Internal Revenue Bulletin 2024-25 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2024–25
June 17, 2024
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
T.D. 9997, page 1730.
Tax return preparers must use a preparer tax identification
number (PTIN) on returns they prepare for compensation.
The PTIN must be renewed annually. The IRS charges a user
fee for each PTIN application or application for renewal to
recover costs for issuing and renewing PTINs. The fee was
established at $11 per application or application for renewal,
in addition to an amount payable directly to a third-party
contractor, by interim final rule (TD 9980) and cross-ref-
erencing notice of proposed rulemaking (REG-106203-23)
published in the Federal Register on October 4, 2023.
These final regulations adopt the $11 fee per application
or application for renewal, in addition to an amount payable
directly to a third-party contractor. TD 9997. Published May
15, 2024.
EMPLOYEE PLANS
Notice 2024-42, page 1732.
This notice specifies updated static mortality tables to be
used for defined benefit pension plans under § 430(h)(3)
(A) of the Code and section 303(h)(3)(A) of ERISA. This
notice also specifies a mortality table for use in determin-
ing minimum present value under § 417(e)(3) of the Code
and section 205(g)(3) of ERISA for distributions with annuity
starting dates that occur during stability periods beginning
in the 2025 calendar year.
INCOME TAX
Announcement 2024-25, page 1741.
This announcement provides the total amount of unallo-
cated environmental justice solar and wind capacity lim-
itation (Capacity Limitation) for the Low-Income Commu-
nities Bonus Credit Program (Program) under § 48(e) of
the Internal Revenue Code and § 1.48(e)-1 of the Income
Tax Regulations that has been carried over from the 2023
Program year to the 2024 Program year. Additionally, this
announcement sets forth the distribution of the carried over
Capacity Limitation among the facility categories, category
1 sub-reservations, and application options for the 2024
Program year.
Notice 2024-43, page 1737.
This Notice announces that the Treasury Department and
the IRS intend to amend the regulations under sections 59A
and 6038A to defer the applicability date of certain provi-
sions of the regulations relating to the reporting of quali-
fied derivative payments until taxable years beginning on or
after January 1, 2027.
Notice 2024-44, page 1737.
This Notice announces that Treasury and the IRS intend to
amend the section 871(m) regulations to delay the effec-
tive/applicability date of certain rules in those final regu-
lations and extends the phase-in period provided in Notice
2022-37, 2022-37 I.R.B. 234, for certain provisions of the
section 871(m) regulations.
REG-133850-13, page 1742.
These proposed regulations would remove the associated
property rule and similar rules from the existing regulations
under § 1.263A-11(e) on the interest capitalization require-
ments for improvements to designated property. In addi-
tion, these proposed regulations would update the definition
of “improvement” under § 1.263A-8(d)(3) for purposes of
applying those existing regulations. Lastly, these proposed
regulations would clarify the application of other rules in
those existing regulations in light of the proposed removal
of the associated property rule.
Finding Lists begin on page ii.

Rev. Rul. 2024-12, page 1677.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for June 2024.
T.D. 9993, page 1679.
The final regulations describe the rules for the transfer
of eligible credits in a taxable year, including definitions
and specific rules for partnerships and S corporations
to follow. In addition, the final regulations provide rules
related to a required IRS pre-filing registration process.
Temporary regulations that were previously issued to
describe rules for the pre-filing registration process are
removed. The pre-filing registration process is necessary
to complete before making a transfer election for eligible
credits.

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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
June 17, 2024 Bulletin No. 2024–25

Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)
Rev. Rul. 2024-12
This revenue ruling provides vari-
ous prescribed rates for federal income
tax purposes for June 2024 (the current
month). Table 1 contains the short-
term, mid-term, and long-term applica-
ble federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted fed-
eral long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-
ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the appli-
cable percentage for non-federally sub-
sidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.
REV. RUL. 2024-12 TABLE 1
Applicable Federal Rates (AFR) for June 2024
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR5.12%5.06%5.03%5.01%
110% AFR5.65%5.57%5.53%5.51%
120% AFR6.16%6.07%6.02%5.99%
130% AFR6.69%6.58%6.53%6.49%
Mid-term
AFR4.66%4.61%4.58%4.57%
110% AFR 5.13%5.07%5.04%5.02%
120% AFR5.61%5.53%5.49%5.47%
130% AFR6.08%5.99%5.95%5.92%
150% AFR7.04%6.92%6.86%6.82%
175% AFR8.23%8.07%7.99%7.94%
Long-term
AFR4.79%4.73%4.70%4.68%
110% AFR5.27%5.20%5.17%5.14%
120% AFR5.76%5.68%5.64%5.61%
130% AFR6.24%6.15%6.10%6.07%
REV. RUL. 2024-12 TABLE 2
Adjusted AFR for June 2024
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR3.88%3.84%3.82%3.81%
Mid-term adjusted AFR3.53%3.50%3.48%3.47%
Long-term adjusted AFR3.62%3.59%3.57%3.56%
Bulletin No. 2024–25 1677 June 17, 2024

REV. RUL. 2024-12 TABLE 3
Rates Under Section 382 for June 2024
Adjusted federal long-term rate for the current month3.62%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)
3.62%
REV. RUL. 2024-12 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for June 2024
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit8.10%
Appropriate percentage for the 30% present value low-income housing credit 3.47%
REV. RUL. 2024-12 TABLE 5
Rate Under Section 7520 for June 2024
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest
5.6%

Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of June 2024. See Rev.
Rul. 2024-12, page 1677.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of June 2024. See Rev. Rul.
2024-12, page 1677.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.
Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of June 2024. See Rev. Rul.
2024-12, page 1677.
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
June 2024. See Rev. Rul. 2024-12, page 1677.

June 17, 2024 1678 Bulletin No. 2024–25

Bulletin No. 2024–25 1679 June 17, 2024
26 CFR 1.6418-1 through 1.6418-5; 26 CFR 1.706-
4(e)(2)(ix) and (g)(2)
T.D. 9993
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Transfer of Certain Credits
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final Regulations and removal
of temporary regulations.
SUMMARY: This document contains
final regulations concerning the election
under the Inflation Reduction Act of 2022
to transfer certain tax credits. The regu-
lations describe rules for the election to
transfer eligible credits in a taxable year,
including definitions and special rules
applicable to partnerships and S corpo-
rations and regarding excessive credit
transfer or recapture events. In addition,
the regulations describe rules related to a
required IRS pre-filing registration pro-
cess. These regulations affect eligible tax-
payers that elect to transfer eligible credits
in a taxable year and the transferee tax-
payers to which eligible credits are trans-
ferred.
DATES: Effective Date: These regula-
tions are effective on July 1, 2024.
Applicability Dates: For dates of appli-
cability, see §§1.6418-1(r), 1.6418-2(g),
1.6418-3(f), 1.6418-4(d), and 1.6418-(5)
(j).
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
James Holmes at (202) 317-5114 and Jer-
emy Milton at (202) 317-5665 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION:
This document contains final regula-
tions that amend the Income Tax Reg-
ulations (26 CFR part 1) to implement
the statutory provisions of section 6418
of the Internal Revenue Code (Code),
as enacted by section 13801(b) of Pub-
lic Law 117-169, 136 Stat. 1818, 2009
(August 16, 2022), commonly known
as the Inflation Reduction Act of 2022
(IRA).
Background
I. Overview of section 6418
Section 6418(a) provides that, in the
case of an eligible taxpayer that elects
to transfer to an unrelated transferee
taxpayer all (or any portion specified
in the election) of an eligible credit
determined with respect to the eligible
taxpayer for any taxable year, the trans-
feree taxpayer specified in such election
(and not the eligible taxpayer) is treated
as the taxpayer for purposes of the Code
with respect to such credit (or such por-
tion thereof). Under section 6418(b),
any amount of consideration paid by
the transferee taxpayer to the eligible
taxpayer for the transfer of such credit
(or such portion thereof) is (1) required
to be paid in cash, (2) not included in
the eligible taxpayer’s gross income,
and (3) not allowed as a deduction to the
transferee taxpayer under any provision
of the Code.
Section 6418(f)(2) defines the term
“eligible taxpayer” to mean any taxpayer
that is not described in section 6417(d)(1)
(A) of the Code (that is, any taxpayer that
is not an “applicable entity” by reason of
section 6417(d)(1)(A)).
Section 6418(f)(1)(A) defines the term
“eligible credit” to mean each of the fol-
lowing 11 credits:
(1) So much of the credit for alternative
fuel vehicle refueling property allowed
under section 30C of the Code that, pur-
suant to section 30C(d)(1), is treated as a
credit listed in section 38(b) of the Code
(section 30C credit);
(2) The renewable electricity produc-
tion credit determined under section 45(a)
of the Code (section 45 credit);
(3) The credit for carbon oxide seques-
tration determined under section 45Q(a)
of the Code (section 45Q credit);
(4) The zero-emission nuclear power
production credit determined under sec-
tion 45U(a) of the Code (section 45U
credit);
(5) The clean hydrogen production
credit determined under section 45V(a) of
the Code (section 45V credit);
(6) The advanced manufacturing pro-
duction credit determined under section
45X(a) of the Code (section 45X credit);
(7) The clean electricity production
credit determined under section 45Y(a) of
the Code (section 45Y credit);
(8) The clean fuel production credit
determined under section 45Z(a) of the
Code (section 45Z credit);
(9) The energy credit determined under
section 48 of the Code (section 48 credit);
(10) The qualifying advanced energy
project credit determined under section
48C of the Code (section 48C credit); and
(11) The clean electricity investment
credit determined under section 48E of the
Code (section 48E credit).
Under section 6418(f)(1)(B), an elec-
tion to transfer a section 45 credit, section
45Q credit, section 45V credit, or section
45Y credit is made separately with respect
to each facility and for each taxable year
during the credit period of the respective
credit. Pursuant to section 6418(f)(1)(C)
an eligible credit does not include any
business credit carryforward or business
credit carryback. Section 6418(g)(4) pro-
vides that an eligible taxpayer may not
make an election to transfer credits for
progress expenditures.
Pursuant to section 6418(e)(1), an eli-
gible taxpayer must make an election to
transfer any portion of an eligible credit
on its original tax return for the taxable
year for which the credit is determined
by the due date of such return (including
extensions of time) but such an election
cannot be made earlier than 180 days
after the date of the enactment of sec-
tion 6418 by section 13801(b) of the IRA
(that is, in no event earlier than 180 days
after August 16, 2022, which is February
13, 2023). An eligible taxpayer cannot
revoke an election to transfer any portion
of a credit. Pursuant to section 6418(d), a
transferee taxpayer takes the transferred
eligible credit into account in its first tax-
able year ending with, or after, the eligi-
ble taxpayer’s taxable year with respect to
which the transferred eligible credit was
determined. Section 6418(e)(2) provides
that a transferee taxpayer may not make
any additional transfers of a transferred
eligible credit under section 6418.

June 17, 2024 1680 Bulletin No. 2024–25
II. Section 6418 rules for partnerships
and S corporations
Pursuant to section 6418(c), in the case
of a partnership or an S corporation (as
defined in section 1361(a)) that directly
holds a facility or property for which an
eligible credit is determined: (1) the elec-
tion to transfer an eligible credit is made
at the entity level and no election by any
partner or shareholder is allowed with
respect to such facility or property; (2) any
amount received as consideration for a
transferred eligible credit is treated as tax
exempt income for purposes of sections
705 and 1366 of the Code; and (3) a part-
ner’s distributive share of the tax exempt
income is based on the partner’s distribu-
tive share of the transferred eligible credit.
III. Special rules
Section 6418(g) provides special rules
regarding the elective transfer of certain
credits. Section 6418(g)(1) provides that,
as a condition of, and prior to, any transfer
of any portion of an eligible credit pursu-
ant to section 6418(a), the Secretary of
the Treasury or her delegate (Secretary)
may require such information (including,
in such form or manner as is determined
appropriate by the Secretary, such infor-
mation returns) or registration as the Sec-
retary deems necessary for purposes of
preventing duplication, fraud, improper
payments, or excessive payments under
section 6418.
Pursuant to section 6418(g)(2), if
the Secretary determines that there is an
excessive credit transfer to a transferee
taxpayer, then the tax imposed on the
transferee taxpayer by chapter 1 of the
Code (chapter 1), regardless of whether
such entity would otherwise be subject
to tax under chapter 1, is increased in the
year of such determination by the amount
of the excessive credit transfer plus 20
percent of such excessive credit transfer.
The additional amount of 20 percent of the
excessive credit transfer does not apply if
the transferee taxpayer demonstrates to
the satisfaction of the Secretary that the
excessive credit transfer resulted from
reasonable cause.
An excessive credit transfer is defined
in section 6418(g)(2)(C) as, with respect
to a facility or property for which an elec-
tion is made under section 6418(a) for
any taxable year, an amount equal to the
excess of (i) the amount of the eligible
credit claimed by the transferee taxpayer
with respect to such facility or property
for such taxable year; over (ii) the amount
of the eligible credit that, without applica-
tion of section 6418, would be otherwise
allowable under the Code with respect to
such facility or property for such taxable
year.
Pursuant to section 6418(g)(3), if a
section 48 credit, section 48C credit,
or section 48E credit is transferred, the
basis reduction rules of section 50(c) of
the Code apply to the applicable invest-
ment credit property as if the transferred
eligible credit was allowed to the eligible
taxpayer. Further, if applicable investment
credit property is disposed of, or other-
wise ceases to be investment credit prop-
erty with respect to the eligible taxpayer,
before the close of the recapture period as
described in section 50(a)(1), then certain
notification requirements apply. The eli-
gible taxpayer must notify the transferee
taxpayer of a recapture event in such form
and manner as the Secretary may provide.
In addition, the transferee taxpayer must
notify the eligible taxpayer of the recap-
ture amount, if any, in such form and man-
ner as the Secretary may provide.
Section 6418(h) directs the Secretary to
issue regulations or other guidance as may
be necessary to carry out the purposes of
section 6418, including guidance provid-
ing rules for determining a partner’s dis-
tributive share of the tax exempt income
described in section 6418(c)(1).
IV. Notice 2022-50
On October 24, 2022, the Department
of the Treasury (Treasury Department)
and the IRS published Notice 2022-50,
2022-43 I.R.B. 325, to, among other
things, request feedback from the pub-
lic on potential issues with respect to the
transfer election provisions under section
6418 that may require guidance. Stake-
holders submitted more than 200 letters in
response to Notice 2022-50.
V. Proposed and Temporary Regulations
On June 21, 2023, informed by
the stakeholder feedback received in
response to Notice 2022-50, the Trea-
sury Department and the IRS published
proposed regulations under section 6418
(REG-101610-23) in the Federal Reg-
ister (88 FR 40496) to provide guid-
ance on transfer elections (proposed
regulations). The proposed regulations
included proposed §1.6418-4, which
contained proposed rules identical to
the text of temporary regulations (TD
9975) at §1.6418-4T. Those temporary
regulations also were published on June
21, 2023, in the Federal Register (88
FR 40086) to provide guidance on the
mandatory information and registration
requirements for transfer elections. The
preamble to the proposed regulations
discusses stakeholder feedback received
in response to Notice 2022-50 and
explains in greater detail the provisions
of the proposed regulations.
VI. 6417 Final Regulations
On March 11, 2024, the Treasury
Department and the IRS published final
regulations under section 6417 (TD 9988)
in the Federal Register (89 FR 17546)
to provide guidance on the section 6417
elective payment election (section 6417
final regulations). Among other things,
the section 6417 final regulations provide
guidance on the definition of applicable
entity under section 6417(d)(1)(A).
Summary of Comments and
Explanation of Revisions
This Summary of Comments and
Explanation of Revisions summarizes
comments submitted in response to the
proposed regulations and the revisions to
the proposed regulations reflected in these
final regulations. The Treasury Depart-
ment and the IRS received more than
80 written comments in response to the
proposed regulations. The comments are
available for public inspection at https://
www.regulations.gov or upon request.
A hearing was conducted in person and
telephonically on August 23, 2023, during
which 10 presenters provided testimony.
After full consideration of the comments
received and testimony provided, these
final regulations adopt the proposed reg-
ulations with modifications in response
to such comments and testimony as

