---
kind: "section"
citation: "26 U.S.C. § 6418"
title: "26"
title_heading: "Internal Revenue Code"
number: "6418"
heading: "Transfer of certain credits"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/6418"
units:
  - "Subtitle F — Procedure and Administration"
  - "Chapter 65 — Abatements, Credits, and Refunds"
  - "Subchapter B — Rules of Special Application"
---

# §6418. Transfer of certain credits

- (a) **In general—** In the case of an eligible [taxpayer](/usc/26/7701.md?p=a-14) which elects to transfer all (or any portion specified in the election) of an eligible credit determined with respect to such [taxpayer](/usc/26/7701.md?p=a-14) for any [taxable year](/usc/26/7701.md?p=a-23) to a [taxpayer](/usc/26/7701.md?p=a-14) (referred to in this section as the “transferee [taxpayer](/usc/26/7701.md?p=a-14)”) which is not [related](/usc/26/7701.md?p=a-51-I-vi) (within the meaning of section [267(b)](/usc/26/267.md?p=b) or [707(b)(1)](/usc/26/707.md?p=b-1)) to the eligible [taxpayer](/usc/26/7701.md?p=a-14), the transferee [taxpayer](/usc/26/7701.md?p=a-14) specified in such election (and not the eligible [taxpayer](/usc/26/7701.md?p=a-14)) shall be treated as the [taxpayer](/usc/26/7701.md?p=a-14) for purposes of this title with respect to such credit (or such portion thereof).
- (b) **Treatment of payments made in connection with transfer—** With respect to any [amount paid](/usc/26/7702A.md?p=e-1-A) by a transferee [taxpayer](/usc/26/7701.md?p=a-14) to an eligible [taxpayer](/usc/26/7701.md?p=a-14) as consideration for a transfer described in [subsection (a)](#a), such consideration—
  - (1) shall be required to be paid in cash,
  - (2) shall not be includible in gross income of the eligible [taxpayer](/usc/26/7701.md?p=a-14), and
  - (3) with respect to the transferee [taxpayer](/usc/26/7701.md?p=a-14), shall not be deductible under this title.
- (c) **Application to partnerships and S corporations—**
  - (1) **In general—** In the case of any eligible credit determined with respect to any facility or property held directly by a [partnership](/usc/26/7701.md?p=a-2) or S [corporation](/usc/26/7701.md?p=a-3), if such [partnership](/usc/26/7701.md?p=a-2) or S [corporation](/usc/26/7701.md?p=a-3) makes an election under [subsection (a)](#a) (in such manner as the [Secretary](/usc/26/7701.md?p=a-11-B) may provide) with respect to such credit—
    - (A) any amount received as consideration for a transfer described in such subsection shall be treated as tax exempt income for purposes of sections [705](/usc/26/705.md) and [1366](/usc/26/1366.md), and
    - (B) a [partner](/usc/26/7701.md?p=a-2)’s distributive share of such tax exempt income shall be based on such [partner](/usc/26/7701.md?p=a-2)’s distributive share of the otherwise eligible credit for each [taxable year](/usc/26/7701.md?p=a-23).
  - (2) **Coordination with application at partner or shareholder level—** In the case of any facility or property held directly by a [partnership](/usc/26/7701.md?p=a-2) or S [corporation](/usc/26/7701.md?p=a-3), no election by any [partner](/usc/26/7701.md?p=a-2) or [shareholder](/usc/26/7701.md?p=a-8) shall be allowed under [subsection (a)](#a) with respect to any eligible credit determined with respect to such facility or property.
- (d) **Taxable year in which credit taken into account—** In the case of any credit (or portion thereof) with respect to which an election is made under [subsection (a)](#a), such credit shall be taken into account in the first [taxable year](/usc/26/7701.md?p=a-23) of the transferee [taxpayer](/usc/26/7701.md?p=a-14) ending with, or after, the [taxable year](/usc/26/7701.md?p=a-23) of the eligible [taxpayer](/usc/26/7701.md?p=a-14) with respect to which the credit was determined.
- (e) **Limitations on election—**
  - (1) **Time for election—** An election under [subsection (a)](#a) to transfer any portion of an eligible credit shall be made not later than the due date ([including](/usc/26/7701.md?p=c) extensions of time) for the return of tax for the [taxable year](/usc/26/7701.md?p=a-23) for which the credit is determined, but in no event earlier than 180 days after the date of the enactment of this section. Any such election, once made, shall be irrevocable.
