Transferable tax credit transactions require careful evaluation of project eligibility, credit calculations, and compliance requirements. Tri-Merit helps buyers and sellers perform structured due diligence to reduce risk and support defensible transactions.
Our team reviews project documentation, credit calculations, and regulatory requirements to help stakeholders understand the technical and compliance factors behind each credit.
Common Risks in Credit Transfer Transactions
Tax credit buyers must evaluate several risks before completing a transaction.
- Recapture Risk
The IRS may require repayment of certain credits if project conditions are not maintained during the applicable recapture period.
- Seller Creditworthiness
The financial stability and credibility of the credit seller can impact transaction security.
- Eligible Basis Verification
The costs used to calculate credits must meet IRS eligibility standards.
- Regulatory Compliance
Projects must comply with applicable federal requirements, including prevailing wage and apprenticeship, domestic content, energy community, and foreign entity of concern (FEOC) restrictions, where applicable. In addition, accurate cost basis determination is critical, as errors in eligible basis or qualified investment calculations can materially affect credit amounts and transferability.
Recapture risk refers to the potential loss or reduction of a tax credit if the underlying project fails to continue meeting eligibility requirements during a specified recapture period. Certain credits, most notably Investment Tax Credits, may be partially or fully recaptured if qualifying property is disposed of, ceases operation, or otherwise falls out of compliance.
Risk can be mitigated through proper due diligence, credit insurance, and verification of project compliance.
See our full FAQ Page for additional technical and compliance questions.