The transfer, step by step

How a tax credit transfer works

Selling a clean-energy tax credit is a cash sale with a strict paper trail. Here is the sequence, the rules that make or break it, and what happens on each side's return.

Verified 11 Oct 2026 · page reviewed 11 Oct 2026

The rule in one paragraph

Under §6418, an eligible taxpayer can elect to transfer all or part of an eligible credit to an unrelated taxpayer for cash. The buyer is then treated as the taxpayer for that credit. The cash is not income to the seller, and the buyer cannot deduct it^[1]. The rule applies to tax years beginning after 2022^[1]; final regulations were issued in April 2024^[2][3].

The seven steps

1. Confirm the credit. Which section, which property or facility, which tax year, and how much, including any bonus amounts. Eleven credits can be sold; the credits page lists them.
2. Register with the IRS. Each property or facility needs its own pre-filing registration number, obtained before the return that makes the election^[4]. See pre-filing registration.
3. Find a buyer. Directly, through a broker or through a marketplace. The buyer must not be related to you under §267(b) or §707(b)(1)^[1].
4. Agree terms. A term sheet, then a tax credit transfer agreement covering price, payment timing, the seller’s representations, indemnities and any insurance^[5].
5. Diligence. The buyer reviews the evidence for the credit: see buyer diligence and risk.
6. Get paid in cash. Payment must be in U.S. dollars by cash, check, wire or similar, within a window that runs from the first day of the tax year in which the credit is determined to the due date of the transfer election statement. A contractual commitment to pay can be signed before the window opens^[6].
7. Make the election. On your original return, filed by its due date including extensions, with the registration number and a transfer election statement signed by both parties^[7]. The amount transferred goes in Form 3800, Part III, column (f), as a negative number^[8]. See which form reports each credit and Form 3800 for transfers.

Rules that decide whether a sale works

• Cash only. Anything other than cash paid in the window is not consideration for the credit^[7].
• Original return, no second chances. A transfer election cannot be made for the first time on an amended return, and late-election relief is not available^[7]. The election is irrevocable^[1].
• One transfer only. A buyer cannot resell a credit it bought^[1].
• Current-year credits only. Carryforwards and carrybacks cannot be transferred^[1].
• Partial sales are fine. You can sell portions of a credit to several buyers, as long as the total does not exceed the credit determined for the property^[7]. Each portion must be a proportionate slice that includes its share of every bonus amount^[6].
• Production credits are sold year by year. For §45, §45Q, §45V and §45Y the election is made separately for each facility and each year of the credit period^[1].
• Foreign buyers. Credits under §§45Q, 45U, 45X, 45Y, 45Z and 48E cannot be transferred to a specified foreign entity for tax years beginning after 4 July 2025^[1].

Partnerships and S corporations

When a partnership or S corporation holds the property, the entity makes the election; partners and shareholders cannot sell their shares of the credit themselves. The cash received is treated as tax-exempt income, allocated to partners or shareholders in line with their shares of the credit^[1]. Detailed rules are in the regulations^[9]; the partnerships and S corporations guide walks through them.

The buyer’s side

• The buyer takes the credit into account in its first tax year ending with, or after, the seller’s tax year in which the credit was determined^[1].
• It reports the purchased amount as a positive number in Form 3800, Part III, column (f)^[8].
• The general business credit limits and, where they apply, the §469 passive activity rules limit how much the buyer can use; purchased credits are treated as arising from a trade or business^[7].
• If the IRS later finds the credit was overstated, the buyer pays the excess back plus a 20% penalty, unless it shows reasonable cause^[1]. For investment credits, the buyer also bears any recapture^[10]. That is why buyers diligence the credit, and why price depends so much on seller strength and insurance.

Who cannot use §6418

Tax-exempt organizations, governments, tribes and other “applicable entities” are not eligible taxpayers for transfer; they use elective pay under §6417 instead^[1][11].