  - (2) **No additional transfers—** No election may be made under [subsection (a)](#a) by a transferee [taxpayer](/usc/26/7701.md?p=a-14) with respect to any portion of an eligible credit which has been previously transferred to such [taxpayer](/usc/26/7701.md?p=a-14) pursuant to this section.
- (f) **Definitions—** For purposes of this section—
  - (1) **Eligible credit—**
    - (A) **In general—** The term “eligible credit” means each of the following:
      - (i) So much of the credit for alternative fuel vehicle refueling property allowed under [section 30C](/usc/26/30C.md) which, pursuant to [subsection (d)(1)](/usc/26/30C.md?p=d-1) of such section, is treated as a credit listed in [section 38(b)](/usc/26/38.md?p=b).
      - (ii) The renewable electricity production credit determined under [section 45(a)](/usc/26/45.md?p=a).
      - (iii) The credit for carbon oxide sequestration determined under [section 45Q(a)](/usc/26/45Q.md?p=a).
      - (iv) The zero-emission nuclear power production credit determined under [section 45U(a)](/usc/26/45U.md?p=a).
      - (v) The clean hydrogen production credit determined under [section 45V(a)](/usc/26/45V.md?p=a).
      - (vi) The advanced manufacturing production credit determined under [section 45X(a)](/usc/26/45X.md?p=a).
      - (vii) The clean electricity production credit determined under [section 45Y(a)](/usc/26/45Y.md?p=a).
      - (viii) The clean fuel production credit determined under [section 45Z(a)](/usc/26/45Z.md?p=a).
      - (ix) The energy credit determined under section 48.
      - (x) The qualifying advanced energy project credit determined under section 48C.
      - (xi) The clean electricity investment credit determined under section 48E.
      - (xii) So much of the biodiesel fuels credit determined under [section 40A](/usc/26/40A.md) which consists of the small agri-biodiesel producer credit determined under [subsection (b)(4)](/usc/26/40A.md?p=b-4) of such section.
    - (B) **Election for certain credits—** In the case of any eligible credit described in clause [(ii)](#f-1-A-ii), [(iii)](#f-1-A-iii), [(v)](#f-1-A-v), or [(vii)](#f-1-A-vii) of subparagraph (A), an election under [subsection (a)](#a) shall be made—
      - (i) separately with respect to each facility for which such credit is determined, and
      - (ii) for each [taxable year](/usc/26/7701.md?p=a-23) during the 10-year period beginning on the date such facility was originally placed in service (or, in the case of the credit described in clause (iii), for each year during the 12-year period beginning on the date the carbon capture equipment was originally placed in service at such facility).
    - (C) **Exception for business credit carryforwards or carrybacks—** The term “eligible credit” shall not include any business credit carryforward or business credit carryback determined under section 39.
  - (2) **Eligible taxpayer—** The term “eligible [taxpayer](/usc/26/7701.md?p=a-14)” means any [taxpayer](/usc/26/7701.md?p=a-14) which is not described in [section 6417(d)(1)(A)](/usc/26/6417.md?p=d-1-A).
- (g) **Special rules—** For purposes of this section—
  - (1) **Additional information—** As a condition of, and prior to, any transfer of any portion of an eligible credit pursuant to [subsection (a)](#a), the [Secretary](/usc/26/7701.md?p=a-11-B) may require such information ([including](/usc/26/7701.md?p=c), in such form or manner as is determined appropriate by the [Secretary](/usc/26/7701.md?p=a-11-B), such [information returns](/usc/26/6724.md?p=d-1)) or registration as the [Secretary](/usc/26/7701.md?p=a-11-B) deems necessary for purposes of preventing duplication, fraud, improper payments, or excessive payments under this section.
  - (2) **Excessive credit transfer—**
    - (A) **In general—** In the case of any portion of an eligible credit which is transferred to a transferee [taxpayer](/usc/26/7701.md?p=a-14) pursuant to [subsection (a)](#a) which the [Secretary](/usc/26/7701.md?p=a-11-B) determines constitutes an excessive credit transfer, the tax imposed on the transferee [taxpayer](/usc/26/7701.md?p=a-14) by [chapter 1](/usc/26/chstA/ch1.md) (regardless of whether such entity would otherwise be subject to tax under such chapter) for the [taxable year](/usc/26/7701.md?p=a-23) in which such determination is made shall be increased by an amount equal to the sum of—