Bulletin No. 2024–25 1681 June 17, 2024
described in this Summary of Comments
and Explanation of Revisions.
Comments merely summarizing or
interpreting the proposed regulations,
recommending statutory revisions to sec-
tion 6418 or other statutes, or addressing
issues that are outside the scope of this
rulemaking, such as the calculation of eli-
gible credits (including any bonus credit
amounts) or recommended changes to IRS
forms, are beyond the scope of these reg-
ulations and are generally not described in
this preamble.
I. General Rule and Definitions
Proposed §1.6418-1 would have
described general rules related to the
transfer of eligible credits. Proposed
§1.6418-1(a) would have provided an
overview of a transfer of eligible cred-
its, and paragraphs (b) through (q) would
have provided definitions of terms under
the section 6418 regulations. Commenters
addressed certain aspects of the proposed
definitions, as described in this part I. To
the extent a definition in §1.6418-1(b)
through (q) is not addressed in this part I
and no comment addressed it, such defini-
tion is adopted by this Treasury Decision
as proposed.
A. Eligible Taxpayer
Section 6418(f)(2) defines the term
“eligible taxpayer” to mean any taxpayer
that is not described in section 6417(d)(1)
(A). Proposed §1.6418-1(b) would have
clarified that the term “eligible taxpayer”
means any taxpayer (as defined in section
7701(a)(14) of the Code), other than one
described in section 6417(d)(1)(A) and
§1.6417-1(b). The intended cite in the
proposed regulations was to §1.6417-1(c),
rather than §1.6417-1(b). As the pream-
ble to the proposed regulations noted, the
term “taxpayer” in section 7701(a)(14)
means “any person subject to any internal
revenue tax” and generally includes enti-
ties that have a United States employment
tax or excise tax obligation even if they
do not have a United States income tax
obligation.
A commenter recommended that an
eligible taxpayer also include any person
that does not have a United States inter-
nal revenue tax obligation, such as a tax-
payer that is only subject to the taxes of a
territory of the United States. Broadening
the definition of eligible taxpayer in sec-
tion 6418(f)(2) is beyond the definition of
taxpayer in section 7701(a)(14) and is not
supported by section 6418. Section 6418(f)
(2) defines eligible taxpayer as “any tax-
payer” not described in section 6417(d)
(1)(A). Section 7701(a)(14) provides the
definition of taxpayer for purposes of
the Code. Pursuant to section 7701(a),
the definition under section 7701(a)(14)
applies to all Code provisions unless a
different definition is otherwise distinctly
expressed or the definition in section
7701(a)(14) is manifestly incompatible
with the intent of section 6418. Under sec-
tion 6418, there is no distinct expression
that the term “taxpayer” should include
those not subject to any United States
tax obligations, and there is no indication
that the definition in section 7701(a)(14)
is incompatible with the intent of section
6418. Thus, it is appropriate to use the
definition of taxpayer in section 7701(a)
(14) for purposes of defining eligible tax-
payer for purposes of section 6418, and
these regulations finalize the definition of
eligible taxpayer as proposed.
A commenter requested a clarifica-
tion that a partnership wholly or partially
owned by applicable entities described
in section 6417(d)(1)(A) qualifies as an
eligible taxpayer under section 6418(f)
(2). The Treasury Department and the
IRS agree that if such a partnership has
not elected to be treated as an applica-
ble entity with respect to the section 45Q
credit, section 45V credit, or section 45X
credit, it can otherwise qualify as an eli-
gible taxpayer. Section 6418(f)(2) defines
eligible taxpayer as a taxpayer other than
one described in section 6417(d)(1)(A).
Under section 6417 and the section 6417
final regulations, a partnership (regardless
of the tax status of its partners) can only
be treated as an applicable entity with
respect to the section 45Q credit, section
45V credit, or section 45X credit and only
if the partnership makes an elective pay-
ment election. Further, section 7701(a)
(14) defines the term “taxpayer” as any
person subject to any internal revenue tax.
The term “person” is defined in section
7701(a)(1) and includes a partnership.
Consequently, if a partnership has not
elected to be treated as an applicable entity
with respect to the section 45Q credit, sec-
tion 45V credit, or section 45X credit, it
can qualify as an eligible taxpayer.
The same commenter also sought to
clarify that a partnership that has one or
more applicable entity partners described
in section 6417(d)(1)(A) is entitled to
transfer the entirety of the eligible cred-
its determined with respect to a property
or facility held directly by the partnership
without a reduction of the eligible credits
allocable to the applicable entity partners.
The Treasury Department and the IRS
agree that such a partnership is entitled to
transfer the entirety of the eligible credits
determined with respect to a property or
facility held directly by the partnership;
however, section 50(b)(3) and (4) may
limit the amount of eligible investment
tax credits (ITCs) determined with respect
to any tax-exempt or government entity
partner.
B. Eligible credit property
Section 6418(a) states that an eligible
taxpayer can elect to transfer all (or any
portion specified in the election) of an
eligible credit determined with respect to
such eligible taxpayer. Proposed §1.6418-
1(a) would have provided that an eligible
taxpayer may make a transfer election to
transfer any specified portion of an eli-
gible credit determined with respect to
any eligible credit property of the eligible
taxpayer for any taxable year. Proposed
§1.6418-1(d) would have defined the
term “eligible credit property” as the unit
of property of an eligible taxpayer with
respect to which the amount of an eligible
credit is determined. Proposed §1.6418-
1(d)(1) through (11) would have described
the unit of property that is considered an
eligible credit property for each of the 11
eligible credits.
A commenter recommended that the
final regulations use the same concept of
a unit of property as is used for the var-
ious underlying eligible credit provisions
(for example, energy property or energy
project for purposes of section 48, and
qualified facility for purposes of section
45). The proposed regulations referenced
the statutory rules for each eligible credit
to determine the appropriate unit of mea-
surement for section 6418 registration and
election and provided additional infor-

June 17, 2024 1682 Bulletin No. 2024–25
mation relevant for each eligible credit.
For example, proposed §1.6418-1(d)(2)
would have provided that, in the case of a
section 45 credit, the relevant unit of prop-
erty is a qualified facility described in sec-
tion 45(d). Likewise, proposed §1.6418-
1(d)(9) would have provided that, in the
case of a section 48 credit, the relevant
unit of property is an energy property
described in section 48, or, at the option of
the taxpayer, an energy project described
in section 48(a)(9)(A)(ii) and defined in
guidance. The proposed regulations, with-
out modification, are consistent with this
comment. Thus, these final regulations,
consistent with the proposed regulations,
base the definition of an eligible credit
property on the underlying Code provi-
sions for the eligible credits and no further
changes are necessary.
Another commenter asked for clarifi-
cation that section 48 credits determined
with respect to energy property qualifying
as “energy storage technology” under sec-
tion 48(c)(6)(A) would be eligible credits
that could be transferred under section
6418. The preamble to the proposed reg-
ulations provided in part that energy prop-
erty is comprised of all components of
property necessary to generate electricity
up to the point of transmission or distribu-
tion. The commenter raised that “energy
storage technology” is specifically desig-
nated as “energy property” under section
48(a)(3)(A)(ix), but unlike other forms
of “energy property,” it does not generate
electricity. The Treasury Department and
the IRS confirm that, to the extent a sec-
tion 48 credit is determined with respect
to energy property held by an eligible tax-
payer, whether the credit is with respect to
energy storage technology or other energy
property, such credit is an eligible credit
that can be transferred under section 6418
by the eligible taxpayer.
Other commenters recommended
revising the definition of eligible credit
property for purposes of section 45Q.
Proposed §1.6418-1(d)(3) would have
provided that an eligible credit is deter-
mined, for purposes of section 45Q, based
on a single process train of carbon cap-
ture equipment described in §1.45Q-2(c)
(3). Commenters recommended that, for
the section 45Q credit, the definition of
eligible credit property be a component
of a single process train for the capture,
disposal, utilization, or injection of qual-
ified carbon oxide, rather than a single
process train of carbon capture equipment
described in §1.45Q-2(c)(3). Other com-
menters urged that the final regulations
reconcile the proposed rules with Rev.
Rul. 2021-13, 2021-30 I.R.B. 152, under
which a taxpayer need own only one com-
ponent in a single process train to be the
person to whom the section 45Q credit is
attributable to (assuming the taxpayer also
meets the requirements of section 45Q(a),
as applicable). The Treasury Department
and the IRS agree that guidance under
section 45Q does not require a taxpayer to
own every component of a single process
train and have revised the language under
§1.6418-1(d)(3) (defining eligible credit
property with respect to the section 45Q
credit) to state “[i]n the case of a section
45Q credit, a component of carbon cap-
ture equipment within a single process
train described in §1.45Q-2(c)(3).”
C. Paid in Cash
Section 6418(b)(1) requires that any
amount paid by a transferee taxpayer
to an eligible taxpayer as consideration
for a transfer be paid in cash. Proposed
§1.6418-1(f) would have defined the
term “paid in cash” to mean a payment in
United States dollars that (1) is made by
cash, check, cashier’s check, money order,
wire transfer, automated clearing house
(ACH) transfer, or other bank transfer of
immediately available funds; (2) is made
within the period beginning on the first
day of the eligible taxpayer’s taxable year
during which a specified credit portion is
determined and ending on the due date for
completing a transfer election statement
(as provided in proposed §1.6418-2(b)
(5)(iii)); and (3) may include a trans-
feree taxpayer’s contractual commitment
to purchase eligible credits with United
States dollars in advance of the date a
specified credit portion is transferred to
such transferee taxpayer if all payment of
United States dollars are made in a man-
ner described in proposed §1.6418-1(f)(1)
and during the time period in proposed
§1.6418-1(f)(2).
Several commenters recommended
revising the proposed paid in cash rule so
that advanced payments could be made
for eligible credits that will be deter-
mined in later taxable years. For exam-
ple, commenters specifically requested
that the final regulations allow upfront
payments for transfers of eligible credits
that are production tax credits (PTCs) that
are expected to be determined in a future
taxable year. Commenters suggested that
such a rule would more closely align the
timing of payments for eligible credits
that are PTCs with the timing of payments
for eligible credits that are ITCs. Com-
menters raised that upfront payments for
PTCs determined in future taxable years
are standard in tax equity transactions and
that allowing for upfront payments for
future PTCs under section 6418 would
more closely align transferability with
traditional tax equity structures. Another
commenter asked for clarification that the
use of certain loan structures would not
violate the paid in cash rule. Specifically,
the commenter requested confirmation
that loans, including security arrange-
ments, made on arm’s length terms by a
transferee taxpayer or a third party to an
eligible taxpayer would not be treated
as an upfront payment under an eligible
credit purchase and sale agreement or oth-
erwise recharacterized.
Allowing advanced payments prior to
the taxable year an eligible credit is deter-
mined may more closely align the section
6418 regulations with current tax equity
transactions. However, proposed §1.6418-
1(f)(2) would have specifically provided
a timing safe harbor that is intended to
provide certainty as to the treatment of
payments of United States dollars made
during the prescribed time period. Allow-
ing advanced payments would also raise
several complex legal and administrative
issues, such as whether an excessive credit
transfer has occurred or if the eligible tax-
payer has gross income if prepaid eligible
credits were not transferred in a later tax
year. No commenter addressed the admin-
istrative and legal challenges of allowing
for advanced payments. Based on these
reasons, the Treasury Department and the
IRS have adopted the paid in cash defini-
tion of the proposed regulations without
change.
Further, the Treasury Department and
the IRS note that there is no prohibition
on either a transferee taxpayer or another
third-party loaning funds to an eligible
taxpayer, including loans secured by an

Bulletin No. 2024–25 1683 June 17, 2024
eligible credit purchase and sale agree-
ment, provided such loans are at arm’s
length and treated as loans for Federal tax
purposes. Whether such loans are treated
as upfront payments for eligible credits or
otherwise recharacterized is an analysis
based on the facts and circumstances of
the loan and is otherwise outside the scope
of these final regulations.
D. Specified Credit Portion
Section 6418(a) provides that an eli-
gible taxpayer can elect to transfer all (or
any portion specified in the election) of
an eligible credit determined with respect
to such taxpayer. Proposed §1.6418-1(h)
would have defined the term “specified
credit portion” to mean a proportionate
share (including all) of an eligible credit
determined with respect to a single eli-
gible credit property of the eligible tax-
payer that is specified in a transfer elec-
tion. The proposed regulations further
provided that a specified credit portion of
an eligible credit reflects a proportionate
share of each bonus credit amount that is
taken into account in calculating the entire
amount of eligible credit determined with
respect to a single eligible credit property.
Thus, under the proposed regulations, an
eligible taxpayer would not be permit-
ted to sever bonus credit amounts taken
into account to determine an eligible
credit from the base eligible credit deter-
mined with respect to the relevant eligi-
ble credit property and separately transfer
any bonus credit amount or base eligible
credit amount (horizontal credit trans-
fer). Instead, an eligible taxpayer would
be permitted to transfer the entire eligi-
ble credit (or portion of the entire eligible
credit, which would include a proportion-
ate amount of any component bonus credit
amounts taken into account to determine
the entire eligible credit) determined with
respect to a single eligible credit property
(vertical credit transfer).
Several commenters recommended that
the final regulations allow for horizontal
credit transfers and that the term “portion”
in section 6418(a) should be broadly con-
strued. As support, commenters contended
that horizontal credit transfers would
increase flexibility and marketability of
eligible credits and allow eligible taxpay-
ers to better allocate credit risk among
various transferee taxpayers. Commenters
also asserted that requiring vertical credit
transfers favors large investors with suf-
ficient resources for diligence, finance,
and risk tolerance. One commenter stated
that requiring vertical credit transfers will
increase the burden of tax administration
because auditing a transferee taxpayer’s
portion of a vertical credit transfer would
require a larger audit team and auditors
conversant with the rules applicable to the
underlying eligible credits and the rules
applicable to the bonus credit amounts.
Another commenter suggested the final
regulations allow for eligible taxpayers to
elect either a vertical or a horizontal credit
transfer for each specified credit portion.
Each eligible credit determined with
respect to a single eligible credit prop-
erty is a single eligible credit that cannot
be separated into a base credit amount
and bonus credit amounts for purposes of
making transfer elections. The language
in section 6418(a) that refers to a portion
specified in the election is better under-
stood to refer to a percentage of a single
overall eligible credit amount, rather than
to a particular “layer” of credit. Further,
while commenters suggested allowing
horizontal transfers of eligible credits,
none of the commenters fully addressed
the potential administrative issues with
the approach. For example, allowing hor-
izontal credit transfers would add another
layer of compliance due to the need for
taxpayers and the IRS to track all base and
bonus credit amounts separately. More-
over, a bonus credit amount is not itself an
eligible credit but only an amount taken
into account to determine the single eligi-
ble credit with respect to an eligible credit
property. In this regard, the pre-filing reg-
istration portal does not allow for registra-
tion numbers associated only with bonus
credit amounts. Thus, these final regu-
lations adopt the definition of specified
credit portion in proposed §1.6418-1(h)
without change.
II. Rules for Making Transfer Elections
A. In general
Proposed §1.6418-2 would have pro-
vided general rules for an eligible tax-
payer to make a transfer election under
section 6418 with respect to any eligible
credit determined with respect to such tax-
payer. Proposed §1.6418-2(a)(1) would
have provided that an eligible taxpayer
can make an election as provided in pro-
posed §1.6418-2. Proposed §1.6418-2(a)
(2) through (4) would have provided
rules regarding making multiple transfer
elections, rules for determining the eligi-
ble taxpayer in certain ownership situa-
tions, and rules describing circumstances
in which no transfer election is allowed.
Commenters addressed aspects of these
proposed rules, as discussed in this part
II of the Summary of Comments and
Explanation of Revisions. These final reg-
ulations generally adopt the rules as pro-
posed, with the modifications described in
this part II of the Summary of Comments
and Explanation of Revisions.
Proposed §1.6418-2(a)(2) would
have provided that an eligible taxpayer
may make multiple transfer elections to
transfer one or more specified credit por-
tion(s) to multiple transferee taxpayers,
provided that the aggregate amount of
specified credit portions transferred with
respect to any single eligible credit prop-
erty does not exceed the amount of the
eligible credit determined with respect to
the eligible credit property. A commenter
asked for clarification of whether an eli-
gible taxpayer may transfer all or a por-
tion of an eligible credit to more than one
taxpayer. The Treasury Department and
the IRS confirm that the proposed regula-
tions, as drafted, would have allowed an
eligible taxpayer to make multiple trans-
fer elections of specified credit portions of
an eligible credit determined with respect
to an eligible credit property subject to
the limitation that such portions, in the
aggregate, cannot exceed the amount of
the determined eligible credit. Because
proposed §1.6418-2(a)(2) would have
already provided this result, a revision
to the proposed rules is unnecessary, and
these final regulations adopt the proposed
rule without change.
Proposed §1.6418-2(a)(3) would have
provided rules for transfer elections in
certain ownership situations, specifically
with respect to ownership through a disre-
garded entity, as an undivided ownership
interest, as a member of a consolidated
group (as defined in §1.1502-1), and for
partnerships and S corporations. One
commenter asked for clarity as to whether

