Energy Tax Credit Transfer Election Statement
(IRC § 6418)

Summary

This template is a transfer election statement that must be attached to the respective income tax return of each party in a transaction under the requirements of I.R.C. § 6418, allowing for the purchase and sale of certain clean energy-related federal tax credits to unrelated parties. This template includes practical guidance and drafting notes. Section 6418, as added to the Internal Revenue Code by the Inflation Reduction Act of 2021, Pub. L. No. 117-169, allows any "eligible taxpayer" to sell certain clean energy tax credits to a "transferee taxpayer" who is unrelated to the transferee taxpayer within the meaning of I.R.C. §§ 267(b) and 707(b)(1). An "eligible taxpayer" is any taxpayer that is not described in I.R.C. § 6417(d)(1)(A). The eligible taxpayer typically is the seller in a transaction in which "eligible credits" as that term is defined in I.R.C. § 6418(f), are transferred, and the buyer is the transferee taxpayer. The transfer election statement must be prepared and signed under penalty of perjury by both the seller and the buyer in a transaction described under I.R.C. § 6418, allowing for the purchase and sale of certain clean energy-related federal tax credits to unrelated parties. In cases where there are transfers of credits that span multiple years, both parties must make an election for each year of the transfer. To make an election to transfer credits, the eligible taxpayer (the seller) must file a properly completed relevant source credit form for the eligible credit, a properly completed Form 3800 (General Business Credit), a schedule attached to Form 3800 showing the amount of the eligible credit transferred for each eligible credit property a transfer election statement, and any other information related to the election specified in guidance. Prop. Treas. Reg. §§ 1.6418-2(b)(3), 1.6418-3(d). The election to transfer an eligible credit must be filed by the due date (including extensions) of the seller's federal income tax return for the tax year in which the credits were determined. See I.R.C. § 6418(e). Be mindful of the following: • The third party must pay cash (which includes check, cashier's check, money order, wire transfer, ACH transfer, or other bank transfer of immediately available funds) but not a credit transfer. Note that a credit transfer would void the transfer of the credits. Prop. Treas. Reg. § 1.6418-1(f). • The transfer will NOT be included in the eligible taxpayer's (Seller's) income and is not deductible by the transferee taxpayer (buyer). I.R.C. § 6418(b); Prop. Treas. Reg. § 1.6418-2(e)(2) and (3). • The eligible taxpayer (Seller) must own the eligible property, and another taxpayer cannot claim the tax credit from an election. Prop. Treas. Reg. § 1.6418-2(d)(1). Note that the transfer provisions at issue were effective January 1, 2023. Again, note, eligible taxpayers and transferee taxpayers who wish to transfer credits under I.R.C. Section 6418 each must attach the Transfer Election Statement to their respective income tax returns. An eligible taxpayer may only sell credits that are defined under I.R.C. Section 6418(f)(1) as "eligible credits." The credits accordingly must be derived from specified clean energy projects. No other federal income tax credit can be freely sold. I.R.C § 6418(f)(1). CAUTION: Before an eligible taxpayer may file the tax return on which a transfer election is made, the proposed regulations require eligible taxpayers to register and provide information on each eligible credit property for which the taxpayer intends to transfer a specified credit portion. The eligible taxpayer would have to complete that registration process through the IRS portal. Taxpayers must register and receive their registration number before making a transfer election. For the IRS protocols, see Pre-Filing Registration Guidance and detailed frequently asked questions on the IRS website. See also Temp. Treas. Reg. § 1.6418-4T; Prop. Treas. Reg. § 1.6418-4; 88 Fed. Reg. 40086 (June 21, 2023). The registration would have to be completed electronically through an IRS portal. Note that as of the writing of this template, in November, 2023, the portal is not yet available. For the most up-to-date information on these developments, see the IRS website, here. Eligible credits for the 2023 tax year are: • Alternative fuel vehicle refueling property. I.R.C. § 30C • Renewable electricity production credit. I.R.C. § 45 • Carbon oxide sequestration credit. I.R.C. § 45Q • Zero-emission nuclear power production credit. I.R.C. § 45U • Clean hydrogen production credit. I.R.C. § 45V • Advanced manufacturing production credit. I.R.C. § 45X • Clean electricity production credit. I.R.C. § 45Y • Clean fuel production credit. I.R.C. § 45Z • Energy credit (e.g., solar, wind, geothermal, etc.). I.R.C. § 48 • Qualifying advanced energy project credit. I.R.C. § 48C • Clean electricity investment credit. I.R.C. § 48E I.R.C. § 6418(f). For proposed regulations under Section 6418, see 88 Fed. Reg. 40496 (June 21, 2023) (Section 6418 Transfer of Certain Credits). Taxpayers do not actually have to use a separate transfer election statement. Taxpayers can use any document, such as a purchase and sale agreement, that provides the required information, but the document must be labeled a "Transfer Election Statement" when attached to the respective income tax returns. The statement must be signed under penalties of perjury by an individual with authority to legally bind the eligible taxpayer, and it must include the written consent of an individual with authority to legally bind the transferee taxpayer. Prop. Treas. Reg. § 1.6418-2(b)(5)(i)) (88 Fed Reg. 40496 (June 21, 2023). For more information on eligible credits, see Energy Tax Credits and Incentives and Selling Federal Energy Tax Credits: Who, What, When, and How and Other Important Points. For additional information on clean and renewable energy projects and project structures, see Clean and Renewable Energy Industry Guide for Capital Markets, Construction Issues in Energy Storage, Energy Tax Credits and Incentives, Offshore Wind Technology, Renewable Natural Gas Basics: Uses, Production, Policy and Economic Drivers, and Challenges to Development, and Solar Energy Financing.