Goldburd | Goldburd McCone LLP

For nationwide tax guidance, call:
212-235-1537 or toll-free at 866-712-9505.

Goldburd | Goldburd McCone LLP

For nationwide tax guidance, call: 212-302-9400 or toll-free at 844-653-2873.

Serving Individual And Corporate Tax Clients Nationwide From Our New York, New Jersey, Florida And California Offices

Steven Goldburd and Benjamin A Goldburd

Since 1983, our tax firm has skillfully represented individuals and corporations across the United States and around the globe from our offices in New York, New Jersey, California and Florida.

We Can Help You Navigate Direct Pay And Transferability Of IRA Tax Credits

The Inflation Reduction Act (IRA) was signed into federal law in 2022. This legislation was designed largely to incentivize certain taxpayers to adopt clean and renewable energy production.

Under section 6417 of the IRA, some taxpayers may qualify for direct payments in lieu of tax credits. Section 6418 also allows tax credits to be transferred to tax-paying entities not eligible for direct payments.

The law in this area can be difficult to navigate. At Goldburd McCone LLP, our Manhattan tax attorneys can help assess if you qualify for these options.

What Is An IRA Tax Credit?

The terms tax rebates and credits are often used interchangeably. However, it is important to note that they are distinct. For example, a rebate may involve you receiving cash back after making a purchase. IRA tax credits, on the other hand, are a dollar-for-dollar reduction on the amount of tax you would otherwise owe when filing your returns for the coming year.

Who Is Eligible For Direct Pay?

Those eligible to apply for direct payment of tax credits are referred to as “applicable entities.” Currently, these include states, U.S. territories, political municipalities, agencies of the state, water districts, school districts, and certain universities and hospitals.

Eligible entities can obtain direct pay credits on the following basis:

  • The credit for alternative fuel vehicle refueling / recharging property (Section 30C)
  • The renewable electricity production credit (Section 45)
  • The carbon oxide sequestration credit (Section 45Q)
  • The clean hydrogen production credit (Section 45V)
  • The zero-emission nuclear power production credit (Section 45U)
  • The advanced manufacturing production credit (Section 45X)
  • The commercial clean vehicle credit (Section 45W)
  • The clean electricity production credit (Section 45Y)
  • The clean fuel production credit (Section 45Z)
  • The energy credit (Section 48)
  • The qualifying advanced energy project credit (Section 48C)
  • The clean electricity investment credit (Section 48E)

It is also possible for certain electing taxpayers, including corporations, to receive direct payment of certain tax credits. However, these are limited to claims on the basis of Section 45Q, 45V and 45X. An experienced U.S. tax attorney can help assess your case to establish if you meet the criteria discussed above.

Transferability Of Credits

In many cases, eligible taxpayers are permitted to transfer tax credits to unrelated taxpayers rather than using credits to limit their own tax liabilities. The credits can only be passed on once according to the “no second transfer” rule. Credits should not be passed from one receiver to another.

If an entity wishes to transfer credits, an election should be made by the original deadline for tax returns that year. An eligible taxpayer is permitted to make more than one election to transfer specified credits, provided those transfers do not exceed the amount of eligible credits available.

All transfers must be appropriately characterized. Where parties have engaged in a series of transactions to avoid tax liabilities beyond the scope of the regulations, the anti-abuse rule will come into play.

The IRS imposes penalties for excessive payments or transfers of tax credits. Generally, the penalty involves a fine that equals 20% of the excessive transfer amount, unless reasonable cause is shown for the excessive payment or transfer. By contacting a tax lawyer, you can ensure that you meet all the relevant deadlines and stay within the scope of the legislation.

For Experienced Legal Guidance On Complex Tax Law Matters, Contact Us Today

At Goldburd McCone LLP, our New York lawyers bring years of experience in tax law to the table. We know how seriously taxpayers take their obligations and our representation reflects this. We will fight for your rights and ensure compliance at every step. Contact us online or reach us at 212-302-9400 for a consultation about your IRA tax options.