June 17, 2024 1684 Bulletin No. 2024–25
a grantor trust is treated as a disregarded
entity in determining ownership of an eli-
gible credit property, and, if a grantor trust
directly holds an eligible credit property,
which party registers the property and
makes a transfer election. The Treasury
Department and the IRS agree that these
final regulations should provide rules for
transfer elections if eligible property is
held directly by a grantor trust. Accord-
ingly, the final regulations add §1.6418-
2(a)(3)(v) to provide that if an eligible
taxpayer is a grantor or any other person
that is treated as the owner of any portion
of a trust as described in section 671 of
the Code, then the eligible taxpayer may
make a transfer election in the manner pro-
vided in §1.6418-2 for any eligible credits
determined with respect to eligible credit
property held directly by the portion of the
trust that the eligible taxpayer is treated as
owning under section 671.
Proposed §1.6418-2(a)(4) would have
described three circumstances in which
no transfer election can be made. First,
consistent with section 6418(g)(4), the
proposed regulations would have pre-
cluded any election with respect to any
amount of an eligible credit determined
based on progress expenditures that is
allowed pursuant to rules similar to the
rules of section 46(c)(4) and (d) (as in
effect on the day before the date of the
enactment of the Revenue Reconciliation
Act of 1990). Second, consistent with sec-
tion 6418(b)(1), proposed §1.6418-2(a)
(4)(ii) would have precluded a transfer
election if an eligible taxpayer receives
any amount not paid in cash (as defined
in proposed §1.6418-1(f)) as consider-
ation in connection with the transfer of a
specified credit portion. Third, consistent
with section 6418(a), proposed §1.6418-
2(a)(4)(iii) would have provided that no
election is allowed if eligible credits are
not determined with respect to an eligible
taxpayer. As a result, proposed §1.6418-
2(a)(4)(iii) would have provided as an
example that a section 45Q credit allow-
able to an eligible taxpayer because of
an election under section 45Q(f)(3)(B),
or a section 48 credit allowable to an
eligible taxpayer because of an election
made under section 50(d)(5) and §1.48-4,
although described in proposed §1.6418-
1(c)(2), is not an eligible credit that can
be transferred because such credit is not
determined with respect to the eligible
taxpayer.
A commenter suggested that the final
regulations allow transfers of section 48
ITCs before the taxable year in which
the energy property is placed in service.
While not explicitly referenced, the com-
menter appears to be requesting that prog-
ress expenditures (under section 48(b)) be
permitted to be transferred under section
6418. Section 6418(g)(4) and proposed
§1.6418-2(a)(4)(i) both directly prohibit
making a transfer election if an eligible
credit is related to progress expenditures.
Based on this, these final regulations
adopt the rule in proposed §1.6418-2(a)
(4)(i) without change.
Multiple commenters advocated that
the proposed regulations be modified to
permit a taxpayer that is allowed a sec-
tion 45Q credit due to an election under
section 45Q(f)(3)(B) to make a trans-
fer election with respect to the section
45Q credit. Commenters generally sug-
gested that the proposed rule is incor-
rect because (1) ownership of the single
process train is not necessary for credit
determination, and (2) a taxpayer claim-
ing the credit and making an election
under section 45Q(f)(3)(B) does in fact
determine the credit because of their
activities. Commenters relied in part on
the language in proposed §1.6418-2(d)
(1), which states that “[f]or an eligible
credit to be determined with respect to
an eligible taxpayer, the eligible tax-
payer must own the underlying eligible
credit property or, if ownership is not
required, otherwise conduct the activi-
ties giving rise to the underlying eligible
credit [emphasis added].”
A taxpayer that is allowed a section
45Q credit as a result of an election
under section 45Q(f)(3)(B) is not the
taxpayer with respect to which the sec-
tion 45Q credit is determined. Under
section 45Q(f)(3)(A)(ii), a section 45Q
credit is attributable to the person that
owns the carbon capture equipment and
physically or contractually ensures the
capture and disposal, utilization, or use
as a tertiary injectant of such qualified
carbon oxide. Further, under §1.45Q-
1(h)(3), it is the taxpayer described in
§1.45Q-1(h)(1) to whom the section 45Q
credit is attributable (electing taxpayer),
that may elect to allow the person that
enters into a contract with the electing
taxpayer to dispose of the qualified car-
bon oxide (disposer), utilize the qualified
carbon oxide (utilizer), or use the quali-
fied carbon oxide as a tertiary injectant
to claim the credit (section 45Q(f)(3)
(B) election). Contrary to commenters’
assertions, it is not sufficient for a party
to only conduct carbon capture activities
to be eligible for a section 45Q credit.
Further, the ownership requirement in
the section 45Q statute and regulations
means the commenters’ suggestions that
the language in proposed §1.6418-2(d)
(1) allows a section 45Q credit to be
determined with respect to an eligible
taxpayer if the party “otherwise conducts
the activities giving rise to the underly-
ing applicable credit” is misplaced. That
language in proposed §1.6418-2(d)(1)
applies only in the case of an eligible
credit for which ownership of property is
not required, which is not the case with
respect to a section 45Q credit. Thus,
these final regulations clarify in §1.6418-
2(d)(1) that the only eligible credit for
which ownership is not required is the
section 45X credit. While the activities
of a contractor may be necessary for a
section 45Q credit to be determined, ulti-
mately, the credit is attributable to and
determined by the person that both owns
the equipment and physically or contrac-
tually ensures the capture and disposal,
injection, or utilization of such qualified
carbon oxide. Thus, these final regu-
lations adopt the proposed regulations
without change on this issue.
A commenter asked that separate,
unrelated taxpayers to which section 45Q
credits and section 45Z credits are deter-
mined with respect to the same quali-
fied facility each be permitted to make
a separate transfer election with respect
the section 45Q credits or section 45Z
credits determined with respect to such
taxpayer. Specifically, the commenter
requested clarification as to who is an eli-
gible taxpayer if more than one eligible
credit (for example, a section 45Q credit
and a section 45Z credit) is determined
with respect to two unrelated, eligible
taxpayers for units of property or a facil-
ity within the same general geographic
location. The commenter stated that the
qualified facility definition under section
45Z(d)(4) should not preclude an owner

Bulletin No. 2024–25 1685 June 17, 2024
and producer taxpayer from making a
transfer election, even if an unrelated
taxpayer who is eligible for the section
45Q credit makes a transfer election in
the same taxable year.
It is beyond the scope of these final
regulations to address underlying require-
ments of eligible credits, such as the
requirements of sections 45Q and 45Z,
and who may be eligible for those cred-
its. The Treasury Department and the IRS
will consider this comment in connection
with drafting additional guidance under
sections 45Q and 45Z.
Several commenters recommended that
the final regulations allow transfer elec-
tions following a lease passthrough elec-
tion under the rules of section 50(d)(5),
both generally and with specific additional
rules (such as, revising §1.48-4 to require
a lessor to commit to not making an elec-
tion to transfer under section 6418 and
requiring the lessee to complete pre-filing
registration). One commenter stated that
the proposed regulations are inconsistent
with existing tax law, suggesting that the
original inclusion of the lease passthrough
election obviated the need to engage in
more complicated sale-leaseback transac-
tions in order to calculate the credit based
on fair market value of a property rather
than on its cost. The commenter posited
that the proposed regulations would upend
that balance by putting sale-leaseback
transactions on unequal footing with lease
passthrough structures in the context of a
contemplated transfer of eligible credits,
which the commenter thought was pre-
cisely the outcome that Congress sought
to avoid in 1962 at the time of the intro-
duction of the ITC.
There is a distinction between
sale-leaseback transactions under section
50(d)(4) and lease passthrough elections
under former section 48(d) (pursuant to
section 50(d)(5)). In the latter case, it is
the owner or lessor that is the party with
respect to which the credit is determined,
and not the lessee that is allowed to claim
the credit as a result of the election. There-
fore, the lessee does not meet the require-
ment of section 6418(a), which requires
the eligible credit to be determined with
respect to the eligible taxpayer making the
transfer election. For the reasons stated,
these final regulations adopt the proposed
rule without change.
B. Manner and due date of making a
transfer election
1. In general
Proposed §1.6418-2(b)(1) would have
provided that an eligible taxpayer must
make a transfer election to transfer a spec-
ified credit portion on the basis of a sin-
gle eligible credit property. As an exam-
ple, the proposed regulations would have
provided that an eligible taxpayer that
determines eligible credits with respect to
two eligible credit properties would need
to make a separate transfer election with
respect to any specified credit portion
determined with respect to each eligible
credit property. Because no comments
were received on proposed §1.6418-2(b)
(1), these final regulations adopt this pro-
vision without change. Some commenters
requested that grouping of eligible credit
properties be permitted for purposes of
registration and making a transfer elec-
tion. These comments are discussed in
part IV of this Summary of Comments and
Explanation of Revisions.
2. Special rules for certain eligible credits
Section 6418(f)(1)(B) provides that, in
the case of any eligible credit under sec-
tions 45, 45Q, 45V, or 45Y, an election is
made (1) separately with respect to each
facility for which a credit is determined,
and (2) for each taxable year during the
10-year period beginning on the date such
facility was originally placed in service
(or, in the case of a section 45Q credit,
for each taxable year during the 12-year
period beginning on the date the single
process train of carbon capture equip-
ment was originally placed in service).
Proposed §1.6418-2(b)(2) would have
provided rules consistent with section
6418(f)(1)(B). Because no comments
were received on proposed §1.6418-2(b)
(2), these final regulations adopt this pro-
vision without change.
3. Manner of making a valid transfer
election
Proposed §1.6418-2(b)(3) would have
provided rules for making a valid transfer
election and included that a transfer elec-
tion is made based on each specified credit
portion with respect to a single eligible
credit property. To make a valid transfer
election, an eligible taxpayer as part of fil-
ing an annual tax return (or a return for a
short year within the meaning of section
443 of the Code), must include the fol-
lowing: (1) a properly completed relevant
source credit form for the eligible credit
for the taxable year that the eligible credit
was determined; (2) a properly completed
Form 3800, General Business Credit (or
its successor); (3) a schedule attached to
the Form 3800 (or its successor) showing
the amount of eligible credit transferred
for each eligible credit property, except
as otherwise provided in guidance; (4) a
transfer election statement as described
in proposed §1.6418-2(b)(5); and (5) any
other information related to the election
specified in guidance. While comments
were received on individual aspects of
this proposed rule as described later in this
Summary of Comments and Explanation
of Revisions, there were no comments
received on proposed §1.6418-2(b)(3),
and so these final regulations adopt the
proposed rule without substantive change.
However, the final regulations clarify that
the registration number received during
the required pre-filing registration (as
described in proposed §1.6418-4) related
to an eligible credit property with respect
to which a transferred eligible credit was
determined must be included on a properly
completed relevant credit source form.
4. Due date and original return
requirement of a transfer election
Section 6418(e)(1) states that an elec-
tion under section 6418(a) to transfer
any portion of an eligible credit must be
made not later than the due date (including
extensions of time) for the return of tax
for the taxable year for which the credit
is determined, but in no event earlier than
180 days after the date of the enactment
of this section. Proposed §1.6418-2(b)(4)
would have provided that a transfer elec-
tion must be made on an original return not
later than the due date (including exten-
sions) for the original return of the eligible
taxpayer for the taxable year for which the
eligible credit is determined. The proposed
regulations stated that no transfer election
could be made or revised on an amended
return or by filing an administrative

June 17, 2024 1686 Bulletin No. 2024–25
adjustment request under section 6227 of
the Code (AAR). The preamble to the pro-
posed regulations clarified that an original
return includes a superseding return filed
on or before the due date (including exten-
sions). The proposed regulations also did
not provide for relief under §§301.9100-1
through 301.9100-3 (9100 relief) for a late
transfer election.
Some commenters asked that a trans-
fer election be permitted on an amended
return or AAR and/or that a taxpayer be
permitted an extension of time under the
9100 relief procedures to make a late
election. Commenters raised concerns
that the amount of information required
to obtain a registration number and file
a transfer election is substantial, and that
given there are bound to be omissions
and misstatements, an eligible taxpayer
should have the ability to cure errors or
omissions on an amended return or pur-
suant to an AAR. Further, commenters
urged that 9100 relief should be available
in situations in which the parties acted in
good faith with respect to a transfer elec-
tion.
The section 6418 transfer election
process is novel and eligible taxpayers
may experience inadvertent errors or
omissions. The statutory text of section
6418(e), however, provides that a transfer
election must not be made “later than the
due date (including extensions of time)
for the return of tax for the taxable year
for which the credit is determined.” The
preamble to the proposed regulations pro-
vided that eligible taxpayers could make a
transfer election on a superseding return
up until the extended due date for the
return.
Neither the Code nor regulations define
a superseding return, but administrative
IRS guidance provides that a supersed-
ing return is a return filed subsequent to
the originally-filed return but before the
due date for filing the return (including
extensions). For example, if an eligible
taxpayer subject to an automatic 6-month
extension files an original return on the
due date (excluding extensions) and then
files a subsequent return within the auto-
matic extension period, the subsequent
return would generally be considered a
superseding return. Unlike a superseding
return, an amended return is a return filed
after the taxpayer filed an original return
and after the due date for filing the return
(including extensions).
Accordingly, these final regulations
modify proposed §1.6418-2(b)(4) by
clarifying that a transfer election filed
by an electing taxpayer may be made or
revised on a superseding return, but not
on an amended return or AAR. These final
regulations further clarify that a transfer
election cannot be made for the first time
on an amended return, withdrawn on an
amended return, or made or withdrawn by
filing an AAR, although a numerical error
with respect to a properly claimed transfer
election may be corrected on an amended
return or by filing an AAR if necessary.
This clarification is intended to address
situations in which an eligible taxpayer
intended to make a transfer election but
made a reporting error with respect to an
element of a valid election (for example,
miscalculating the amount of the eligible
credit on the original return or making
a typographical error in the process of
inputting a registration number), and to
allow the eligible taxpayer to correct any
errors that would result in a denial of the
transfer election. The provision cannot be
used to revoke a transfer election made
on an original return or to make a transfer
election for the first time on an amended
return. In addition, the eligible taxpayer’s
original return (including a superseding
return), which must be signed under pen-
alties of perjury, must contain all of the
information, including a registration num-
ber, required by these final regulations. In
order to correct an error on an amended
return or AAR, an eligible taxpayer must
have made an error in the information
included on the original return such that
there is a substantive item to correct; a
taxpayer cannot correct a blank item or an
item that is described as being “available
upon request.”
The Treasury Department and the IRS
note that the rules described in this part
II.B.4 of the Summary of Comments
and Explanation of Revisions, regarding
the original return requirement, apply to
transfer elections made on an originally
filed return of the eligible taxpayer. A
transferee taxpayer, however, may take
a transferred specified credit portion into
account on a properly filed amended
return or AAR, or correct the amount of
the transferred specified credit portion on
a properly filed amended return or AAR
to, for example, avoid a determination by
the IRS that the transferee taxpayer is sub-
ject to an excessive credit transfer under
§1.6418-5(a). Excessive credit transfers
are discussed in more detail in part V.A of
this Summary of Comments and Explana-
tion of Revisions.
An eligible taxpayer may file an
amended return or an AAR to adjust the
amount of the eligible credit following a
timely and properly filed transfer election.
Such an adjustment may affect the infor-
mation that was reported on the transfer
election statement under §1.6418-2(b)
(5)(ii), for example, the total amount of
the credit determined with respect to the
eligible credit property and any corre-
sponding specified credit portion being
transferred. Some commenters suggested
that the final regulations provide clarity
for a taxpayer that may need to correct the
amount of an eligible credit reported on
its tax return. The final regulations modify
proposed §1.6418-2(b)(4) to provide that
an eligible taxpayer may, after making
a timely and complete transfer election,
file an amended return or AAR, if appli-
cable, to adjust the amount of the eligible
credit reported on the eligible taxpayer’s
original return if the amount of the eligi-
ble credit was incorrectly reported on the
original return. Under §1.6418-2(b)(4)(ii)
(B), to the extent the eligible taxpayer’s
correction of an eligible credit results in
an increase in the amount of the eligi-
ble credit reported, such amount must be
reflected on the credit source forms with
the eligible taxpayer’s amended return
or AAR, if applicable. However, such
increase cannot be reflected by either
the eligible taxpayer or the transferee
taxpayer as a transferred specified credit
portion on the transfer election statement,
in accordance with the rules set forth in
§1.6418-2(b)(4)(i). Those rules, regarding
the due date and original return require-
ment of a transfer election, are described
in greater detail in part II.B.3 and 4 of the
Summary of Comments and Explanation
of Revisions.
Under §1.6418-2(b)(4)(ii)(C), to the
extent the eligible taxpayer’s correction of
an eligible credit results in a decrease in
the amount of the eligible credit reported,
such amount must be reflected on the
credit source forms with the eligible tax-

