Transferable Tax Credits

Businesses, corporate taxpayers, and individuals may be able to reduce their federal and state tax burdens and also support certain historic, cultural, and community-driven causes by purchasing tax credits.

Many states, as well as the federal government, provide tax credits for certain investments in historic rehabilitation projects, low-income housing, film production, and other activities that spur economic growth and innovation, expand employment, and support progressive initiatives — with many opportunities expanded under the Inflation Reduction Act. 30+ states and select federal programs allow these credits to be purchased by taxpayers to reduce tax rates.

Properly selecting credits to purchase or sell, as well as overseeing the transfers, can be a complex process that consumes time and resources without guidance from professionals versed in federal and state tax credit nuances. Matching buyers to the right sellers who are unable to use credits in their business is also vital to create a foundation for success.

Credit purchase opportunities

Transfer prices can range from $0.70 to $1.18 per dollar of credit purchased. Credit amounts depend on if the transfer is at the federal or state level, the type of credit, the types of taxes that may be offset, and whether additional tax attributes and priority returns are passed through to the investor.

Beyond the potential to deliver a high rate of return to buyers and reduce effective tax rates, transferable tax credits can also help you:

• Reduce your total state income tax liability
• Diversify your investment portfolio
• Promote the arts and film, renewable energy, historic rehabilitation, affordable housing, or other industries and causes you may support
• Achieve sustainability goals and environmental, social, and governance requirements
• Meet local Community Reinvestment Act requirements

Notable credit purchase opportunities also include Federal and State Historic Rehabilitation Tax Credits for restoration to facilities as well as federal transferable renewable energy credits under the Inflation Reduction Act.