The IRS and Treasury have issued final regulations describing rules and definitions for the transfer of eligible credits in a taxable year, including specific rules for partnerships and S corporations.
The Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors act enable taxpayers to take advantage of certain manufacturing investments, clean energy investments and production tax credits through elective pay or transfer provisions.
For tax years beginning after Dec. 31, 2022, eligible taxpayers can choose to transfer all or a portion of eligible credits to unrelated taxpayers for cash payments.
The unrelated taxpayers are then allowed to claim the transferred credits on their tax returns. The cash payments are not included in the gross income of the eligible taxpayers and are not deductible by the unrelated taxpayers.
The final regulations also provide rules for a mandatory IRS pre-filing registration process through an electronic portal. Learn more.