Bulletin No. 2024–25 1687 June 17, 2024
payer’s amended return or AAR, if appli-
cable, and the transfer election statement
reducing the amount of the credit reported.
The amount of the decrease first reduces
the amount of the eligible credit that is
retained, if any (and thus not transferred)
by the eligible taxpayer. Any portion of
such decrease that remains after reducing
the eligible credit retained by the eligible
taxpayer then reduces the amount reported
by the transferee taxpayer. If the eligible
credit was transferred to more than one
transferee taxpayer, the reduction to each
transferee taxpayer’s specified credit por-
tion is on a pro rata basis. The amount of
any cash consideration retained by the
eligible taxpayer after accounting for any
reduction in the amount of the eligible
credit transferred to the transferee tax-
payer(s) cannot be excluded from gross
income. These rules are further described
in §1.6418-2(e)(2). The final regulations
provide examples illustrating these rules.
If an eligible taxpayer has made an
adjustment such that the specified credit
portion is reduced, depending on the facts
and circumstances, a transferee taxpayer
may be at risk for an excessive credit
transfer, should the IRS make such a
determination prior to the transferee tax-
payer making its own adjustment to cor-
rect the specified credit portion through a
qualified amended return under §1.6664-
2(c)(3). The eligible taxpayer itself may
have income to include to the extent it
received a payment that directly relates to
the excessive credit transfer.
These final regulations do not mandate
a reporting or notification requirement on
the eligible taxpayer or the transferee tax-
payer in the event of an adjustment that
occurs after a timely and properly filed
transfer election. The eligible taxpayer
and the transferee taxpayer may freely
contract for such a requirement. Never-
theless, this part II.B.4 of the Summary of
Comments and Explanation of Revisions
acknowledges that an adjustment to the
eligible credit determined by an eligible
taxpayer may impact the tax liability of a
transferee taxpayer.
Additionally, these final regulations
modify the proposed regulations to permit
an extension of time under §301.9100-
2(b) to allow for an automatic six-month
extension of time from the due date of the
return (excluding extensions) to make the
election prescribed in section 6418(e)(1).
A transfer election is a statutory election
because its due date is prescribed by stat-
ute. As such, the section 9100 relief proce-
dures only apply insofar as the late election
is being filed pursuant to §301.9100-2(b),
which requires that the taxpayer timely
filed its return for the year the election
should have been made. Relief under this
provision will only apply to taxpayers that
have not received an extension of time
to file a return after the original due date
(excluding extensions). Taxpayers eligible
for this relief must take corrective action
under §301.9100-2(c) and follow the pro-
cedural requirements of §301.9100-2(d).
5. Transfer election statement
Proposed §1.6418-2(b)(5)(i) gener-
ally would have defined a transfer elec-
tion statement as a written document that
describes the transfer of a specified credit
portion between an eligible taxpayer and
transferee taxpayer and would have pro-
vided rules for both an eligible taxpayer
and transferee taxpayer to attach a trans-
fer election statement to their respective
return. The proposed regulations would
have provided that any document can be
used that meets the requirements of pro-
posed §1.6418-2(b)(5)(ii), with the doc-
ument labeled as a “Transfer Election
Statement” that is attached to a return.
The information required in proposed
§1.6418-2(b)(5)(ii) would not otherwise
have limited any other information that the
eligible taxpayer and transferee taxpayer
may agree to provide in connection with
the transfer of any specified credit portion.
The proposed regulations would have pro-
vided that the statement must be signed
under penalties of perjury by an individual
with authority to legally bind the eligible
taxpayer and must also include the written
consent of an individual with authority to
legally bind the transferee taxpayer.
Proposed §1.6418-2(b)(5)(ii) described
the information required in a transfer elec-
tion statement, which generally would
have included: (1) information related to
the transferee taxpayer and the eligible
taxpayer; (2) a statement that provides
the necessary information and amounts
to allow the transferee taxpayer to take
into account the specified credit portion
with respect to the eligible credit prop-
erty; (3) an attestation that the parties are
not related (within the meaning of section
267(b) or 707(b)(1)); (4) a statement or
representation from the eligible taxpayer
that it has or will comply with all relevant
requirements to make a transfer election;
(5) a statement or representation from
the eligible taxpayer and the transferee
taxpayer acknowledging the notification
of recapture requirements under section
6418(g)(3) and the section 6418 regula-
tions (if applicable); and (6) a statement or
representation from the eligible taxpayer
that it has provided the required minimum
documentation to the transferee taxpayer.
A commenter requested clarification on
whether a transfer election statement can
be a partnership agreement. Unless other-
wise provided in guidance, any document,
including a written partnership agreement,
can serve as a transfer election statement
if the document otherwise meets the
requirements of proposed §1.6418-2(b)
(5)(i) and includes the information out-
lined in proposed §1.6418-2(b)(5)(ii). The
Treasury Department and the IRS did not
include a specific rule in these final reg-
ulations allowing for a partnership agree-
ment to be treated as a transfer election
statement because the language in pro-
posed §1.6418-2(b)(5) was already broad
enough to allow for such an agreement to
qualify.
Another commenter recommended that
an eligible taxpayer be required, in a form
accompanying its annual tax return, to list
all tax credits it generated in the year by
credit type, the total amount of those tax
credits it sold, a schedule of projects to
which the sold credits relate, the parties
to whom it sold, and the remaining cred-
its it retained. The Treasury Department
and the IRS note that the registration and
transfer election process will require an
eligible taxpayer to list all eligible cred-
its it determined and transferred during a
taxable year. Additionally, an eligible tax-
payer will be required to file the relevant
credit source forms and the Form 3800,
which will include the type of credits
the eligible taxpayer determined and if it
claimed any credits against its tax liabil-
ity. At this time, the Treasury Department
and the IRS do not think it is necessary for
tax administration purposes for an eligible
taxpayer to report the parties to whom it
transferred eligible credits as part of the

June 17, 2024 1688 Bulletin No. 2024–25
registration process. This is because the
IRS matches the registration numbers
obtained by an eligible taxpayer in the
registration process with the transferee
taxpayers that claim transferred specified
credit portions against their tax liability.
Because no changes are necessary to pro-
posed §1.6418-2(b)(5)(i) and (ii), these
final regulations adopt these provisions
without substantive change.
Proposed §1.6418-2(b)(5)(iii)
described the time by which a transfer
election statement must be completed.
The proposed rule provided that a trans-
fer election statement can be completed
at any time after the eligible taxpayer and
transferee taxpayer have sufficient infor-
mation to meet the requirements of pro-
posed §1.6418-2(b)(5)(ii), but, for any
year, the transfer election statement can-
not be completed after the earlier of: (1)
the filing of the eligible taxpayer’s return
for the taxable year for which the specified
credit portion is determined with respect
to the eligible credit; or (2) the filing of the
transferee taxpayer’s return for the year in
which the specified credit portion is taken
into account. Because no comments were
received on proposed §1.6418-2(b)(5)
(iii), these final regulations adopt this pro-
vision without change.
Proposed §1.6418-2(b)(5)(iv) would
have defined required minimum documen-
tation as the minimum documentation that
the eligible taxpayer is required to provide
to a transferee taxpayer. This documenta-
tion included: (1) information that validates
the existence of the eligible credit property;
(2) if applicable, documentation substan-
tiating that the eligible taxpayer has satis-
fied the requirements to include any bonus
credit amounts (as defined in proposed
§1.6418-1(c)(3)); and (3) evidence of the
eligible taxpayer’s qualifying costs in the
case of a transfer of an eligible credit that is
part of the investment credit or the amount
of qualifying production activities and
sales amounts, in the case of a transfer of
an eligible credit that is a production credit.
Proposed §1.6418-2(b)(5)(v) would have
specified that a transferee taxpayer, consis-
tent with §1.6001-1(e), would be required
to retain the required minimum documen-
tation provided by the eligible taxpayer so
long as the contents thereof may become
material in the administration of any inter-
nal revenue law.
Several commenters recommended
that the final regulations increase the
amount of required minimum documenta-
tion that an eligible taxpayer must provide
to a transferee taxpayer to make a valid
transfer election under section 6418(a).
One commenter urged that all of the
records that would be necessary for an eli-
gible taxpayer to substantiate the claimed
tax credit should be provided to the trans-
feree taxpayer. Other commenters stated
that more robust minimum documentation
requirements should be imposed, includ-
ing specific disclosure requirements and
minimum documentation that an eligible
taxpayer must provide to a transferee tax-
payer concerning compliance with labor
laws and an affirmation that the eligible
taxpayer has undertaken best efforts to
establish compliance. Another commenter
asked for confirmation that the required
minimum documentation is the same for
all taxpayers.
In providing for the required minimum
documentation that an eligible taxpayer
must provide to a transferee taxpayer,
the intention was to require a baseline
of information that is necessary for val-
idating an eligible taxpayer’s claim of
eligibility to an eligible credit, while
not overburdening the eligible taxpayer
with production requirements or altering
the arm’s length arrangement between
the parties. Further, the proposed regu-
lations did not limit the amount or type
of information that a transferee taxpayer
can require prior to agreeing to an eligi-
ble credit transfer. This means that while
the required minimum documentation
requirements are the same for all taxpay-
ers, any particular agreement between an
eligible taxpayer and transferee taxpayer
may go beyond the required minimum
documentation based on the arrange-
ment of the parties. The proposed regu-
lations allowed sufficient flexibility for
market participants to determine if more
information is necessary in a particular
transaction, while balancing the burden
of producing the required minimum doc-
umentation required to make a transfer
election. Thus, these final regulations
adopt proposed §1.6418-2(b)(5)(iv) and
(v) without substantive change.
Another commenter requested clari-
fication that any responsibility to engage
in regular reporting of certified payroll,
apprentice labor hour reports, or other
obligation under the prevailing wage and
apprenticeship requirements for trans-
ferred specified credit portions remain
with the eligible taxpayer. Because an eli-
gible taxpayer determines any increased
credit amount applicable to the prevailing
wage and apprenticeship requirements,
proposed regulations under section 45
would provide that the requirements rel-
evant to determining the credit, includ-
ing the correction and penalty provisions
described in section 45(b)(7)(B) and 45(b)
(8)(D), would remain with the eligible
taxpayer who determined the credit. On
August 30, 2023, the Treasury Depart-
ment and the IRS published proposed reg-
ulations under section 45 (REG-100908-
23) in the Federal Register (88 FR
60018) (section 45 proposed regulations)
that would also provide that the general
recordkeeping requirements for prevailing
wage and apprenticeship (PWA) require-
ments would remain with an eligible
taxpayer who transfers a specified credit
portion that includes an increased credit
amount. The section 45 proposed regula-
tions would not require regular reporting
of certified payroll or apprentice labor
hour reports to the IRS. The responsibil-
ity of determining a credit is initially with
the eligible taxpayer, and the transfer of
an eligible credit does not relieve an eli-
gible taxpayer of this responsibility or the
responsibility to substantiate. Thus, the
responsibility for substantiating a PWA
increased credit amount does not shift to
the transferee taxpayer, although a trans-
feree taxpayer may be treated as the rele-
vant taxpayer for other purposes under the
IRA under section 6418(a). In light of the
section 45 proposed regulations, the Trea-
sury Department and the IRS have deter-
mined that no clarification is needed under
proposed §1.6418-2(b)(5)(iv) and (v) and
thus, these final regulations adopt these
provisions without substantive change.
C. Limitations after a transfer election is
made
Proposed §1.6418-2(c)(1) would have
provided that a transfer election with
respect to a specified credit portion is irre-
vocable. No comments were received on
this rule, and these final regulations adopt
the rule without change.

Bulletin No. 2024–25 1689 June 17, 2024
Consistent with section 6418(e)(2),
proposed §1.6418-2(c)(2) would have
provided that a specified credit portion
may only be transferred pursuant to a
transfer election once. A transferee tax-
payer cannot make a transfer election of
any specified credit portion transferred
to the transferee taxpayer. As described
in the Explanation of Provisions in the
preamble to the proposed regulations, the
proposed rule would have disallowed any
arrangement in which the Federal income
tax ownership of a specified credit portion
transfers first from an eligible taxpayer
to a dealer or intermediary and then, ulti-
mately, to a transferee taxpayer. In con-
trast, the Explanation of Provisions in the
preamble to the proposed regulations pro-
vided that an arrangement using a broker
to match eligible taxpayers and transferee
taxpayers should not violate the no addi-
tional transfer rule, assuming the arrange-
ment at no point transfers the Federal
income tax ownership of a specified credit
portion to the broker or any taxpayer other
than the transferee taxpayer.
Commenters advocated for the final
regulations to allow certain transac-
tions with brokers, or other taxpayers,
that were disallowed under proposed
§1.6418-2(c)(2) based on the no addi-
tional transfer rule of section 6418(e)(2).
Those commenters posited that allow-
ing such transactions would increase the
number of participants entering the credit
purchasing market. Another commenter
recommended that the final regulations
apply the no additional transfer rule in
proposed §1.6418-2(c)(2) to prohibit only
successive transfers made by a transferee
taxpayer specified in the transfer elec-
tion, assuming the intent of the rule is not
to prohibit the development of a liquid
trading market or derivative activity by
third parties other than the eligible tax-
payer. The commenter stated that if the
intent of the rule is to prevent the devel-
opment of such a market or activities,
then the final regulations should contain
clear and administrable rules based upon
the other timing rules provided in the pro-
posed regulations because applying nor-
mal “benefits and burdens of ownership”
principles, as described in the Explana-
tion of Provisions in the preamble to the
proposed regulations, to transfers of eli-
gible credits is not workable.
The Treasury Department and the IRS
agree that it is unnecessary to apply bene-
fits and burdens of ownership principles to
transfers of eligible credits under section
6418, but no changes are needed to pro-
posed §1.6418-2(c)(2) because it does not
reference those principles. To clarify the
rules, to make a transfer election, all the
requirements of §1.6418-2(b) must be sat-
isfied. Until the requirements are satisfied,
then there is no valid transfer, no trans-
feree taxpayer, and the requirements of
§1.6418-2(c)(2) are not applicable. To the
extent there are brokers or other taxpayers
providing liquidity, it is noteworthy that
any payments received by those taxpayers
related to eligible credits will be taxable
because the provisions of section 6418
will not prevent the inclusion of gross
income for such taxpayers, or for any
amounts received by an eligible taxpayer
other than amounts paid by a transferee
taxpayer in consideration for the eligible
credit. Further, if brokers, or others, are
transferred a specified credit portion after
satisfying the rules of §1.6418-2(b) such
that they are considered transferee taxpay-
ers, then the prohibition of section 6418(e)
(2) and the requirements of §1.6418-2(c)
(2) will prevent a second transfer by such
transferee taxpayer.
A commenter recommended that the
final regulations clarify that agreements
for the right to purchase eligible credits
may be transferred and are not subject
to the rule in proposed §1.6418-2(c)(2).
Specifically, the commenter raised that
the statutory language prohibiting multi-
ple transfers with respect to any portion
of an eligible credit does not prohibit a
transferee taxpayer that entered into an
agreement with an eligible taxpayer for
the right to purchase eligible credits for
a number of years from transferring that
right to another transferee taxpayer as long
as the eligible credits themselves have not
been transferred to the original transferee
taxpayer first. These final regulations do
not adopt a specific rule related to this sit-
uation because it describes a transaction
that is outside of section 6418. As previ-
ously described, until the requirements of
a valid transfer election are satisfied, then
there is no valid transfer and no transferee
taxpayer.
Several commenters asked for clarity
on when a transfer has occurred or rec-
ommended the point at which a transfer
has occurred. For example, one com-
menter recommended a rule that once the
amount of the credit has been determined,
the specified credit portion is considered
to have been transferred on the earliest
date on which payment for credit has been
made, the last day of the eligible taxpay-
er’s taxable year, or (if earlier) the date the
transfer election statement has been filed.
To clarify, a transfer of a specified credit
portion does not technically occur until an
eligible taxpayer satisfies all the require-
ments in §1.6418-2(b) to make a valid
transfer election. However, it is important
to note that the technical transfer date does
not necessarily control for other purposes
of section 6418. For example, under the
paid in cash rule, amounts can be paid
with respect to the specified credit portion
as early as the beginning of the taxable
year in which the related eligible credit is
determined.
D. Determining the eligible credit
Section 6418(a) states that an eligible
taxpayer may elect to transfer an eligible
credit determined with respect to such tax-
payer. Proposed §1.6418-2(d) would have
provided rules to clarify how an eligible
taxpayer determines an eligible credit.
Under proposed §1.6418-2(d)(1), an eli-
gible taxpayer can only transfer eligible
credits determined with respect to the eli-
gible taxpayer. The proposed regulations
would have provided that, for an eligible
credit to be determined with respect to
an eligible taxpayer, the eligible taxpayer
must own the underlying eligible credit
property or, if ownership is not required,
conduct the activities giving rise to the
underlying eligible credit.
A commenter suggested that, in the
absence of clear statutory language indi-
cating that ownership of underlying eligi-
ble credit property or conducting activi-
ties giving rise to the underlying eligible
credit is a prerequisite to transferability,
such requirements should not be imposed
under proposed §1.6418-2(d)(1). The text
of section 6418(a), which requires the eli-
gible credit to be determined with respect
to the eligible taxpayer, and the text of
the underlying eligible credit provisions
confirm the requirement that ownership
of underlying eligible credit property or