      - (i) the amount of such excessive credit transfer, plus
      - (ii) an amount equal to 20 percent of such excessive credit transfer.
    - (B) **Reasonable cause—** [Subparagraph (A)(ii)](#g-2-A-ii) shall not apply if the transferee [taxpayer](/usc/26/7701.md?p=a-14) demonstrates to the satisfaction of the [Secretary](/usc/26/7701.md?p=a-11-B) that the excessive credit transfer resulted from reasonable cause.
    - (C) **Excessive credit transfer defined—** For purposes of this paragraph, the term “excessive credit transfer” means, with respect to a facility or property for which an election is made under [subsection (a)](#a) for any [taxable year](/usc/26/7701.md?p=a-23), an amount equal to the excess of—
      - (i) the amount of the eligible credit claimed by the transferee [taxpayer](/usc/26/7701.md?p=a-14) with respect to such facility or property for such [taxable year](/usc/26/7701.md?p=a-23), over
      - (ii) the amount of such credit which, without application of this section, would be otherwise allowable under this title with respect to such facility or property for such [taxable year](/usc/26/7701.md?p=a-23).
  - (3) **Basis reduction; notification of recapture—** In the case of any election under [subsection (a)](#a) with respect to any portion of an eligible credit described in clauses [(ix)](#f-1-A-ix) through [(xi)](#f-1-A-xi) of subsection (f)(1)(A)—
    - (A) [subsection (c)](/usc/26/50.md?p=c) of section 50 shall apply to the applicable investment credit property (as defined in subsection (a)(7) of such section) as if such eligible credit was allowed to the eligible [taxpayer](/usc/26/7701.md?p=a-14), and
    - (B) if, during any [taxable year](/usc/26/7701.md?p=a-23), the applicable investment credit property (as defined in [subsection (a)(7)](/usc/26/50.md?p=a-7) of section 50) is disposed of, or otherwise ceases to be investment credit property with respect to the eligible [taxpayer](/usc/26/7701.md?p=a-14), before the close of the recapture period (as described in subsection (a)(1) of such section)—
      - (i) such eligible [taxpayer](/usc/26/7701.md?p=a-14) shall provide notice of such occurrence to the transferee [taxpayer](/usc/26/7701.md?p=a-14) (in such form and manner as the [Secretary](/usc/26/7701.md?p=a-11-B) shall prescribe), and
      - (ii) the transferee [taxpayer](/usc/26/7701.md?p=a-14) shall provide notice of the recapture amount (as defined in [subsection (c)(2)](#c-2) of such section), if any, to the eligible [taxpayer](/usc/26/7701.md?p=a-14) (in such form and manner as the [Secretary](/usc/26/7701.md?p=a-11-B) shall prescribe).
  - (4) **Prohibition on election or transfer with respect to progress expenditures—** This section shall not apply with respect to any amount of an eligible credit which is allowed pursuant to rules similar to the rules of subsections [(c)(4)](/usc/26/46.md) and [(d)](/usc/26/46.md) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
  - (5) **Prohibition on transfer of credits to specified foreign entities—** With respect to any eligible credit described in clause [(iii)](#f-1-A-iii), [(iv)](#f-1-A-iv), [(vi)](#f-1-A-vi), [(vii)](#f-1-A-vii), [(viii)](#f-1-A-viii), or [(xi)](#f-1-A-xi) of subsection (f)(1)(A), an eligible [taxpayer](/usc/26/7701.md?p=a-14) may not elect to transfer any portion of such credit to a [taxpayer](/usc/26/7701.md?p=a-14) that is a [specified foreign entity](/usc/26/7701.md?p=a-51-B) (as defined in [section 7701(a)(51)(B)](/usc/26/7701.md?p=a-51-B)).
- (h) **Regulations—** The [Secretary](/usc/26/7701.md?p=a-11-B) shall issue such regulations or other guidance as may be necessary to carry out the purposes of this section, [including](/usc/26/7701.md?p=c) regulations or other guidance providing rules for determining a [partner](/usc/26/7701.md?p=a-2)’s distributive share of the tax exempt income described in [subsection (c)(1)](#c-1).

