Final energy tax credit transferability rules released last week by the Treasury Department make clear that a partnership made up of one or more applicable entities, including public power utilities, can elect to transfer certain energy production tax credits they could also claim through elective payment.
This is significant because while credits claimed through elective payment must meet domestic content requirements, credits that are transferred do not.
Because of certain provisions that existed in the tax code before elective pay was created, this “work around” is not available for investment tax credits, noted John Godfrey, Senior Government Relations Director at APPA.
Taking advantage of this would require creating a partnership to own and operate the facility and require finding a buyer for the credits.
However, as the New York University Tax Law Center noted in a blog post about the final rule, “this is key, because it provides a pathway for governmental and tax-exempt entities to monetize certain tax credits even if the project does not meet the domestic content requirements.”
The final rules are available on the Federal Register's website.
APPA said it remains hopeful that Treasury will craft domestic content requirements, and rules for qualifying for waivers to those requirements, that are simple, clear, and reliable, but the final rule providing an alternative route to monetization is welcome.
