Reference

Glossary

The words you will meet in a §6418 transaction, defined in one or two sentences each, with the source where the term comes from law.

Verified 11 Oct 2026 · page reviewed 11 Oct 2026

Applicable entity. A tax-exempt organization, government, tribe or similar body. It cannot transfer credits; it uses elective pay instead^[1].

Beginning of construction. The date construction is treated as starting, which decides which rules apply. For wind and solar facilities that had not begun construction before 2 September 2025, it is shown only by the physical work test (with a 5% safe harbor kept for solar of 1.5 MW AC or less)^[2].

Bonus credit amount. An increase for meeting extra requirements such as prevailing wage and apprenticeship, energy community or domestic content. A transferred portion must include its proportionate share of each bonus^[3].

Continuity safe harbor. For wind and solar under §45Y and §48E, construction is treated as continuous if the facility is placed in service within four calendar years after the year construction began^[2].

Domestic content. A bonus for projects whose steel, iron and manufactured products meet U.S.-content thresholds^[4].

Elective pay (§6417). The route by which applicable entities, and some others, receive certain credits as a cash payment from the IRS^[5].

Eligible credit. A credit that may be transferred: §§30C (business portion), 45, 45Q, 45U, 45V, 45X, 45Y, 45Z, 48, 48C and 48E, plus the small agri-biodiesel producer credit. Carryforwards and carrybacks are excluded^[1].

Eligible taxpayer. The seller: any taxpayer that is not an applicable entity^[1].

Energy community. A location test that earns a bonus under several credits^[4].

Energy Credits Online (ECO). The IRS online tool for pre-filing registration^[6].

Excessive credit transfer. The amount by which the credit a buyer claims exceeds the credit actually allowable. The buyer pays it back plus 20%, unless it shows reasonable cause^[1].

Foreign-influenced entity. An entity over which a specified foreign entity has certain ownership, appointment or debt-based influence^[7].

ITC (investment tax credit). A credit equal to a percentage of an investment’s cost, claimed once (§§48, 48C, 48E, 30C).

Material assistance cost ratio (MACR). The measure used to decide whether a project or component has too much material assistance from prohibited foreign entities^[7]. See FEOC rules.

Paid in cash. U.S. dollars by cash, check, wire or similar, paid between the first day of the seller’s tax year in which the credit is determined and the due date of the transfer election statement^[3].

Placed in service. When property is ready and available for its specific use. It fixes the tax year of an investment credit and starts a production credit’s period.

Pre-filing registration. The IRS process that issues a registration number for each property before a transfer election^[8]. See registration.

Prevailing wage and apprenticeship (PWA). Labour requirements that multiply the base credit, usually by five^[9].

Prohibited foreign entity. A specified foreign entity or a foreign-influenced entity^[7].

PTC (production tax credit). A credit earned per unit produced and sold, over a set period (§§45, 45Y, 45U, 45V, 45Q, 45X, 45Z).

PTC strip. A purchase of a facility’s production credits for several future years at once^[10].

Recapture. The clawback of an investment credit if the property is disposed of or stops qualifying during the recapture period. After a transfer, the buyer bears it^[1].

Registration number. The IRS-issued number for one property and one tax year, required on the return that makes the election^[8].

Related party. A buyer related to the seller under §267(b) or §707(b)(1). Transfers to related parties are not allowed^[1].

Specified credit portion. The part of a credit that is transferred: a proportionate share, including each bonus amount^[3].

Specified foreign entity. A category of foreign entity defined in §7701(a)(51)(B), including foreign entities of concern^[7].

Tax credit insurance. A policy covering the buyer against disallowance or recapture. Premiums ran about 2–5% on deals under $10 million^[11].

Tax credit transfer agreement (TCTA). The purchase contract between seller and buyer^[11].

Transfer election statement. The statement, signed by the seller and consented to by the buyer, that records the transfer and is attached to both returns^[12].

Transferee taxpayer. The buyer^[1].