June 17, 2024 1690 Bulletin No. 2024–25
conducting activities giving rise to the
underlying eligible credit is a prerequisite
to transferability. However, as discussed
in part 2.A of this Summary of Comments
and Explanation of Revisions, these final
regulations clarify that the only eligible
credit for which an eligible taxpayer does
not have to own an underlying eligible
credit property, and instead can merely
conduct activities, is section 45X. This
revision should help clarify the “deter-
mined with respect to” requirements of
section 6418.
A commenter noted that section 50(b)
(1) limits the use of certain eligible
credits in the territories and requested
that the final regulations provide an
exception to section 50(b)(1) to allow
eligible taxpayers in U.S. territories to
transfer all eligible credits. Since before
the enactment of the IRA, section 50(b)
(1) has limited the use of certain credits
(including ITCs, vehicle-related cred-
its, and energy efficiency incentives)
for property used in the U.S. territories.
Section 50(b)(1) provides that no credit
can be determined with respect to any
property that is used predominantly out-
side the United States
1
unless section
168(g)(4)(G) applies. Section 168(g)(4)
(G) provides an exception for any prop-
erty that is owned by a domestic corpo-
ration or by a United States citizen other
than a citizen entitled to the benefits of
sections 931 or 933, and that is used
predominantly in a possession of the
United States by such a corporation or
such a citizen, or by a corporation cre-
ated or organized in, or under the law of,
a possession of the United States. The
IRA did not amend these provisions;
instead, the IRA specifically referenced
section 50(b)(1) in section 30C and did
not exclude section 48, 48C, or 48E
from the application of section 50(b)
(1). Without specific language in sec-
tion 6418 or in the underlying eligible
credits addressing section 50(b)(1), or
other compelling evidence of Congres-
sional intent, a special rule turning off
the application of section 50(b)(1) is not
supported by the Code. Therefore, these
final regulations do not adopt this rec-
ommendation.
E. Treatment of Payments Made in
Connection with a Transfer Election
Section 6418(b)(1) through (3) pro-
vides rules related to the treatment of pay-
ments made in connection with a transfer.
Proposed §1.6418-2(e)(1) through (4)
would have provided guidance related to
these rules, including that such amounts
are required to be paid in cash, are not
includable in the gross income of the eli-
gible taxpayer and are not deductible by
the transferee taxpayer, as well as an anti-
abuse rule that included examples illus-
trating the anti-abuse rule.
1. Cash requirement
Section 6418(b)(1) requires that any
amount paid by a transferee taxpayer for an
eligible credit must be paid in cash. Con-
sistent with section 6418(b)(1), proposed
§1.6418-2(e)(1) would have provided that
an amount paid by a transferee taxpayer
to an eligible taxpayer would be consid-
eration for a transfer of a specified credit
portion only if it is paid in cash (as defined
in proposed §1.6418-1(f)), directly relates
to the specified credit portion, and is not
described in proposed §1.6418-5(a)(3)
(describing payments related to an exces-
sive credit transfer). Consistent with sec-
tion 6418(b)(2), proposed §1.6418-2(e)(2)
would have provided that any amount paid
to an eligible taxpayer as consideration for
a transfer of a specified credit portion is
not includible in the gross income of the
eligible taxpayer. Correspondingly and
consistent with section 6418(b)(3), pro-
posed §1.6418-2(e)(3) would have pro-
vided that no deduction is allowed to the
transferee taxpayer for consideration that
is paid as consideration for a transfer of a
specified credit portion.
2. Anti-abuse provision
Section 6418(h) authorizes the Sec-
retary to issue regulations or other guid-
ance that may be necessary to carry out
the purposes of section 6418. To prevent
transactions contrary to the purposes of
section 6418, the proposed regulations
would have included an anti-abuse pro-
vision in proposed §1.6418-2(e)(4). This
rule would have provided that a transfer
election of any specified credit portion,
and therefore the transfer of that specified
credit portion to a transferee taxpayer,
may be disallowed, or the Federal income
tax consequences of any transaction(s)
effecting such a transfer may be rechar-
acterized, in circumstances in which the
parties to the transaction have engaged in
the transaction or a series of transactions
with the principal purpose of avoiding any
Federal tax liability beyond the intent of
section 6418. For example, under the pro-
posed rule, an amount of cash paid by a
transferee taxpayer would not be consid-
ered as paid in connection with the transfer
of a specified credit portion in proposed
§1.6418-2(e)(1) if a principal purpose
of a transaction or series of transactions
was to allow an eligible taxpayer to avoid
gross income. Conversely, an amount of
cash paid by a transferee taxpayer would
have been considered paid in connection
with the transfer of a specified credit por-
tion under proposed §1.6418-2(e)(1) if a
principal purpose of a transaction or series
of transactions was to increase a Federal
income tax deduction of a transferee tax-
payer.
The proposed regulations included
two examples in §1.6418-2(e)(4)(ii)
and (iii) to illustrate the application of
the anti-abuse rule. In the first example,
to avoid recognizing gross income, the
eligible taxpayer (Taxpayer A) under-
charges for services to the transferee tax-
payer (Customer B) in combination with
the transfer of a specified credit portion,
and so the transaction is recharacter-
ized. Specifically, Taxpayer A normally
charges $20 for the same services without
the purchase of the eligible credit, and
the average transfer price of the eligible
credit between unrelated parties is $80
paid in cash for $100 of an eligible credit.
The example provides that Taxpayer A
instead charges Customer B $100 for the
eligible credit and $0 for the services. In
the second example, to increase a trans-
feree taxpayer’s (Customer D) deduction,
an eligible taxpayer (Taxpayer C) over-
charges for property and undercharges
for the eligible credit. Specifically, Tax-
1
Under section 7701(a)(9), “[t]he term ‘United States’ when used in a geographical sense includes only the States and the District of Columbia.”

Bulletin No. 2024–25 1691 June 17, 2024
payer C normally charges $20 for the
same property without the transfer of the
eligible credit, and the average transfer
price of an eligible credit between unre-
lated parties is $80 paid in cash for $100
of the eligible credit. The example pro-
vides that Taxpayer C instead charges
Customer D $80 for the property and $20
for the eligible credit. In both examples,
the proposed regulations would have
recharacterized the transactions.
A number of commenters made sug-
gestions related to the proposed anti-abuse
rule and examples. One commenter urged
the Treasury Department and the IRS to
take all possible precautionary measures
to protect taxpayer interests and pre-
vent abuse. Another commenter, while
acknowledging that concerns raised by
the anti-abuse rule and the examples are
fair and appropriate, recommended as an
alternative that the final regulations only
include the general anti-abuse rule and
remove the specific rules and examples.
The commenter suggested that the IRS
could rely on generally applicable princi-
ples and the anti-abuse rule to recharac-
terize abusive transactions and separately
issue sub-regulatory guidance to provide
safe harbors for cases in which the anti-
abuse rule will not be asserted. The com-
menter also suggested that the IRS could
issue further clarifying guidance if a pub-
licly available and readily commoditized
market develops. While the commenter
did not expressly describe the specific
rules it recommended be removed, the
Treasury Department and the IRS infer
that the commenter was referring to the
language describing situations that had
a principal purpose of eligible taxpayers
avoiding the recognition of gross income
or of transferee taxpayers increasing
deductions. Other commenters, however,
recommended that the final regulations
include additional specific examples or
safe harbors to determine those situations
that would not be considered abusive.
In considering all of these commenters’
views, the Treasury Department and IRS
have determined that taxpayers would
benefit from having fact patterns in these
final regulations that are likely to represent
situations in which abuse could be pres-
ent. Thus, these final regulations adopt
the anti-abuse provision of the proposed
regulations, but with certain revisions in
response to commenters that are described
in the following paragraphs.
A commenter noted a discrepancy
in the language of the anti-abuse rule in
proposed §1.6418-2(e)(4)(i), making it
unclear whether the standard of the anti-
abuse rule was that parties to the trans-
action have engaged in the transaction
or a series of transactions with “the” or
“a” principal purpose of tax avoidance.
As noted by the commenter, the use of
“the” or “a” represent different standards.
To demonstrate the difference, the com-
menter compared the regulations under
section 269 of the Code (employing a
“the principal purpose” standard) with the
regulations under section 881 of the Code
(section 881 regulations) (employing a
“one of the principal purposes” standard).
The proposed rule was intended to apply
the anti-abuse provision if a transaction
was entered into with “a” principal pur-
pose of avoidance of tax beyond the intent
of section 6418. In response to the com-
ment, these final regulations are clarified.
This “a” principal purpose standard is sim-
ilar to other anti-abuse standards, such as
the standard in the section 881 regulations
cited by the commenter or the anti-abuse
rule in §1.45D-1(g) (relating to the new
markets tax credit determined under sec-
tion 45D (section 45D credit)). This stan-
dard is appropriate based on the goals of
preventing fraud and improper payments
and in accordance with section 6418(h)
to provide rules necessary to carry out the
purposes of section 6418.
Another commenter requested clarifi-
cation on the meaning of the phrase “will
be considered paid” in proposed §1.6418-
2(e)(4)(i), noting that the proposed regula-
tions would have provided that an “amount
of cash paid by a transferee taxpayer will
not be considered as paid in connection
with the transfer of a specified credit por-
tion under paragraph (e)(1) of this section
if a principal purpose of a transaction or
series of transactions is to allow an eli-
gible taxpayer to avoid gross income.”
The commenter stated, however, that the
next sentence in proposed §1.6418-2(e)
(4)(i) provides: “[c]onversely, an amount
of cash paid by a transferee taxpayer will
be considered paid in connection with the
transfer of a specified credit portion under
paragraph (e)(1) of this section if a prin-
cipal purpose of a transaction or series
of transactions is to increase a Federal
income tax deduction of a transferee tax-
payer [emphasis added].” The commenter
believed that the “will be considered paid”
in the quoted second sentence should read
as “will not be considered paid” similar
to the quoted first sentence. The Treasury
Department and the IRS clarify that the
proposed rule is written as intended, and
no changes to the proposed rule are made
based on this comment. The quoted sec-
ond sentence is describing a situation in
which a transferee taxpayer paid less for
an eligible credit and more for an item or
service that resulted in a deduction. In this
scenario, it is correct that the amount “will
be considered paid” in connection with
the transfer of the specified credit portion,
and not with respect to the purchase of the
item that was deductible.
Commenters requested clarification of
the language in the examples in proposed
§1.6418-2(e)(4)(ii) and (iii) that referred
to the “average transfer price of the eli-
gible credit between unrelated parties”
in determining whether the transactions
are subject to recharacterization under
the proposed anti-abuse rule. Comment-
ers raised concerns about the availability
of pricing information, including specifi-
cally in the case of the section 45U credit.
A commenter thought that there will be
insufficient publicly available pricing
information, and if the available data are
limited and incomplete, price averages
will not yield reliable results. That same
commenter noted that if the IRS devel-
ops the requisite data to determine an
average transfer price for each eligible
credit, organizing such data and publish-
ing it regularly would be administratively
burdensome. Further, commenters were
concerned that the average price would
not take into account the facts and circum-
stances of an arrangement, which com-
menters believed relevant for determin-
ing price. The commenter recommended
changing “the average transfer price of the
eligible credit between unrelated parties”
to “an arm’s length price of the eligible
credit without regard to other commercial
relationships” could solve potential issues
with the language in the proposed regula-
tions. The commenter stated that the rec-
ommendation would also resolve a sepa-
rate comment related to the use of the term
“unrelated party” in the proposed regula-

June 17, 2024 1692 Bulletin No. 2024–25
tions by clarifying that the intent was the
price be determined without regard to
other commercial relationships.
In response, these final regulations
adopt the commenter’s suggested lan-
guage and revise the examples in proposed
§1.6418-2(e)(4)(ii) and (iii) accordingly.
This change is made in acknowledgment
that average price data may not be cur-
rently available, may take more time to
develop, and will most likely be depen-
dent on the facts and circumstances of the
transaction (for example, the risk profile
of the project). The language suggested
by the commenter will still allow average
transfer price data to be used to the extent
it is relevant. The intent of using an aver-
age transfer price was to suggest an objec-
tive criterion for evaluating a transaction,
along with using the pricing information
of the eligible taxpayer in the determina-
tion. While the language “an arm’s length
price of the eligible credit without regard
to other commercial relationships” has the
potential to add more subjectivity to the
determination, concerns with respect to
determining the average transfer price of
a certain eligible credit, including those
with limited markets, outweigh any ben-
efit with respect to retaining a potentially
more objective standard.
Another commenter requested clari-
fication on whether a transfer of a credit
for cash consideration could ever be fully
respected in cases in which the cash con-
sideration for such credit transfer is greater
or less than the average transfer price
of the eligible credit between unrelated
parties. Any deviation from an average
transfer price of an eligible credit should
not necessarily require recharacterization
under the anti-abuse rule; however, the
revisions made to the examples in pro-
posed §1.6418-2(e)(4)(ii) and (iii) should
help clarify this issue. The intent of the
anti-abuse rule is to allow recharacteriza-
tion if the price paid is not economically
supportable and is unreasonable based on
the facts and circumstances of the trans-
action.
Another commenter asked that the
final regulations include considerations of
whether an eligible taxpayer is viewed as
transferring credits at a discount without
avoiding tax liabilities. For example, if
an eligible taxpayer is willing to transfer
eligible credits at a discount and receive
income from product sales or services
that is in accordance with such eligible
taxpayer’s acceptable investment rate of
return, the commenter wanted to know
whether the anti-abuse rule would be
applicable. In the commenter’s hypothet-
ical, the eligible taxpayer appears to be
decreasing the price of eligible credits to
encourage customers to purchase products
or services but not making a correspond-
ing increase to the price of its products or
services, which could avoid recognizing
gross income. However, the facts and cir-
cumstances would dictate whether the eli-
gible taxpayer and the transferee taxpayer
were engaging in the transaction with a
principal purpose of avoiding any Federal
income tax liability beyond the intent of
section 6418.
The Treasury Department and the IRS
have concluded that it is premature to
adopt any safe harbor or a list of abuse
examples in these final regulations in
§1.6418-2(e)(4) but will continue to study
transactions between eligible taxpayers
and transferee taxpayers to determine if it
is appropriate to adopt an objective safe
harbor or clarify other examples of abu-
sive practices.
F. Transferee taxpayer’s treatment of
eligible credit
1. Taxable year
Pursuant to section 6418(d), a trans-
feree taxpayer takes the transferred eligi-
ble credit into account in its first taxable
year ending with, or after, the eligible
taxpayer’s taxable year with respect to
which the transferred eligible credit was
determined. Proposed §1.6418-2(f)(1)
would have adopted this rule and further
explained that to the extent the taxable
years of an eligible taxpayer and a trans-
feree taxpayer end on the same date, the
transferee taxpayer will take the specified
credit portion into account in that taxable
year. To the extent the taxable years of an
eligible taxpayer and a transferee taxpayer
end on different dates, the transferee tax-
payer will take the specified credit portion
into account in the first taxable year that
ends after the taxable year of the eligible
taxpayer.
Commenters requested clarification
on whether a taxpayer that has a 52–53-
week taxable year can rely on §1.441-2(c)
(1) to allow its taxable year that other-
wise ends the last Saturday in December
to be treated as ending on December 31.
Otherwise, a transferee taxpayer with a
52–53-week taxable year would have to
wait until the following taxable year to
take into account an eligible credit that
was transferred by an eligible taxpayer
with a calendar year. A similar delay could
result if the eligible taxpayer had a 52–53-
week taxable year ending in January and
the transferee taxpayer has a taxable year
ending on December 31. Section 1.441-
2(c)(1) provides, in relevant part, that for
purposes of determining the effective date
(for example, of legislative, regulatory, or
administrative changes) or the applicabil-
ity of any provision of the internal revenue
laws that is expressed in terms of taxable
years beginning, including, or ending with
reference to the first or last day of a spec-
ified calendar month, a 52–53-week tax-
able year is deemed to begin on the first
day of the calendar month nearest to the
first day of the 52–53-week taxable year,
and is deemed to end or close on the last
day of the calendar month nearest to the
last day of the 52–53-week taxable year,
as the case may be. While the fact patterns
from commenters do not fall within the
explicit language of §1.441-2(c)(1), the
Treasury Department and the IRS con-
clude it is consistent to adopt a similar
rule with respect to taxable year ends for
purposes of section 6418(d). Thus, these
final regulations include a rule in §1.6418-
2(f)(1)(ii) providing that, for purposes of
determining the taxable year in which a
credit is taken into account under section
6418(d) and §1.6418-2(f)(1)(i), a 52–53-
week taxable year of an eligible taxpayer
and transferee taxpayer is deemed to end
on or close on the last day of the calen-
dar month nearest to the last day of the
52–53-week taxable year, as the case may
be. Thus, in the fact patterns described
by commenters, the transferee taxpayer
and the eligible taxpayer would have the
same year end, and the transferee taxpayer
would not have to wait until the follow-
ing year-end to take the eligible credit into
account.
Another commenter asked when a
transferee taxpayer with a taxable year that
is a calendar year can take into account an
eligible credit transferred from an eligible

Bulletin No. 2024–25 1693 June 17, 2024
taxpayer that has a fiscal year ending June
30, if the eligible taxpayer’s project was
placed in service on November 1, 2023,
and the eligible taxpayer proposes to
transfer the eligible credit to the transferee
taxpayer on November 15, 2023 (and
assuming all other requirements of section
6418 were met). It appears this comment
is seeking clarity on whether it is possi-
ble for an eligible taxpayer to determine
an eligible credit during its taxable year
beginning July 1, 2023, and ending June
30, 2024, and transfer the eligible credit in
November 2023 to a transferee taxpayer
with a taxable year ending December 31,
2023, for the transferee taxpayer to use
in calculating its 2023 tax liability. Sec-
tion 6418(d)(1) requires that a transferee
taxpayer take a specified credit portion
into account in a taxable year ending
with or after the taxable year of the eli-
gible taxpayer to which the eligible credit
was determined. In this fact pattern, the
transferee taxpayer’s taxable year ends
after the eligible taxpayer’s taxable year.
The transferee taxpayer cannot take into
account the eligible credit until its first
taxable year ending after June 30, 2024,
meaning that the transferee taxpayer
would have to wait until it filed its 2024
tax return (not considering whether the
transferee taxpayer was able to use the
eligible credit against its estimated tax
payments as described in part II.F.5 of this
Summary of Comments and Explanation
of Revisions). The eligible taxpayer’s
taxable year end of June 30, 2023, does
not impact this analysis, as there was no
eligible credit determined with respect to
the eligible taxpayer in that taxable year.
Further, even if a credit was determined
in the taxable year ending June 30, 2023,
because section 6418 only applies to tax-
able years beginning after December 31,
2022, no eligible credits generated in such
year are eligible to be transferred.
2. No gross income for a transferee
taxpayer upon claiming a transferred
specified credit portion
Proposed §1.6418-2(f)(2) would have
provided that a transferee taxpayer does
not have gross income upon claiming a
transferred specified credit portion even
if the amount of cash paid to the eligi-
ble taxpayer was less than the amount of
the transferred specified credit portion,
assuming all other requirements of sec-
tion 6418 are met. For example, a trans-
feree taxpayer who paid $9X for $10X of
a specified credit portion that the trans-
feree taxpayer then claims on its return
does not result in the $1X difference being
included in the gross income of the trans-
feree taxpayer.
A commenter suggested that the pro-
posed rule conflicted with Palmer v. Com-
missioner, 302 U.S. 63 (1937), which held
that the purpose of a bargain purchase
determines its tax treatment; that is, if it
is intended as compensation, then it is so
treated for Federal tax purposes. Based
on the case, the commenter thought that
it is not possible to determine that a bar-
gain purchase of a tax credit is not gross
income to the purchaser, as the proposed
regulations provided, without examining
the facts and circumstances surrounding
the transaction.
Proposed §1.6418-2(f)(2) does not
conflict with Palmer. The proposed rule
presumes that the eligible taxpayer and
the transferee taxpayer negotiated the
consideration paid for the specified credit
portion at arm’s length and that the differ-
ence between the specified credit portion
and the consideration paid for the credit
(the “discount”) reflects the transferee
taxpayer’s assumption of the risk of an
excess credit transfer or recapture event.
The proposed rule does not preclude the
IRS from parsing the net consideration
paid for the specified credit portion and
analyzing whether the net consideration
reflects a reduction due to an amount
separately owed by the transferor to the
transferee due to the receipt of services or
property from the transferee. In such situ-
ation, the proposed rule does not preclude
the IRS from asserting that a portion of the
discount is income to the transferee tax-
payer under Palmer or the anti-abuse rule
in §1.6418-2(e)(4) if a portion of the dis-
count, in fact, constitutes compensation to
the transferee taxpayer under section 61.
Section 6418(a) is unambiguous that the
transferee taxpayer is treated as the eli-
gible taxpayer for purposes of the Code.
Because the eligible taxpayer does not
recognize gross income from generating
or claiming a transferred specified credit
portion under the Code, the Treasury
Department and the IRS interpret section
6418(a) to provide the transferee taxpayer
with the same treatment upon claim-
ing a transferred specified credit portion
acquired at a discount. Section 6418(a) is
also unambiguous that the income exclu-
sion is limited to the claiming of the eligi-
ble credit and does not cover compensa-
tion paid to the transferee taxpayer.
For these reasons, these final regu-
lations adopt proposed §1.6418-2(f)(2)
without substantive change.
3. Transferee taxpayer treated as the
eligible taxpayer
Consistent with the language in sec-
tion 6418(a), proposed §1.6418-2(f)(3)
(i) would have provided that a transferee
taxpayer (and not the eligible taxpayer) is
treated as the taxpayer for purposes of the
Code with respect to the transferred speci-
fied credit portion. Proposed §1.6418-2(f)
(3)(i) further explained that an eligible
taxpayer must apply the rules necessary to
determine the amount of an eligible credit
prior to making the transfer election for a
specified credit portion, and therefore a
transferee taxpayer does not re-apply rules
that relate to a determination of an eligi-
ble credit, such as the rules in sections 49
or 50(b). However, a transferee taxpayer
must apply rules that relate to computing
the amount of the specified credit portion
that is allowed to be claimed in the taxable
year by the transferee taxpayer, such as the
rules in sections 38 or 469, as applicable.
a. Passive credit rules generally
Proposed §1.6418-2(f)(3)(ii) provided
a more specific rule regarding application
of section 469 to a transferee taxpayer.
This proposed rule provided that a spec-
ified credit portion transferred to a trans-
feree taxpayer is treated as determined in
connection with the conduct of a trade or
business and, if applicable, such trans-
ferred specified credit portion is subject
to the rules in section 469 (passive credit
rules).
Many comments were received regard-
ing the application of section 469 to trans-
ferred specified credit portions. One com-
menter supported applying the passive
credit rules to transferee taxpayers and
believed that a more restrictive rule would
better prevent potential fraud and abuse.

