26 C.F.R. §§ 1.6418-1–1.6418-5

Alternative fuel vehicle refueling property. So much of the credit for alternative fuel vehicle refueling property allowed under section 30C of the Code that, pursuant to section 30C(d)(1), is treated as a credit listed in section 38(b) of the Code (section 30C credit).

Renewable electricity production. The renewable electricity production credit determined under section 45(a) of the Code (section 45 credit).

Carbon oxide sequestration. The credit for carbon oxide sequestration determined under section 45Q(a) of the Code (section 45Q credit).

Zero-emission nuclear power production. The zero-emission nuclear power production credit determined under section 45U(a) of the Code (section 45U credit).

Clean hydrogen production. The clean hydrogen production credit determined under section 45V(a) of the Code (section 45V credit).

Advanced manufacturing production. The advanced manufacturing production credit determined under section 45X(a) of the Code (section 45X credit).

Clean electricity production. The clean electricity production credit determined under section 45Y(a) of the Code (section 45Y credit).

Clean fuel production. The clean fuel production credit determined under section 45Z(a) of the Code (section 45Z credit).

Energy. The energy credit determined under section 48 of the Code (section 48 credit).

Qualifying advance energy project. The qualifying advanced energy project credit determined under section 48C of the Code (section 48C credit).

Clean electricity. The clean electricity investment credit determined under section 48E of the Code (section 48E credit).

In the case of a section 30C credit, the increased credit amounts for which the requirements under section 30C(g)(2)(A) and (3) are satisfied.

In the case of a section 45 credit, the increased credit amounts for which the requirements under section 45(b)(7)(A)(8), (9), and (11) are satisfied.

In the case of a section 45Q credit, the increased credit amounts for which the requirements under section 45Q(h)(3) and (4) are satisfied.

In the case of a section 45U credit, the increased credit amount for which the requirements under section 45U(d)(2) are satisfied.

In the case of a section 45V credit, the increased credit amounts for which the requirements under section 45V(e)(3) and (4) are satisfied.

In the case of a section 45Y credit, the increased credit amounts for which the requirements under section 45Y(g)(7), (9), (10), and (11) are satisfied.

In the case of a section 45Z credit, the increased credit amounts for which the requirements under section 45Z(f)(6) and (7) are satisfied.

In the case of a section 48 credit, the increased credit amounts for which the requirements under section 48(a)(10), (11), (12), (14), and (e) are satisfied.

In the case of a section 48C credit, the increased credit amounts for which the requirements under section 48C(e)(5) and (6) are satisfied.

In the case of a section 48E credit, the increased credit amounts for which the requirements under section 48E(a)(3)(A), (B), (d)(3), (d)(4), and (h) are satisfied.

Separate eligible credit property. A transfer election must be made separately with respect to each eligible credit property described in § 1.6418-1(d)(2), (3), (5), and (7), as applicable, for which an eligible credit is determined.

Time period. A transfer election must be made for each taxable year an eligible taxpayer elects to transfer specified credit portions with respect to such an eligible credit property during the 10-year period beginning on the date such eligible credit property was originally placed in service (or, in the case of a section 45Q credit, for each taxable year during the 12-year period beginning on the date the single process train of carbon capture equipment was originally placed in service).

A properly completed relevant source credit form for the eligible credit (such as Form 7207, Advanced Manufacturing Production Credit, if making a transfer election for a section 45X credit) for the taxable year that the eligible credit was determined, including the registration number received during the required pre-filing registration (as described in § 1.6418-4) related to the eligible credit property with respect to which a transferred eligible credit was determined;

A properly completed Form 3800, General Business Credit (or its successor), including reductions necessary because of the transferred eligible credit as required by the form and instructions and the registration number received during the required pre-filing registration (as described in § 1.6418-4) related to the eligible credit property with respect to which a transferred eligible credit was determined;

A schedule attached to the Form 3800 (or its successor) showing the amount of eligible credit transferred for each eligible credit property (such as for a section 45X election, the relevant lines that include the eligible credit property reported on Form 7207), except as otherwise provided in guidance;

A transfer election statement as described in paragraph (b)(5) of this section; and

A properly completed Form 3800, General Business Credit (or its successor), to take into account the transferred specified credit portion as a current general business credit, and including all registration number(s) related to the transferred specified credit portion;

The transfer election statement described in paragraph (b)(5) of this section attached to the return; and

Any amount of cash payment received as consideration for the transferred specified credit portion will be treated as tax exempt income for purposes of sections 705 and 1366 of the Code; and

A partner's distributive share of such tax exempt income will be as described in paragraphs (b)(1) and (2) of this section.

