Risk and compliance

Buyer diligence and risk

Once a credit is sold, most of the tax risk sits with the buyer. That is what buyers price, and what a seller's file has to answer.

Verified 11 Oct 2026 · page reviewed 11 Oct 2026

Who carries the risk

After a transfer, the buyer is treated as the taxpayer for the credit^[1]. Three risks follow it:

1. Excessive credit transfer. If the buyer claims more than the credit actually allowable for the property, its tax rises by the excess plus 20%, unless it shows the excess resulted from reasonable cause^[1]. The regulations describe what diligence can support reasonable cause, such as reviewing the seller’s records and, where relevant, its audited financial statements^[2].
2. Recapture of investment credits. If §48, §48C or §48E property is disposed of or stops qualifying during the five-year recapture period, the buyer owes the recapture; the seller must notify the buyer in time for the buyer’s return^[1][2].
3. §45Q recapture. Carbon oxide that escapes storage triggers §45Q’s own recapture, which the regulations keep separate from an excessive credit transfer^[2].

Because the buyer’s protection is mostly contractual, buyers price seller strength: in Crux’s survey, 73% of buyers named the seller’s credit quality as the most important factor in their bid^[3].

What buyers check

For every credit:

• that the credit exists for the year and amount claimed, with the calculation;
• the pre-filing registration number for each property^[4];
• that the seller is not related to the buyer^[1];
• prevailing wage and apprenticeship records, where the higher rate is claimed. The statutes allow some failures to be cured with back pay and penalties^[5];
• evidence for every bonus amount;
• the foreign-entity position: whether the buyer or the seller is a specified foreign entity, and for projects starting construction after 2025, the material-assistance analysis^[6].

For investment credits, add cost-basis support (85% of buyer advisers review cost-segregation reports in depth^[7]) and placed-in-service evidence. For production credits, add metered production and proof of sale to unrelated persons.

Indemnities and insurance

• Indemnity. The seller promises to make the buyer whole if the credit is reduced or recaptured. In 2024, 55.3% of transactions relied on a parent indemnity rather than full or partial insurance^[7].
• Tax credit insurance. Premiums ran about 2.0–5.0% for credits under $10 million and 1.5–3.0% above that^[7]. On small deals, insurance can be what makes an unrated seller acceptable to a buyer^[3].

Seller-side mistakes that become buyer risk

• an election on an amended return, which does not work^[8];
• payment outside the cash window^[9];
• a sold portion that leaves out its share of a bonus^[9];
• a transfer to a specified foreign entity for §§45Q, 45U, 45X, 45Y, 45Z or 48E^[1].

The Readiness Checker turns this list into a checklist for your own credit.