June 17, 2024 1694 Bulletin No. 2024–25
Similarly, another commenter raised that
allowing individuals to be credit purchas-
ers raises important potential concerns
about fraud and abuse since individuals,
particularly those who are less affluent,
may have less ability to perform due dil-
igence on the transferred eligible credits
and may become targets of fraudulent
schemes. Most commenters, however,
asserted that the passive credit rules
should not apply to transferee taxpayers or
that the rules should only apply in limited
circumstances.
Some commenters argued that applying
the rules will limit the market of potential
purchasers of eligible credits to corporate
entities with large tax liabilities and thus,
exclude other taxpayers as potential inves-
tors. Other commenters contended that
if the passive credit rules did not apply
to transferee taxpayers, participation of
individuals could materially increase,
which would strengthen the transferability
market and support the IRA’s renewable
energy and job creation goals. One com-
menter supported providing a carveout
from the application of the passive credit
rules for projects that generate less than
5 megawatts of energy. A few comment-
ers requested that if the application of the
passive credit rules remains, the Treasury
Department and the IRS should allow for
some amount of non-passive income tax
liability flowing from operating S corpo-
rations and limited liability companies to
be eligible to be offset by transferred eli-
gible credits.
Many commenters addressed the rule
in proposed §1.6418-2(f)(3)(ii) that would
treat a specified credit portion transferred
to a transferee taxpayer as determined in
connection with the conduct of a trade or
business. One commenter generally sup-
ported the position that an eligible credit
is earned in connection with the conduct
of a trade or business, as that reflects how
an eligible credit would arise. Other com-
menters, however, contended that treat-
ing transferred specified credit portions
as earned in connection with a trade or
business is inconsistent with the language
in section 6418(a), which states that the
transferee taxpayer is treated as the tax-
payer with respect to a transferred credit.
Some commenters stated that the language
in section 6418(a) should be read as only
transferring the rights of the credit to the
transferee rather than subjecting the trans-
feree to the passive credit rules. Another
commenter argued that section 469 can-
not apply to an activity that is not owned
directly, or indirectly, by the taxpayer.
A few commenters urged that instead of
treating transferred specified credit por-
tions as determined in connection with the
conduct of a trade or business, it would be
appropriate to treat transferee taxpayers
as engaged in an investment activity and
specified credit portions as determined in
connection with such investment activ-
ity. As support for this position, these
commenters cited Rev. Rul. 2010-16,
2010-26 I.R.B. 769, which addresses the
application of the passive credit rules to
section 45D credits earned through cer-
tain factual situations. Although unclear,
another commenter appeared to assert
that a transferred specified credit portion
should be treated as a capital asset under
section 1221 to a transferee taxpayer and
that Palmer v. Commissioner, supra, is
misapplied.
The language in section 6418 is most
straightforwardly understood to not sup-
port disregarding the passive credit rules
for transferred specified credit portions or
applying the rules in a different manner
than they apply to other general business
credits arising in a trade or business. In
enacting the novel credit delivery mecha-
nisms of sections 6417 and 6418 as part of
the IRA, Congress considered the appli-
cation of the rules governing the determi-
nation and the utilization of tax credits. In
cases in which Congress desired to alter
the application of certain rules, they pro-
vided as such. For example, Congress
generally turned off section 38(c) and sec-
tions 50(b)(3) and (4)(A)(i) in the case of
elective pay under section 6417. Like sec-
tion 38(c), the application of section 469
can materially affect whether a taxpayer
can use tax credits to offset its tax liabil-
ity. There is no carveout for section 469
in section 6418. Instead, section 469 pro-
vides in relevant part that a credit is sub-
ject to the passive credit rules if the credit
arises in the conduct of a trade or business
in which the taxpayer does not materially
participate in the year to which it is attrib-
utable, and the credit is a general business
credit under section 38. All of the eligible
credits listed in section 6418(d) arise in the
conduct of a trade or business and are gen-
eral business credits under section 38. As
a result, section 469 applies to the use of
such eligible credits unless Congress pro-
vides otherwise, and commenters did not
point to strong statutory or other evidence
that Congress intended a different result.
Moreover, any differences in the applica-
tion of the passive credit rules among tax-
payers is a result of section 469(a) and not
the result of section 6418 or the proposed
regulations.
Also, the application of section 469
to a transferee taxpayer is not inconsis-
tent with the language in section 6418(a)
that provides a transferee taxpayer “shall
be treated as the taxpayer” for purposes
of the Code with respect to a transferred
credit. Absent section 6418, any taxpayer
that has determined a general business
credit under section 38 in the conduct of
a trade or business is subject to section
469. While section 469 may not apply,
for example, because a taxpayer is not a
person described in section 469(a)(2), or
may not result in a passive activity credit
because a taxpayer materially participated
in the trade or business or has sufficient
passive activity income, all taxpayers
have to consider whether section 469 is
applicable to the use of any general busi-
ness credit arising in the conduct of a trade
or business. Thus, it is not inconsistent to
apply section 469 to a transferee taxpayer
that is treated as the taxpayer for purposes
of the Code with respect to a transferred
credit. Moreover, an eligible credit gen-
erated through the conduct of a trade or
business and transferred does not lose its
status as a section 38 credit or its status of
having arisen in a trade or business solely
because the credit is transferred. If such
attributes did not transfer under section
6418, eligible credits earned and used
by eligible taxpayers would be subject
to different limitations than transferred
eligible credits used by transferee tax-
payers. Lastly, the Treasury Department
and the IRS agree with commenters that
not applying the passive credit rules to
transferred specified credit portions could
increase the risk of fraud and abuse.
It is also inappropriate to treat trans-
ferred specified credit portions as deter-
mined in connection with the conduct
of an investment activity or as a capital
asset. Specifically, the facts and analysis
in Rev. Rul. 2010-16 are distinguishable

Bulletin No. 2024–25 1695 June 17, 2024
from transfers of specified credit portions
under section 6418. Rev. Rul. 2010-16
held that if an acquisition, either directly
or indirectly through a partnership, of a
qualified equity investment in a commu-
nity development entity (CDE) is not in
connection with the conduct of a trade
or business (or in anticipation of a trade
or business), the section 45D credit will
not be a passive activity credit under sec-
tion 469. The determination of a section
45D credit does not require the conduct
of a trade or business. Instead, a section
45D credit is determined based on the
percentage of the amount paid to a CDE
for a qualified equity investment at origi-
nal issue and can be determined through a
mere investment activity. Under the facts
of Rev. Rul. 2010-16, the section 45D
credit was not a passive activity credit
under section 469 to either the individual
or the partnership investors because it did
not arise in the conduct of a trade or busi-
ness. Conversely, eligible credits under
section 6418 can only be determined (or
arise) in connection with the conduct of a
trade or business. Moreover, eligible cred-
its are not determined through (or do not
arise in connection with) an investment
activity by a transferee taxpayer. Instead,
all eligible credits are determined with
respect to (or arise in connection with)
the conduct of a trade or business owned
by an eligible taxpayer. Eligible credits
are transferred after they are determined.
Thus, they cannot be redetermined in con-
nection with an investment activity by a
transferee. For these reasons, the final
regulations do not adopt commenters’
suggestions to not apply the passive credit
rules to transferred specified credit por-
tions or to apply the passive credit rules
in a different manner than as provided in
the proposed regulations. For a discussion
of the application of Palmer v. Commis-
sioner, supra, to section 6418, see part
II.F.2 of this Summary of Comments and
Explanation of Revisions.
A comment was received stating that
the proposed regulations were silent on
the rule of section 48(a)(3)(C) requiring
the property to be used in a trade or busi-
ness or held for the production of income.
Any rules applicable to the underlying eli-
gible credits are beyond the scope of the
final regulations; however, the Treasury
Department and the IRS note that any
rules that relate to the determination of
the eligible credit apply to the eligible tax-
payer as described in proposed §1.6418-
2(d).
b. Material participation and grouping
rules
Proposed §1.6418-2(f)(3)(ii) provided
that in applying section 469, a transferee
taxpayer is not considered to own an
interest in the eligible taxpayer’s trade or
business at the time the work was done (as
required for material participation under
§1.469-5(f)(1)) (material participation
rules). Accordingly, a transferee taxpayer
will not ordinarily materially participate
within the meaning of section 469(h) in
order to be treated as participating in the
activity. Proposed §1.6418-2(f)(3)(ii) also
provided that a transferee taxpayer cannot
change the characterization of its partic-
ipation (or lack thereof) in the eligible
taxpayer’s trade or business by using any
of the grouping rules under §1.469-4(c)
(grouping rules). Generally, §1.469-4(c)
allows a taxpayer to satisfy the material
participation standard for a specific activ-
ity by virtue of having materially partic-
ipated in a separate but related trade or
business.
Comments were received in connection
with the application of the material partic-
ipation and grouping rules under section
469 to transferred specified credit por-
tions. One commenter supported treating
a transferee as not materially participating
in the trade or business that generates an
eligible credit if they did not actually do
so. Other commenters asserted that the
final rules should clarify that a transferee
taxpayer that actually owns an interest in
an eligible taxpayer, and materially par-
ticipates in the credit generating activity,
is treated as owning an interest in the eli-
gible taxpayer’s trade or business at the
time the work was done. One commenter
requested that transferee taxpayers that
conduct an activity directly relating to and
necessary for the generation of an eligible
credit (but do not own an interest in the
eligible taxpayer’s credit generating trade
or business) be treated as materially par-
ticipating in the credit generating activity
for purposes of section 469. Another com-
menter supported an approach that would
permit taxpayers subject to the passive
credit rules that satisfy the material partic-
ipation requirement with respect to a spe-
cific activity (but do not own an interest in
the activity that generates to the specified
credit portion) to treat purchased cred-
its from that activity as nonpassive. The
same commenter raised that the applica-
tion of the grouping rules under §1.469-
4(c) could be used to expand the potential
purchasers of credits but acknowledged
that this approach would be difficult to
administer. Other commenters suggested
that the language in section 6418(a) treat-
ing the transferee taxpayer as the taxpayer
for purposes of the Code with respect to
the transferred specified credit portion
supports attributing the activities or all
characteristics of an eligible taxpayer to a
transferee taxpayer for purposes of apply-
ing the passive credit rules.
The Treasury Department and the IRS
agree that in the limited circumstance of
a transferee taxpayer who materially par-
ticipates in an eligible credit generating
activity within the meaning of section
469(h) in which the transferee taxpayer
owns an interest at the time the work is
done, the transferee taxpayer should be
permitted to purchase eligible credits
generated from the activity (assuming
the transferee taxpayer is not related to
the eligible taxpayer within the mean-
ing of section 267(b) or section 707(b)
(1)) and treat those purchased credits as
not arising in connection with a passive
activity. It is not workable to expand the
material participation rules under section
469 for purposes of transferred specified
credit portions in a meaningful manner
without substantially increasing adminis-
trative burdens. For example, such a view
would presumably require ownership of
the underlying eligible credit property
to be attributed to a transferee taxpayer.
This formulation would be impracticable
for purposes of section 50(c) and section
6418(g)(3)(A), which require an eligible
taxpayer to make basis adjustments for
transferred ITCs. Commenters did not
address how to overcome the technical
and administrative complexities in attrib-
uting the activities or attributes of an eli-
gible taxpayer to a transferee taxpayer for
purposes of applying the passive credit
rules. Additionally, allowing a transferee
taxpayer to change the characterization
of an eligible credit based on grouping

June 17, 2024 1696 Bulletin No. 2024–25
with its own activities is inconsistent with
the grouping rules under §1.469-4(c) and
would create significant administrative
complexity. As such, these final regu-
lations clarify that a transferee taxpayer
who directly owns an interest in an eli-
gible taxpayer’s trade or business at the
time the work was done (as required for
the material participation rules), is not
deemed to fail the requirements of section
469(h). However, these final regulations
do not adopt commenters’ suggestions
to expand the material participation or
grouping rules for purposes of applying
the passive credit rules to transferred
specified credit portions.
Lastly, commenters wanted confirma-
tion that an individual transferee taxpayer
can use eligible credits acquired as a result
of a transfer election to offset passive
income tax liability if the approach from
the proposed regulations is adopted. The
Treasury Department and the IRS confirm
that if an individual transferee taxpayer
does not materially participate (within
the meaning of §§1.469-5 and 1.469-5T)
in the activity that generates a specified
credit portion, a transferred specified
credit portion will be treated to the trans-
feree taxpayer as arising in connection
with a passive activity.
4. Transferee taxpayer requirements to
take into account a transferred specified
credit portion.
Section 6418(d) provides the taxable
year that a transferee taxpayer takes a
transferred eligible credit into account but
does not provide rules on how a transferee
taxpayer can take a transferred specified
credit portion into account. To that end,
proposed § 1.6418-2(f)(4) would have
required (1) a properly completed Form
3800, General Business Credit (or its suc-
cessor), taking into account a transferred
eligible credit as a current general busi-
ness credit, including all registration num-
ber(s) related to the transferred eligible
credit; (2) the transfer election statement
described earlier in this preamble attached
to the return; and (3) any other informa-
tion related to the transfer election spec-
ified in guidance. Because no comments
were received on proposed §1.6418-2(f)
(4), these final regulations adopt this pro-
vision without change.
5. Estimated tax payments
The preamble to the proposed regula-
tions explained that a transferee taxpayer
could take into account a specified credit
portion that it has purchased, or intends
to purchase, to calculate its estimated tax
payments, though the transferee taxpayer
remains liable for any additions to tax in
accordance with sections 6654 and 6655
of the Code to the extent the transferee
taxpayer has an underpayment of esti-
mated tax.
Commenters generally acknowledged
that the preamble to the proposed regu-
lations provided that transferred credits
could be taken into account for purposes
of calculating estimated tax but asked that
the final regulations include a specific rule
on how transferred credits should be taken
into account. Commenters also offered
particular circumstances for the Treasury
Department and the IRS to consider in for-
mulating a potential rule regarding trans-
ferred credits and estimated tax. One com-
menter requested that credits purchased in
the first quarter could be applied against
the transferee taxpayer’s first quarter esti-
mated tax payment if the taxpayer relied
on a “prior year safe harbor” under sec-
tion 6655(d)(2)(B). Another commenter
requested clarification that the transferred
credits should apply to a transferee’s tax
liability when the credit is determined.
Another commenter requested that the
final regulations should permit a trans-
feree taxpayer to make an election to take
into account the specified credit portion in
the first taxable year in which such credit
was determined by the eligible taxpayer.
The addition of a specific rule on esti-
mated tax payments is unnecessary. The
appropriateness of a transferee taxpayer
taking the eligible credit into account for
purposes of determining its quarterly esti-
mated tax liability depends on the facts
and circumstances. Nevertheless, as a
clarification, because section 6418 gen-
erally contemplates a transferee taxpayer
effectively stepping in the shoes of the
eligible taxpayer from whom the trans-
feree taxpayer was transferred the eligible
credit, it follows that a transferee taxpayer
can take into account the eligible credit for
purposes of determining its quarterly esti-
mated tax liability no earlier than an eligi-
ble taxpayer would. Further, if a transferee
taxpayer is required to take a transferred
eligible credit into account in a taxable
year that has not yet begun because of
the application of section 6418(d) and
§1.6418-2(f)(1), then a transferee taxpayer
cannot take the eligible credit into account
for purposes of determining quarterly esti-
mated tax liability until after the start of
that later year. As noted in the preamble
to the proposed regulations and confirmed
in this part II.F.5 of the Summary of Com-
ments and Explanation of Revisions, the
transferee taxpayer remains liable for
any additions to tax in accordance with
sections 6654 and 6655 to the extent the
transferee taxpayer has an underpayment
of estimated tax.
For example, if a calendar year eligible
taxpayer enters into an agreement with a
calendar year transferee taxpayer during
calendar year 2024 to transfer an eligible
credit, and such credit is determined with
respect to the eligible taxpayer in calen-
dar year 2024, then assuming a timely
and complete transfer election is made,
the transferee taxpayer can take the trans-
ferred credit into account when calculating
the required annual payment and quarterly
estimated tax installments for calendar
year 2024. The transferee taxpayer cannot
treat the transferred credit as a payment of
estimated tax. If any portion of the eligi-
ble credit that is ultimately transferred to a
transferee taxpayer under section 6418(a)
is subsequently adjusted to an amount less
than what was agreed upon by the eligi-
ble taxpayer and the transferee taxpayer
in calendar year 2024, the transferee tax-
payer may be liable for any additions to
tax under sections 6654 or 6655, given the
reduced credit amount being transferred.
Commenters requested clarification of
the phrase “intends to purchase” as used in
the preamble to the proposed regulations.
The phrase captures a situation in which
the taxpayer plans to complete a transac-
tion that meets the requirements of pro-
posed §1.6418-2(b) so that the taxpayer
would qualify as a transferee taxpayer
with respect to a specified credit portion,
but has not yet done so. This phrase illus-
trates that all the requirements of proposed
§1.6418-2(b) do not have to be met for a
transferee taxpayer to take the expected
eligible credit into account in its estimated
tax calculations, though the transferee tax-
payer remains liable for any additions to