First, the partnership must determine each partner's distributive share of the otherwise eligible credits with respect to such eligible credit property in accordance with paragraph (b)(1) of this section (partner's eligible credit amount).

Thereafter, the transferor partnership may determine, in any manner described in the partnership agreement, or as the partners may agree, the portion of each partner's eligible credit amount to be transferred, and the portion of each partner's eligible credit amount to be retained and allocated to such partner. The partnership may allocate to each partner its agreed upon share of eligible credits, tax exempt income resulting from the receipt of consideration for the specified credit portion(s), or both, as the case may be, provided that—

Each partner's proportionate share of tax exempt income resulting from the transfer(s) is equal to the total amount of tax exempt income resulting from the transfer(s) of the specified credit portion(s) by the partnership multiplied by a fraction—

An allocation of an eligible credit, the upper-tier partnership is not an eligible taxpayer under section 6418 with respect to any eligible credit allocated by a transferor partnership; or

An allocation of tax exempt income resulting from the receipt of consideration for the transfer of a specified credit portion by a transferor partnership, the upper-tier partnership must determine its partners' distributive shares of such tax exempt income in proportion to the partners' distributive shares of the otherwise eligible credit as provided in paragraph (b)(1) of this section.

The eligible taxpayer's general information, including its name, address, taxpayer identification number, and type of legal entity;

Any additional information required by the IRS electronic portal, such as information establishing that the entity is an eligible taxpayer;

The taxpayer's taxable year, as determined under section 441;

The type of annual tax return(s) normally filed by the eligible taxpayer, or that the eligible taxpayer does not normally file an annual tax return with the IRS;

The type of eligible credit(s) for which the eligible taxpayer intends to make a transfer election;

Each eligible credit property that the eligible taxpayer intends to use to determine a specified credit portion for which the eligible taxpayer intends to make a transfer election;

For each eligible credit property listed in paragraph (b)(5)(vi) of this section, any further information required by the IRS electronic portal, such as—

The name of a contact person for the eligible taxpayer. The contact person is the person whom the IRS may contact if there is an issue with the registration. The contact person must either:

A penalties of perjury statement, effective for all information submitted as a complete application, and signed by a person with personal knowledge of the relevant facts that is authorized to bind the registrant; and

Any other information the IRS deems necessary for purposes of preventing duplication, fraud, improper payments, or excessive payments under this section that is provided in guidance.

The amount of such excessive credit transfer; and

The amount of the transferred specified credit portion claimed by the transferee taxpayer with respect to such eligible credit property for such taxable year; over

The amount of the eligible credit that, without the application of section 6418, would be otherwise allowable under the Code with respect to such eligible credit property for such taxable year.

Example 1—No excessive credit transfer. Taxpayer A claims $40x of an eligible credit and transfers $60x of an eligible credit to Transferee Taxpayer B related to a single facility that was expected to generate $100x of such eligible credit. In a subsequent year it is determined that the facility only generated $60x of such eligible credit. There is no excessive credit transfer in this case because the amount of the eligible credit claimed by Transferee Taxpayer B of $60x is equal to the amount of the credit that would be otherwise allowable with respect to such facility for the taxable year the transfer occurred. Taxpayer A is disallowed the $40x of the eligible credit claimed.

