KPMG report: Analysis and observations of final transferable credit regulations

The U.S. Treasury Department and IRS issued final regulations related to the election to transfer certain tax credits. As introduced in the “Inflation Reduction Act of 2022” (IRA), for tax years beginning after December 31, 2022, certain eligible taxpayers can make an election to transfer all or a portion of an eligible credit to unrelated persons (within the meaning of section 267(b) or 707(b)(1)) solely for cash consideration under section 6418. The unrelated taxpayers are then allowed to claim the transferred credits on their tax return. The cash payments are not included in gross income of the eligible taxpayer and are not deductible by the unrelated taxpayers.

Treasury and the IRS on June 14, 2023, released proposed and temporary regulations on transferability (section 6418) and direct pay (section 6417) for certain IRA energy credits (read TaxNewsFlash). Final section 6417 regulations were published in the Federal Register on March 11, 2024 (read TaxNewsFlash).

Read a May 2024 report prepared by KPMG LLP that provides analysis and observations of the final section 6418 regulations, explaining that the regulations largely adopt the proposed regulations despite various suggested changes from commenters, but also highlighting notable adoptions and departures from the proposed regulations for the election to transfer credits.