## Source credit

(Added Pub. L. 117–169, title I, § 13801(b), Aug. 16, 2022, 136 Stat. 2009; amended Pub. L. 119–21, title VII, §§ 70512(h), 70513(b)(3)(B)(ii), 70521(j)(2), July 4, 2025, 139 Stat. 267, 272, 279.)

## Notes

### Editorial Notes

### References in Text

The date of the enactment of this section, referred to in subsec. (e)(1), is the date of enactment of Pub. L. 117–169, which was approved Aug. 16, 2022.

The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (g)(4), is the date of enactment of title XI of Pub. L. 101–508, which was approved Nov. 5, 1990.

### Prior Provisions

A prior section 6418, acts Aug. 16, 1954, ch. 736, 68A Stat. 801; May 29, 1956, ch. 342, § 21(b), 70 Stat. 221; May 24, 1962, Pub. L. 87–456, title III, § 302(c), 76 Stat. 77; Nov. 8, 1965, Pub. L. 89–331, § 9(b), 79 Stat. 1278; Oct. 4, 1976, Pub. L. 94–455, title XIX, § 1906(b)(13)(A), 90 Stat. 1834, authorized refund of taxes paid on sugar used as livestock feed, for distillation or production of alcohol, or in certain cases where sugar was exported, prior to repeal by Pub. L. 101–508, title XI, § 11801(c)(22)(B)(i), Nov. 5, 1990, 104 Stat. 1388–528. For provisions that nothing in repeal by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

### Amendments

2025—Subsec. (f)(1)(A)(xii). Pub. L. 119–21, § 70521(j)(2), added cl. (xii).

Subsec. (g)(3). Pub. L. 119–21, § 70513(b)(3)(B)(ii), substituted “subsection (a)(7)” for “subsection (a)(5)” in subpars. (A) and (B).

Subsec. (g)(5). Pub. L. 119–21, § 70512(h), added par. (5).

### Statutory Notes and Related Subsidiaries

### Effective Date of 2025 Amendment

Amendment by section 70512(h) of Pub. L. 119–21 applicable to taxable years beginning after July 4, 2025, see section 70512(l)(1) of Pub. L. 119–21, set out in a note under section 45 of this title.

Amendment by section 70513(b)(3)(B)(ii) of Pub. L. 119–21 applicable to taxable years beginning after July 4, 2025, see section 70513(g)(1) of Pub. L. 119–21, set out in a note under section 48 of this title.

Amendment by section 70521(j)(2) of Pub. L. 119–21 applicable to fuel sold or used after June 30, 2025, see section 70521(j)(3) of Pub. L. 119–21, set out as a note under section 40A of this title.

### Effective Date

Section applicable to taxable years beginning after Dec. 31, 2022, see section 13801(g) of Pub. L. 117–169, set out as a note under section 6417 of this title.