Under §6418 , eligible IRA energy credits (§48 ITC, §45 PTC, §45L, §48E and others) can be sold for cash to unrelated parties, once per credit per year. Buyers pay a discount to face value (typical pricing 92¢, 96¢ on the dollar). Transferability has substantially replaced traditional tax-equity flips for many CRE energy projects.
Transferability mechanics and how it changes CRE energy financing
Tax credit programs change with IRS, Treasury, NPS, and CDFI Fund guidance. This page is sponsor-POV process commentary, not tax or legal advice. Engage tax counsel and a tax-credit syndicator for every transaction before relying on the mechanics described.
Transferability statutory framework: §6418, enacted in the IRA, allows eligible taxpayers to elect to transfer eligible tax credits to unrelated transferees in exchange for cash. The election is made annually for credits generated in that year. Transfer can be of all or a portion of a credit, but credits cannot be re-transferred after the first transfer.
Eligible credits: most IRA energy credits qualify for transfer including §48 (energy investment tax credit, including solar, wind, geothermal, EV charging), §45 (production tax credit), §45L (energy-efficient new homes), §48E (technology-neutral ITC, post-2024), §45X (advanced manufacturing), and others. §179D and certain housing credits do not qualify for transferability under current rules.
Pricing dynamics: transfer pricing is market-driven. Typical transfer prices range 92¢ to 96¢ per dollar of credit, depending on credit type, project quality, sponsor reputation, and market conditions. Higher-quality projects (operating projects with completed cost certifications) price tighter than projects at construction start with technical risk.
Vs. traditional tax-equity flip: pre-IRA, the tax-equity flip was the dominant structure. The investor would take a partnership interest, receive credits and accelerated depreciation, then flip out at a defined IRR. Transferability eliminates the partnership-flip overhead, the investor just buys credits for cash.
Bridge financing: bridge lenders advance capital against expected credit transfer proceeds. A typical structure: the project secures an investor commitment (LOI plus eventual transfer agreement) for a defined credit amount at a defined price; the bridge lender advances a percentage of that expected proceeds.
Sponsor playbook: at project planning, decide whether transferability or partnership-flip fits the deal better. Transferability is simpler, faster, and avoids partnership-flip complications, but loses the depreciation flow-through that benefits the tax-equity investor in a flip. For CRE energy add-ons (rooftop solar on industrial, EV charging, geothermal), transferability has become the default.
Compliance considerations: the credit transfer requires accurate project documentation (placed-in-service date, basis calculations, cost certifications). Errors in the underlying credit calculation can trigger recapture and indemnity claims by the credit purchaser. Engage transactional counsel familiar with §6418 and the relevant IRS Notice and proposed regulations.
Sources
- Elective Pay and Transferability under the Inflation Reduction Act (§6418, §6417) · U.S. Internal Revenue Service · current
- Energy-Efficient Commercial Buildings Deduction (§179D) · U.S. Internal Revenue Service · current