Final IRS Regulations for Transfer of Inflation Reduction Act Tax Credits

Credits for energy products are included. May 23, 2024

IRS Regulations on Transfer of tax credits

The Internal Revenue Service (IRS) has recently issued final regulations for the transfer of certain tax credits related to the Inflation Reduction Act (IRA) of 2022.

Overview of Regulations

The regulations detail the rules for transferring tax credits under the IRA, including definitions, rules for partnerships and S corporations, and procedures for credit transfers.

Transfer Process

Taxpayers can choose to transfer eligible tax credits to another taxpayer for a given year. The recipient becomes the taxpayer for the credit, with the transfer made in cash and not taxable or deductible.

Eligible Credits

Eleven specific credits can be transferred, such as those for renewable electricity production, clean hydrogen production, and energy projects. Each credit transfer must be done separately for each facility and year.

Important Considerations

The election to transfer credits must be made on the original tax return, cannot be revoked, and the transferee must account for the credit in their first taxable year after the transfer.

Effective Date

These regulations will come into effect on July 1, 2024.

Jeff Wardon, Jr. is the assistant editor for the facilities market.

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