Corporations and investors can purchase transferable renewable energy tax credits to offset federal tax liability. Tri-Merit helps buyers perform technical due diligence, verify credit calculations, and evaluate transaction risk before purchasing credits.
Our documentation-first approach helps buyers understand the underlying project, credit calculation, and compliance requirements before completing a transaction.
Why Companies Buy Tax Credits
Purchasing transferable tax credits can be an effective tax planning strategy for businesses with federal tax liability.
Key benefits include:
- Reducing Federal Tax Liability
Tax credits directly reduce federal income taxes owed. - Attractive Economic Return
Credits are often purchased at a discount, generating immediate savings on tax payments. - Supporting Energy Innovation
Credit purchases help support renewable energy and clean technology projects. - Supporting ESG Initiatives
Many buyers incorporate credit purchases into sustainability strategies.
Who Typically Buys Tax Credits
Eligible buyers commonly include:
- C-Corporations with federal tax liability
- High-net-worth investors with passive income
- Banks and insurance companies
- Real estate investment trusts (REITs)
- Private equity and institutional investors
- Utility companies
Each buyer must be an unrelated taxpayer to the credit owner.
Key Considerations for Buyers
Before purchasing a tax credit, buyers should evaluate several important factors.
Recapture Risk
Certain credits, particularly Investment Tax Credits, may be subject to recapture if project requirements are not maintained.
Seller Credibility
Buyers should evaluate the financial stability and track record of the credit owner.
Eligible Basis Verification
The project costs used to calculate the credit must meet IRS requirements and align with standards similar to other engineering-based tax studies.
Compliance Requirements
Credits must meet program rules, including prevailing wage, domestic content, and other applicable provisions.
Timing of Transfer
The transfer must be properly reported on a timely filed federal tax return.
Yes. Corporations with federal tax liability can purchase transferable energy tax credits from eligible sellers under IRC §6418.
Because credits are purchased at a discount to face value, buyers may realize an immediate economic benefit upon utilization. The effective return depends on factors such as purchase price, credit type, timing of utilization, and the buyer’s tax capacity.
Buyers typically engage qualified tax professionals to conduct diligence prior to purchase. This process generally includes reviewing project eligibility, validating credit calculations, confirming IRS registration and transfer requirements, and assessing potential recapture or compliance risk.
See our full FAQ Page for additional technical and compliance questions.