Bulletin No. 2024–25 1697 June 17, 2024
tax in accordance with sections 6654 and
6655 of the Code to the extent the trans-
feree taxpayer has an underpayment of
estimated tax if the eligible credit is not
obtained as expected.
6. Chaining
Multiple commenters responding to
the section 6418 proposed regulations, as
well as the section 6417 proposed regula-
tions, requested that a transferee taxpayer
that is also an applicable entity under sec-
tion 6417 be permitted to make an elective
payment election under section 6417(a)
for a credit that the transferee taxpayer
purchased from an eligible taxpayer under
section 6418(a) (referred to in the section
6417 regulations as “chaining”). These
comments are outside of the scope of these
final regulations because they ask a ques-
tion that can only be resolved under section
6417. As explained in the preamble to TD
9988, the Treasury Department and the IRS
note that §1.6417-2(c)(4) specifically does
not adopt commenters’ recommendations.
However, the Treasury Department and the
IRS also published Notice 2024-27, 2024-
12 IRB 715, which requests comments on
situations in which a section 6417(a) elec-
tion could be made for credits purchased
in transfers under section 6418(a). Written
comments submitted pursuant to proce-
dures described in Notice 2024-27 are due
by December 1, 2024.
III. Additional Rules for Partnerships and
S corporations
Section 6418(c)(2) provides that, in
the case of any facility or property held
directly by a partnership or an S corpora-
tion, any election under section 6418(a)
is made by such partnership or S corpo-
ration. Section 6418(c)(1)(A) and (B)
describes the treatment of a transfer elec-
tion made by a partnership or an S cor-
poration, and proposed §1.6418-3 would
have provided additional rules for part-
nerships or S corporations that are eligible
taxpayers or transferee taxpayers.
A. Rules applicable to both partnerships
and S corporations
Proposed §1.6418-3(a)(1) through (6)
provided certain rules that are applicable
to both partnerships and S corporations.
Proposed §1.6418-3(a)(1) provided gen-
erally that a partnership or an S corpora-
tion may qualify as an eligible taxpayer
or a transferee taxpayer, assuming all
other relevant requirements in section
6418 are met. Proposed §1.6418-3(a)(2)
provided that in the case of any specified
credit portion determined with respect to
any eligible credit property held directly
by a partnership or an S corporation, if
such partnership or S corporation makes
a transfer election with respect to such
specified credit portion, (i) any amount of
cash payment received as consideration
for the transferred specified credit por-
tion will be treated as tax exempt income
for purposes of sections 705 and 1366 of
the Code, and (ii) a partner’s distributive
share of such tax exempt income will be
as described in proposed §1.6418-3(b)(1)
and (2). Proposed §1.6418-3(a)(3) clari-
fied that in the case of an eligible credit
property held directly by a partnership or
an S corporation, no transfer election by
any partner or S corporation shareholder
is allowed. Proposed §1.6418-3(a)(4) clar-
ified that the language in section 6418(c)
requiring an eligible credit property to be
“held directly” by a transferor partnership
or transferor S corporation allows for such
eligible credit property to be owned by an
entity disregarded as separate from the
transferor partnership or transferor S cor-
poration for Federal income tax purposes.
Proposed §1.6418-3(a)(5) provided that
any tax exempt income resulting from the
receipt of consideration for the transfer of
a specified credit portion by a transferor
partnership or transferor S corporation
is treated as arising from an investment
activity and not from the conduct of a
trade or business within the meaning of
section 469(c)(1)(A). Additionally, the
proposed regulations provided that any
tax exempt income is not treated as pas-
sive income to any direct or indirect part-
ners or shareholders who do not materially
participate within the meaning of section
469(c)(1)(B). Lastly, proposed §1.6418-
3(a)(6)(i) provided that the disposition
of a partner’s interest under §1.47-6(a)
(2) or the disposition of an S corporation
shareholder’s interest under §1.47-4(a)
(2) in a transferor partnership or an S
corporation, respectively, does not result
in recapture under section 6418(g)(3)(B)
to which a transferee taxpayer is liable.
Likewise, proposed §1.6418-3(a)(6)(ii)
provided that a change in the nonqualified
nonrecourse financing (as defined in sec-
tion 49(a)(1)(D)) amount of any partner
or shareholder of a transferor partnership
or transferor S corporation, respectively,
after the close of the taxable year in which
the investment credit property is placed in
service and the specified credit portion is
determined, is disregarded for purposes
of section 6418(g)(3)(B). That is, only
the applicable partner in the transferor
partnership or shareholder in the trans-
feror S corporation is liable for recapture
in such a circumstance. As such, notifi-
cation by the transferor partnership or
transferor S corporation to the transferee
taxpayer of a section 49 recapture event is
not required. Because there were no com-
ments related to the provisions described
in this paragraph, the proposed regula-
tions are adopted without change in these
final regulations.
B. Rules solely applicable to transferor
and transferee partnerships
Section 6418(c)(1)(A) provides that
any amount received as consideration
for a transfer of eligible credits by a
transferor partnership is treated as tax
exempt income for purposes of section
705. Section 6418(c)(1)(B) provides that
a partner’s distributive share of such tax
exempt income is based on such partner’s
distributive share of the otherwise eligi-
ble credit for each taxable year. Proposed
§1.6418-3(b)(1) provided that a transferor
partnership must generally determine a
partner’s distributive share of any tax
exempt income resulting from the receipt
of consideration by a transferor partner-
ship for a transferred specified credit por-
tion based on such partner’s proportionate
distributive share of the eligible credit
that would otherwise have been allocated
to such partner absent the transfer of the
specified credit portion (otherwise eligible
credit). The proposed regulations noted
that a partner’s distributive share of an
otherwise eligible credit is determined
under §§ 1.46-3(f) and 1.704-1(b)(4)(ii).
The proposed regulations further clarified
that any tax exempt income resulting from
the receipt of consideration by a trans-
feror partnership for a transferred spec-

June 17, 2024 1698 Bulletin No. 2024–25
ified credit portion is treated as received
or accrued, including for purposes of sec-
tion 705, as of the date the specified credit
portion is determined with respect to the
transferor partnership (such as, for invest-
ment credit property, the date the property
is placed in service).
Proposed §1.6418-3(b)(2) provided a
special rule for allocations of tax exempt
income and eligible credits resulting from
a transfer of a specified credit portion of
less than all eligible credits determined
with respect to an eligible credit prop-
erty held by a transferor partnership. This
special rule permitted tax exempt income
resulting from the receipt of consideration
for a transfer of one or more specified
credit portion(s) of less than all eligible
credits from an eligible credit property to,
generally, be allocated to those partners
that desired to transfer their distributive
share of the underlying credits. To take
advantage of this special rule, the proposed
regulations provided that a transferor part-
nership would first determine each part-
ner’s distributive share of the otherwise
eligible credits determined with respect to
such eligible credit property in accordance
with §§1.46-3(f) and 1.704-1(b)(4)(ii).
This amount is referred to as a “partner’s
eligible credit amount.” Thereafter, the
transferor partnership would determine,
either in a manner described in the part-
nership agreement or as the partners may
agree, the portion of each partner’s eligi-
ble credit amount to be transferred and the
portion of each partner’s eligible credit
amount to be retained and allocated to
such partner. Following the transfer of the
specified credit portion(s), the transferor
partnership would be permitted to allocate
to each partner its agreed upon share of
eligible credits, tax exempt income result-
ing from the receipt of consideration for
the transferred specified credit portion(s),
or both, as the case may be; provided that,
the amount of eligible credits allocated to
each partner did not exceed such partner’s
eligible credit amount and the amount
of tax exempt income allocated to each
partner would equal such partner’s pro-
portionate share of tax exempt income
resulting from the transfer(s). Each part-
ner’s proportionate share of tax exempt
income resulting from the transfer(s)
would be equal to the total tax exempt
income resulting from the transfer(s) of
the specified credit portion(s) multiplied
by a fraction, (i) the numerator of which
would be a partner’s total eligible credit
amount minus the amount of eligible cred-
its actually allocated to the partner with
respect to the eligible credit property for
the taxable year, and (ii) the denominator
of which would be the total amount of the
specified credit portion(s) transferred by
the partnership with respect to the eligible
credit property for the taxable year. The
proposed regulations provided examples
of this rule.
A commenter generally supported the
partnership allocation rules in the pro-
posed regulations, although there was a
non-specific question related to the admin-
istrability of the proposed rules in the tax
credit industry. The Treasury Department
and the IRS appreciate that the partner-
ship allocation rules under section 6418
could be considered complex and difficult
to administer, but any such complexity of
those rules is warranted given the flexi-
bility they provide to taxpayers operating
through transferor partnerships.
A commenter requested clarifying
language and an example showing that
the varying annual election and separate
determination of each partner’s eligible
credit amount to be transferred under
section 6418 and the portion of each part-
ner’s eligible credit amount to be retained
and allocated to such partner and related
allocations of tax exempt income can be
made or revised at any time during the
taxable year the eligible credit is gener-
ated and the following taxable year up to
the due date of the partnership return for
the taxable year under sections 706 and
761. Section 761(c) provides that for pur-
poses of subchapter K of chapter 1 of the
Code, a partnership agreement includes
any modifications of the agreement made
on or before the due date (not including
extensions) of the partnership return for
the taxable year, which are agreed to by
all the partners or are adopted in accor-
dance with the provisions of the agree-
ment. The effect of section 761(c) is that
a partnership is allowed to change its part-
ners’ distributive shares of income, gain,
loss, deductions or credits for a taxable
year (assuming such allocations are com-
pliant with section 704(b)) up until the
due date (not including extensions) for
the partnership’s tax return for such year.
Proposed §1.6418-3(b)(2)(ii) would have
provided that a transferor partnership may
determine, in any manner described in the
partnership agreement, or as the partners
may agree, the portion of each partner’s
eligible credit amount to be transferred,
and the portion of each partner’s eligible
credit amount to be retained and allocated
to such partner. Assuming the agreement
between the partners as to the portion of
each partner’s eligible credit amount to be
transferred, and the portion of each part-
ner’s eligible credit amount to be retained
and allocated to such partner, is prop-
erly treated as part of the partnership’s
agreement, such amounts can be made or
revised under section 761(c) up until the
due date (not including extensions) of the
partnership’s annual tax return. As such,
there would already be considerable flexi-
bility under the proposed regulations, and
that additional language or an example is
unnecessary to address this commenter’s
request.
Proposed §1.6418-3(b)(4)(i) would
have provided that a partnership may
qualify as a transferee partnership to the
extent it is not related (within the mean-
ing of section 267(b) or 707(b)(1)) to an
eligible taxpayer. The proposed regula-
tions also would have provided that while
a transferee partnership is subject to the
no additional transfer rule, an allocation
of a transferred specified credit portion to
a direct or indirect partner of a transferee
partnership under section 704(b) is not a
transfer for purposes of section 6418. Pro-
posed §1.6418-3(b)(4)(ii) would have pro-
vided that a cash payment by a transferee
partnership as consideration for a trans-
ferred specified credit portion is treated
as an expenditure described in section
705(a)(2)(B). Proposed §1.6418-3(b)(4)
(iii) would have provided that each part-
ner’s distributive share of any transferred
specified credit portion is based on such
partner’s distributive share of the section
705(a)(2)(B) expenditures used to fund
the purchase of such transferred specified
credit portion. Under the proposed regu-
lations, each partner’s distributive share
of the section 705(a)(2)(B) expenditures
used to fund the purchase of any trans-
ferred specified credit portion would be
determined by the partnership agreement.
Or, if the partnership agreement did not
provide for the allocation of such nonde-

Bulletin No. 2024–25 1699 June 17, 2024
ductible expenditures, then each partner’s
distributive share would be based on the
transferee partnership’s general allocation
of nondeductible expenditures.
To prevent avoidance of the no addi-
tional transfer rule in proposed § 1.6418-
2(c)(2), the proposed regulations in pro-
posed § 1.6418-3(b)(4)(iv) would have
provided that a transferred specified
credit portion purchased by a transferee
partnership is treated as an extraordinary
item under §1.706-4(e) (and would have
included a proposed addition to §1.706-
4(e) confirming a transferred specified
credit portion is an extraordinary item).
The proposed regulations further would
have provided that if the transferee part-
nership and eligible taxpayer have the
same taxable years, such extraordinary
item is deemed to occur on the date the
transferee partnership first makes a cash
payment to an eligible taxpayer for any
transferred specified credit portion. The
proposed regulations also would have
provided that if the transferee partner-
ship and eligible taxpayer have different
taxable years, the extraordinary item is
deemed to occur on the later of the first
date the transferee partnership takes the
transferred specified credit portion into
account under section 6418(d), or the first
date that the transferee partnership made a
cash payment to the eligible taxpayer for
the transferred specified credit portion.
Lastly, proposed §1.6418-3(b)(4)(v)
would have provided that if an upper-tier
partnership is a direct or indirect partner
of a transferee partnership and directly
or indirectly receives an allocation of a
transferred specified credit portion, the
upper-tier partnership is not an eligible
taxpayer under section 6418 with respect
to the transferred specified credit portion.
The proposed regulations would have
provided that an upper-tier partnership
must determine each partner’s distributive
share of the transferred specified credit
portion in accordance with rules in pro-
posed §1.6418-3(b)(4)(iii) and (iv) and
must report the credits to its partners in
accordance with guidance.
A commenter recommended that the
final regulations avoid excluding partners
from credit allocations due to the extraor-
dinary items rule of proposed §1.6418-
3(b)(4)(iv) if a new partner is admitted
to the partnership after the transferee
taxpayer signs a credit purchase agree-
ment but before any cash payments have
been made. The commenter’s concern
was with respect to the application of pro-
posed §1.6418-1(f)(3) to a partnership.
This provision stated that the term “paid
in cash” means a payment in U.S. dollars
and “[m]ay include a transferee taxpay-
er’s contractual commitment to purchase
eligible credits with United States dollars
in advance of the date a specified credit
portion is transferred to such transferee
taxpayer.” The commenter suggested that
the clause in the previous sentence could
be interpreted to mean that the term “paid
in cash” means the advance contractual
commitment itself, rather than the pay-
ment pursuant to the advance commitment
and suggested some changes to proposed
§1.6418-1(f)(3). The paid in cash defini-
tion in proposed §1.6418-1(f)(3) confirms
that advanced commitments are permis-
sible and do not violate the paid in cash
requirement. As the commenter hypoth-
esizes, this provision is intended to clar-
ify that payments in U.S. dollars made
at the proper time can qualify even if the
payments are made pursuant to advance
contractual commitments. Likewise, the
Treasury Department and the IRS confirm
that an advanced commitment is not by
itself considered a cash payment. Thus, if
a partnership has not yet made any cash
payments pursuant to a commitment to
purchase eligible credits, an extraordinary
item has not yet arisen.
A commenter requested additional
guidance in the form of examples that
illustrate the transfer of partnership inter-
ests. The Treasury Department and the IRS
have considered these general requests
and have determined such additional
guidance is not necessary. The final regu-
lations already provide examples demon-
strating the rules applicable to a transferee
partnership and its partners under section
6418, including rules applicable to an
upper-tier partnership that is a direct or
indirect partner in a transferee partnership.
However, the final regulations clarify that
an upper-tier partnership’s distributive
share of a transferred specified credit por-
tion is treated as an extraordinary item to
the upper-tier partnership. As a result, a
transferred specified credit portion must
be allocated among the partners of an
upper-tier partnership as of the time the
transfer of the specified credit portion is
treated as occurring to the transferee part-
nership in accordance with §1.6418-3(b)
(4)(iv) and §1.706-4(e)(1) and (e)(2)(ix).
This is the case regardless of whether the
transferee partnership and the upper-tier
partnership have different taxable years
under section 706(b).
A commenter recommended updates
to §1.704-1(b)(3) to provide that the spe-
cial allocations of tax exempt income and
non-deductible expenses in the manner
contemplated by the proposed regulations
will be treated as having been made in
accordance with the partners’ interests in
the partnership. The Treasury Department
and the IRS have considered whether
updates to §1.704-1(b)(3) are necessary
and have determined that updates to those
regulations are outside the scope of final
regulations for section 6418.
C. Rules solely applicable to transferor
and transferee S corporations
Section 6418(c)(1)(A) provides that
any amount received as consideration for
a transfer of eligible credits by a transferor
S corporation is treated as tax exempt
income for purposes of section 1366.
Proposed §1.6418-3(c)(1) would have
provided that each shareholder of a trans-
feror S corporation must take into account
such shareholder’s pro rata share (as
determined under section 1377(a) of the
Code) of any tax exempt income resulting
from the receipt of consideration for the
transfer. The proposed regulations further
would have provided that any tax exempt
income resulting from the receipt of con-
sideration by a transferor S corporation
for a transferred specified credit portion is
treated as received or accrued, including
for purposes of section 1366 of the Code,
as of the date the specified credit portion is
determined with respect to the transferor S
corporation (such as, for investment credit
property, the date the property is placed in
service).
Proposed §1.6418-3(c)(2)(i) would
have provided that an S corporation may
qualify as a transferee taxpayer to the
extent it is not related (within the meaning
of section 267(b) or 707(b)(1)) to an eli-
gible taxpayer. The proposed regulations
also would have provided that while a
transferee S corporation is subject to the

