The market for selling clean energy tax credits continues to thrive despite the 2025 budget law’s stricter eligibility rules for solar and wind incentives. Much of that resilience stems from a novel tax credit monetization mechanism in Internal Revenue Code Section 6418 – known as transferability – that has made it easier for many developers to capitalize their project-associated credits.
Direct pay and transferability were among the most “consequential changes” in the 2022 law, Bracewell’s Elizabeth McGinley told Law360, who noted that the provisions marked a departure from the traditional framework of federal tax law, under which tax attributes generally cannot be sold.
“There are a lot of rules around net operating losses not being transferable, either directly or indirectly,” McGinley said. “So this was really a huge new opportunity for the market.”
For project owners with tax credits they cannot use, Section 6418 is a great mechanism because they do not have to wait many years to capitalize the incentives, she said. “They get the value of the credits right away,” McGinley said.