Example 2—Excessive credit transfer. Same facts as in paragraph (b)(3)(i) of this section (Example 1) except that Taxpayer A transfers $75x of the $100x of eligible credit to Transferee Taxpayer B in exchange for a cash payment of $67.5x. Taxpayer A claims $25x of the eligible credit and Transferee Taxpayer B claims $75x of the eligible credit. In this situation, a $40x reduction in credit results in a $15x excessive credit transfer to Transferee Taxpayer B because the amount of the credit claimed by Transferee Taxpayer B ($75x) exceeds the amount of credit otherwise allowable with respect to the facility ($60x) by $15x. Therefore, Transferee Taxpayer B's tax is increased for the determination year by $18x, which is equal to the amount of the excessive credit transfer plus 20 percent of the excessive credit transfer as provided in paragraph (a) of this section and section 6418(g)(2)(A). If Transferee Taxpayer B can show reasonable cause as provided in paragraph (a)(4) of this section and section 6418(g)(2)(B), then Transferee Taxpayer B will only have a tax increase of $15x. Taxpayer A is disallowed the $25x of the eligible credit claimed. Under paragraph (a)(3) of this section, the portion of the cash payment of $67.5x made by Transferee Taxpayer B that is attributable to the excessive credit transfer is $13.5x and is equal to Transferee Taxpayer B's cash payment of $67.5x multiplied by the ratio of the excessive credit transfer ($15x) to the transferred specified credit portion claimed by Transferee Taxpayer B ($75x). Pursuant to paragraph (a)(3) of this section, the payment of $13.5x made to Taxpayer A from Transferee Taxpayer B that directly relate to the excessive credit transfer are not subject to section 6418(b)(2), 6418(b)(3), or § 1.6418-2(e).

Example 3— Excessive credit with multiple transferees. Same facts as in paragraph (b)(3)(i) of this section (Example 1) except that Taxpayer A transfers $50x of the eligible credit to Transferee Taxpayer B and $30x of the eligible credit to Transferee Taxpayer C. In exchange for transfer of the credit, Transferee Taxpayer B made a cash payment of $45x and Transferee Taxpayer C made a cash payment of $27x. Taxpayer A claims $20x of the eligible credit, Transferee Taxpayer B claims $50x of the eligible credit, and Transferee Taxpayer C claims $30x of the eligible credit. In this situation, because there are multiple transferees, all transferees are treated as one transferee for determining the excessive credit transfer amount under paragraph (b)(2) of this section. There is a total excessive credit transfer of $20x because the amount of the credit claimed by the transferees in total ($80x) exceeds the amount of credit otherwise allowable with respect to the facility ($60x) by $20x. The excessive credit transfer to Taxpayer B is equal to ($50x/$80x * $20x) = $12.5x, and the excessive credit transfer to Taxpayer C is equal to ($30x/$80x * $20x) = $7.5x. Therefore, Transferee Taxpayer B and Transferee Taxpayer C are subject to the provisions in paragraph (a) of this section. Transferee Taxpayer B's and Transferee Taxpayer C's tax is increased for the determination year by the respective excessive credit transfer amount and 20 percent of the excessive credit transfer amount ($15x for Transferee Taxpayer B and $9x for Transferee Taxpayer C) as provided in paragraph (a) of this section and section 6418(g)(2)(A). If Transferee Taxpayer B or Transferee Taxpayer C can show reasonable cause as provided in paragraph (a)(4) of this section and section 6418(g)(2)(B), then the tax increase will only be $12.5x or $7.5x, respectively. Taxpayer A is disallowed the $20x of eligible credit claimed. Under paragraph (a)(3) of this section, the portion of the cash payment of $45x made by Transferee Taxpayer B that is attributable to its portion of the excessive credit transfer is $11.25x and is equal to Transferee Taxpayer B's cash payment of $45x multiplied by the ratio of the excessive credit transfer ($12.5x) to the transferred specified credit portion claimed by Transferee Taxpayer B ($50x). Similarly, the portion of the cash payment of $27x made by Transferee Taxpayer C that is attributable to its portion of the excessive credit transfer is $6.75x and is equal to Transferee Taxpayer C's cash payment of $27x multiplied by the ratio of the excessive credit transfer ($7.5x) to the transferred specified credit portion claimed by Transferee Taxpayer B ($30x). Pursuant to paragraph (a)(3) of this section, the payments made to Taxpayer A by Transferee Taxpayer B ($11.25x) and Transferee Taxpayer C ($6.75x) that directly relate to the excessive credit transfer are not subject to section 6418(b)(2), 6418(b)(3), or § 1.6418-2(e).