Q. Why should I sell my tax credit?
You may want to sell a Tax Credit if your credit is larger than your tax liability. You should consult with a tax professional or other advisor to find out whether it is in your best interests to sell your Tax Credit.
Q. How much will my tax credit sell for?
At this point there is no market data on Tax Credit sales pricing given no sales have occurred. We expect sales pricing to vary due to various factors over time (e.g., type of Tax Credit, etc.).
Q. Should I register with you even if my credit has not been earned?
Yes, we encourage you to register even if your Tax Credit has not yet been realized. Your registration allows us to place you on our priority list, send you further information, and begin the process of matching you with a potential buyer.
Q. If I sell a tax credit, who will keep track of the sales?
The IRS is expected to publish a tracking process for tax credit sales. We also will accurately track and account for tax credit transfers.
Q. Are there state tax benefits from the same activity that generates a transferable state income tax credit?
Some transactions give rise to both federal and state tax incentives (state tax credits are not sold by United States Tax Credit Alliance). For example, Section 170(h) allows for a federal deduction for real property charitable contributions, which can also produce a transferable state tax credit for donations completed in New Mexico, Colorado, and Virgina.
Q. Do I pay tax on the cash received from selling a federal transferable tax credit?
No, cash paid is statutorily excluded from a seller’s gross income and, moreover, the buyer is not entitled to a deduction for the payment.
Q. Are the similarities between state and federal transferable tax credit systems?
Yes, after the recent publication of Treasury Guidance, broadly, we now see that the proposed federal system closely mirrors many state tax credit systems. The largest similarity to state transferable tax credit architectures is the IRS’s registration system; it is analogous to many state tax credit certification processes where a state taxing authority certifies the credit as valid before it can be transferred.
Q. When can tax credits be transferred?
The sale of a tax credit cannot occur until a tax credit number is issued for each eligible tax credit property through an IRS registration process. The IRS has announced that more information regarding its tax credit registration portal will not be available until late 2023. Therefore, no tax credit sales will occur before late 2023 because no registration numbers will be issued before such additional information is provided by the IRS and the registration portal subsequently is opened.
Q. Are the any short-term complications regarding the IRS delay in opening their tax credit registration number with regard to tax credits produced in 2023?
Unfortunately, the delay associated with the IRS opening of the registration portal, as well as any subsequent delays by the IRS in issuing registration numbers to tax credit sellers, may present a challenge for meeting transfer election deadlines, particularly for tax credits generated in 2023.
Q. Can PTCs generated from facilities placed into service prior to 2023 qualify for transferable tax credits?
The Regulations confirm what many in the industry predicted, that these types of PTCs are fully transferable.
Q. What ITCs are qualified for transferability?
The Regulations confirm what many in the industry predicted, that these types of PTCs are fully transferable.
Q. What ITCs are qualified for transferability?
With respect to qualified ITCs relating to renewable energy, transferable ITCs are awarded for qualified renewable energy projects placed into service during or after 2023.
Q. Are there penalties associated with erroneous tax credit transfers?
Yes. Section 6418 contains a 20% statutory excessive credit transfer penalty. The follow on Treasury Regulations also contain anti-abuse rules that target transactions with the principal purposes of avoiding federal income tax.