated as the taxpayer with respect to the transferred credit for federal income tax purposes.

Tip: If you’re trying to decide between “transferability” and “direct pay,” start with How It Works and check official IRS guidance.

Which credits are eligible to transfer?

IRC §6418 limits transferability to a specific list of credits. Use the index page: Eligible Credits.

Quick index (credit pages)

• Section 30C — Alternative fuel vehicle refueling/recharging property.
• Section 45 — Renewable electricity production (PTC).
• Section 45Q — Carbon oxide sequestration.
• Section 45U — Zero-emission nuclear production.
• Section 45V — Clean hydrogen production.
• Section 45X — Advanced manufacturing production.
• Section 45Y — Clean electricity production.
• Section 45Z — Clean fuel production.
• Section 48 — Energy investment (ITC).
• Section 48C — Qualifying advanced energy project.
• Section 48E — Clean electricity investment.

How the process works (high level)

1. Determine credit eligibility (project-specific; consult qualified professionals as needed).
2. Complete IRS pre-filing registration and obtain a registration number for each eligible credit property (as applicable).
3. Negotiate the transfer with an unrelated buyer (pricing and terms are private negotiations).
4. Ensure consideration is paid in cash as required by §6418 rules.
5. Make the transfer election on the seller’s return for the year the credit is determined (subject to timing rules).
6. Buyer claims the credit on its return (subject to rules and potential risks if the credit is later challenged).

For the practical steps, go to: Registration Filing and How It Works.

Key risks to understand (high level)

• Eligibility risk: If a credit is later disallowed, the buyer may face tax consequences under the rules.
• “Excessive credit transfer” risk: Rules address situations where more credit is claimed than is allowable.
• Recapture (certain credits): Some investment-type credits can be subject to recapture concepts if conditions change (details are fact-specific).

Read next: Risk Compliance.

FAQs

1) Can I transfer only part of a credit?

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

2) Does the buyer have to be unrelated?

Yes — §6418 transferability is structured around a transfer to an unrelated transferee taxpayer (see official guidance for details).

3) Does payment have to be cash?

The rules require that the consideration be paid in cash. Non-cash consideration can create compliance issues.

4) Can the buyer re-sell the credit?

Generally, transferred credits cannot be re-transferred by the buyer under §6418 rules.

5) Is IRS registration required?

The system includes a mandatory pre-filing registration process and registration numbers for eligible credit property (as described in the regulations).

6) Is this site giving tax advice?

No. This site provides general educational information only. See the full 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: This page is educational and does not provide tax or legal advice. See Disclaimer.