In a tax credit transfer, the buyer owes the excessive credit transfer tax if the credit turns out to be overstated: the excess plus 20%, with the 20% removed if the buyer shows reasonable cause. The seller keeps the prevailing wage and apprenticeship (PWA) records and the correction payment obligation. So the buyer needs diligence on PWA, and the seller needs records ready to show.
By Alex Jones and Reed Dalton. Adapted from the DSPTCH IRA Field Guide (January 2025). Updated November 2026.
Reasonable cause can include reviewing the seller's records, including documents showing eligibility for bonus credit amounts, and reasonable reliance on third party expert reports (26 CFR 1.6418-5(a)(4)). The DSPTCH IRA Field Guide suggests a file with these items:
The Field Guide also lists legal opinions and memos, placed in service documents, third party cost segregation, an independent appraisal, ownership and partnership documents, permits, the offtake agreement, insurance and the project financial model. Your counsel and buyer will set the final list.
For section 48 and 48E credits, the prevailing wage requirement continues for alteration or repair during the five-year recapture period. A year with no alteration or repair work is treated as meeting the requirement.
The eligible taxpayer loses the increased credit amount, and section 6418 and its regulations decide the impact on the buyer (26 CFR 1.45-7(c)(1)(iv)). That is why transfer agreements address indemnities and insurance.
Sources: 26 CFR 1.6418-5, 26 CFR 1.45-7, 26 CFR 1.45-12, 26 CFR 1.48-13. General information only, not legal or tax advice.