June 17, 2024 1700 Bulletin No. 2024–25
no additional transfer rule, an allocation
of a transferred specified credit portion
to a direct or indirect shareholder of a
transferee S corporation is not a transfer
for purposes of section 6418. Proposed
§1.6418-3(c)(2)(ii) would have provided
that a cash payment by a transferee S cor-
poration as consideration for a transferred
specified credit portion is treated as an
expenditure described in section 1367(a)
(2)(D) of the Code. Proposed §1.6418-
3(c)(2)(iii) would have provided that each
shareholder of a transferee S corporation
must take into account such shareholder’s
pro rata share (as determined under section
1377(a)) of any transferred specified credit
portion. The proposed regulations further
would have provided that if a transferee S
corporation and eligible taxpayer have the
same taxable years, the transfer of a spec-
ified credit portion is treated as occurring
to a transferee S corporation during the
transferee S corporation’s permitted year
(as defined under section 1378(b)) or the
taxable year elected under section 444 that
the transferee S corporation first makes a
cash payment as consideration to the eli-
gible taxpayer for the specified credit por-
tion. The proposed regulations also would
have provided that if a transferee S corpo-
ration and eligible taxpayer have different
taxable years, then the transfer of a spec-
ified credit portion is treated as occurring
to a transferee S corporation during the
transferee S corporation’s first permitted
year (as defined under sections 444 and
1378(b)) ending with or after, the taxable
year of the eligible taxpayer to which the
transferred specified credit portion was
determined. Because there were no com-
ments related to the provisions described
in this paragraph, the proposed regula-
tions are adopted without change in these
final regulations.
D. Elections for transferor partnerships
and transferor S corporations
Proposed §1.6418-3(d) would have
provided specific rules relating to elections
for transferor partnerships or transferor
S corporations. Proposed §1.6418-3(d)
(1) would have provided that a transfer
election is made on the basis of an eligi-
ble credit property and only applies to the
specified credit portion identified in the
transfer election by such partnership or S
corporation in the taxable year for which
the election is made. Proposed §1.6418-
3(d)(2) would have provided that a trans-
fer election for a specified credit portion
must be made in the manner provided in
proposed §1.6418-2(b)(1) through (3),
including that all documents required in
proposed §1.6418-2(b)(1) through (3)
must be attached to the partnership or S
corporation return for the taxable year
during which the transferred specified
credit portion was determined. The pro-
posed regulations further would have pro-
vided that for the transfer election to be
valid, the return must be filed not later than
the time prescribed by §§1.6031(a)-1(e)
and 1.6037-1(b) (including extensions of
time) for filing the return for such taxable
year. Additionally, the proposed regula-
tions would have provided that no trans-
fer election may be made or revised on an
amended return or by filing an AAR and
that no 9100 relief would be available for
a transfer election that is not timely filed.
Lastly, proposed §1.6418-3(d)(3) would
have provided that a transfer election by
a partnership or an S corporation is irre-
vocable. As described in greater detail in
part II.B.4 of this Summary of Comments
and Explanation of Revisions, these final
regulations modify proposed §1.6418-
2(b)(4) to permit an automatic six-month
extension of time under §301.9100-2(b)
to make the election prescribed in section
6418(e)(1). Consistent with that modifi-
cation, these final regulations also modify
proposed §1.6418-3(d)(2) to provide for
late-election relief under §301.9100-2(b)
for a partnership or an S corporation mak-
ing a transfer election and permit, based
on some commenters’ requests, that a
partnership or an S corporation, much like
any other eligible taxpayer, may correct a
numerical error with respect to a properly
claimed transfer election on an amended
return or AAR. The partnership‘s or S cor-
poration’s original return must have been
signed under penalties of perjury and must
have contained all of the information,
including a registration number, required
by these final regulations. The final reg-
ulations clarify that in order to correct an
error on an amended return or AAR, a
partnership or an S corporation must have
made an error in the information included
on the original return such that there is a
substantive item to correct. A partnership
or an S corporation cannot correct a blank
item or an item that is described as being
“available upon request.”
IV. Additional Information and
Registration
Section 6418(g)(1) provides that as
a condition of, and prior to, any transfer
of any portion of an eligible credit under
section 6418, the Secretary may require
such information (including, in such form
or manner as is determined appropriate by
the Secretary, such information returns)
or registration as the Secretary deems
necessary for purposes of preventing
duplication, fraud, improper payments,
or excessive payments under this section.
Proposed §1.6418-4 would have addressed
these requirements by adding a pre-filing
registration process, and §1.6418-4T,
issued contemporaneously, put those rules
into effect for taxable years ending on or
after June 21, 2023. Because the tempo-
rary regulations are removed, this part IV
discusses the proposed regulations rather
than the temporary regulations, which are
identical.
Proposed §1.6418-4(a)-(c) would have
provided the mandatory pre-filing regis-
tration process that, except as provided in
guidance, an eligible taxpayer would be
required to complete as a condition of, and
prior to, the transfer of an eligible credit
under proposed §1.6418-2 or §1.6418-3.
Proposed §1.6418-4(a) would have
provided an overview of the pre-filing
registration process. Proposed §1.6418-
4(b) would have included the pre-filing
registration requirements, including:
(1) manner of pre-filing registration; (2)
pre-filing registration and election for
members of a consolidated group; (3) tim-
ing of pre-filing registration; (4) that each
eligible credit property must have its own
registration number; and (5) information
required to complete the pre-filing regis-
tration process. Proposed §1.6418-4(c)
would have provided rules related to the
registration number, including: (1) general
rules; (2) that the registration number is
valid for only one taxable year; (3) renew-
ing registration numbers; (4) amendment
of previously submitted registration
information if a change occurs before the
registration number is used; and (5) that
the registration number is required to be

Bulletin No. 2024–25 1701 June 17, 2024
reported by an eligible taxpayer and trans-
feree taxpayer.
Several commenters requested that the
IRS implement a streamlined process for
registration, including registration for mul-
tiple properties. Several commenters pro-
vided suggestions for alternatives to a reg-
istration process, such as creating a registry
of tax credits, an election out of pre-filing
registration, or utilizing the current process
for matching transactions. Section 6418(g)
(1) provides that the Secretary may imple-
ment a registration process she deems
necessary for purposes of preventing
duplication, fraud, or improper or exces-
sive transfers of eligible credits. Proposed
§1.6418-4(a) would have required an eligi-
ble taxpayer to satisfy the pre-filing regis-
tration requirements of proposed §1.6418-
4(b) as a condition of, and prior to, making
a transfer election under section 6418(a).
The Treasury Department and the IRS rec-
ognize the concerns of eligible taxpayers
needing an efficient registration process to
transfer eligible credits but must mitigate
opportunities for fraud. The IRS will con-
sider ways outside of these final regulations
to make the pre-filing registration process
more streamlined for eligible taxpayers,
and the IRS will continue to monitor the
pre-filing registration process to determine
whether there are areas in which more effi-
ciencies in the pre-filing registration pro-
cess can be created. However, these final
regulations finalize proposed §1.6418-4(a)
without change.
Several commenters recommended
that the final regulations allow transfers
under section 6418(a) without a regis-
tration requirement if the pre-filing reg-
istration application had been submitted.
The Treasury Department and the IRS
understand commenters’ recommenda-
tions were made prior to the pre-filing
registration portal being open; however,
pre-filing registration is necessary to help
meet the government’s compelling inter-
est to prevent fraud and duplication while
also allowing for a more efficient process-
ing and payment upon filing of the return.
These final regulations do not adopt this
suggestion because the timing of the sub-
mission is only one issue. The quality and
accuracy of information of the provided
information is also important, and so only
submitting an application is an insufficient
guardrail.
Several commenters stated that the reg-
istration process might create burdens for
taxpayers that could prevent their partic-
ipation in transfer opportunities. A com-
menter stated that the documentation and
process related to acquiring a registration
number should account for the fact that,
while there are many large taxpayers that
may be selling tax credits, the transfer
market will include many smaller tax-
payers as well. The Treasury Department
and the IRS understand commenters’
concerns about the need for resources to
complete the pre-filing registration pro-
cess; however, as described previously,
pre-filing registration is necessary to help
meet the government’s compelling inter-
est to prevent fraud and duplication while
also allowing for a more efficient pro-
cessing of the eligible taxpayer’s return
and the transferee taxpayer’s return. The
information requested during the pre-fil-
ing registration process is also infor-
mation that the eligible taxpayer should
have available after having engaged in
an activity for which an eligible credit is
determined. Further, for smaller eligible
taxpayers that engage in fewer projects,
the pre-filing registration process will be
less complex. For example, an eligible
taxpayer with one eligible credit property
for which an eligible credit is determined
during the taxable year will have a more
streamlined registration process than will
an eligible taxpayer with multiple eligi-
ble credit properties for which multiple
eligible credits are determined during the
taxable year. Finally, the IRS is committed
to ongoing efforts to provide guidance to
help taxpayers understand how to qualify
for the underlying credits, how to meet
the pre-filing registration requirements,
and how to complete the transfer elec-
tion process. These efforts, among others
undertaken by the IRS, should address the
commenters’ concerns. Thus, these final
regulations adopt the pre-filing registra-
tion process as proposed.
Commenters recommended a time
limit for registration approval. A com-
menter urged the IRS to provide registra-
tion numbers as quickly as possible and
publicly share estimates for issuing regis-
tration numbers to incentivize efficiency.
Another commenter urged that the IRS
be required to clarify reasons for delay in
issuing a registration number and provide
relief from estimated tax penalties due
to the delay. Several commenters recom-
mended that the final regulations create
specific exceptions to the pre-filing reg-
istration requirement, such as a transition
rule allowing transferee taxpayers to take
eligible credits into account on the trans-
feree taxpayer’s 2023 tax return without a
registration number for the eligible credits
if a pre-registration application has been
submitted by the eligible taxpayer. These
final regulations do not adopt these sug-
gestions for a time limit or a transition
rule for a 2023 taxable year. Instead, the
Treasury Department and the IRS recom-
mend that taxpayers with these sorts of
questions consult the current version of
Publication 5884, Inflation Reduction Act
(IRA) and CHIPS Act of 2022 (CHIPS)
Pre-Filing Registration Tool User Guide
and Instructions, for the latest guidance
on the pre-filing registration process. In
April 2024, Publication 5884 stated:
Even though registration is not possible
prior to the beginning of the tax year in
which the credit will be earned, the IRS
recommends that taxpayers register as
soon as reasonably practicable during
the tax year. The current recommen-
dation is to submit the pre-filing regis-
tration at least 120 days prior to when
the organization or entity plans to file
its tax return. This should allow time
for IRS review, and for the taxpayer to
respond if the IRS requires additional
information before issuing the registra-
tion numbers.
This information in Publication 5884
should also help other commenters that
asked for clarification on the timeline
for such a pre-filing registration process,
including the lead-time required to initiate
the process before the anticipated date of
filing the applicable tax return.
One commenter suggested that the
proposed regulations failure to mention
bonus credits in proposed §1.6418-4
means it is ambiguous whether eligible
taxpayers must separately declare their
intent to elect to transfer a bonus credit.
The commenter strongly encouraged that
the final regulations resolve this ambigu-
ity and clearly specify that such an intent
must be separately reported. However,
as explained in part I.D of the Summary

June 17, 2024 1702 Bulletin No. 2024–25
of Comments and Explanation of Revi-
sions, bonus credits are not separately
transferred from an eligible credit. Fur-
ther, these final regulations do not adopt
these proposed revisions to the proposed
regulations because the pre-filing reg-
istration process is primarily intended
to verify that the applicant is an eligible
taxpayer and that the registered property
is an eligible credit property. Calculation
of the credit amount (including quali-
fying for any bonus amounts that would
increase the base credit amount) is done
on an annual return. However, the Trea-
sury Department and the IRS will monitor
the pre-filing registration process to deter-
mine whether requesting additional infor-
mation is needed to prevent duplication,
fraud, improper payments, or excessive
credit transfers under section 6418.
Several commenters requested clarifi-
cation of the IRS’s review and determina-
tion procedures after a taxpayer completes
registration, including whether taxpayers
may appeal any denials of registration
numbers. Publication 5884 describes this
process. In cases in which a pre-filing
registration submission is incomplete, the
IRS will attempt to contact the registrant
using the information provided to indicate
deficiencies with the registration prior to
making a determination.
Section 7803(e)(3) of the Code pro-
vides that it is the function of the IRS
Independent Office of Appeals (Appeals)
to resolve Federal tax controversies with-
out litigation. Decisions made by the
IRS relating to the denial, suspension, or
revocation of a registration number are
not Federal tax controversies within the
meaning of section 7803(e)(3) because
registration is too attenuated and separate
from any tax liability of the eligible tax-
payer. Accordingly, once the IRS deter-
mines that a registration number should
not be given, the registrant cannot appeal
the denial unless the IRS and Appeals
agree that such review is available and
the IRS provides the time and manner for
such review.
Commenters requested that the final
regulations clarify documentation reten-
tion requirements, including additional
rules for the types of documents to retain
or the type of information to be retained.
The documentation to support the exis-
tence of valid eligible credit property will
vary by the credit being claimed. The
pre-filing registration portal and Publica-
tion 5884 list, for each credit, a descrip-
tion of the types of documents that will
facilitate processing of the pre-filing reg-
istration. A registrant does not need to pro-
vide all information that may be available;
in fact, as of April 2024, Publication 5884
states:
If detailed project plans or contractual
agreements are the best support that
the taxpayer is engaging in activities
or making tax credit investments that
qualify the registrant to claim a credit,
the registrant should submit an extract
of the document showing the name
of the taxpayer, date of purchase and
identifying information such as serial
numbers, rather than the entire docu-
ment.
However, to the extent the information
provided is insufficient for purposes of
the pre-filing registration process, the IRS
may request further information. See Pub-
lication 5884.
Commenters provided suggestions
of how the registration portal should be
constructed and how it should function.
Commenters also recommended that the
IRS enable a transferee taxpayer to verify
the legitimacy of a registration number by
providing the eligible taxpayer’s pre-fil-
ing registration information, including a
truncated taxpayer identification number,
into the portal. The Treasury Department
and the IRS recognize that these com-
ments were provided prior to the opening
of the registration portal; however, much
of the infrastructure and planning for the
registration portal was in process at the
time these comments were received. The
Treasury Department and the IRS will
continue to review the efficiency of the
registration portal, including functionality
responses from the public, to determine
whether changes should be implemented
or whether additional guidance or publi-
cations should be issued; however, these
comments are outside of the scope of
these final regulations.
Several commenters stated that the final
regulations should allow grouping for reg-
istration and transfer either by means of
the underlying Code section provisions
or existing guidance. Other commenters
recommended changes in the final regula-
tions to allow for grouping based on spe-
cific types of property. The definition of
eligible credit property in section 6418 is
based on the relevant rules for the under-
lying eligible credit, and changes to the
definition of particular properties pursuant
to the underlying Code sections is outside
the scope of this rulemaking. If any such
underlying Code section allows grouping
to determine a qualified property, then
grouping for purposes of a registration
number is permitted. If such definition
does not allow grouping, then each eligi-
ble credit property must be registered sep-
arately; however, for some eligible cred-
its, the pre-filing registration portal allows
eligible credit property information to be
uploaded by way of a spreadsheet file
(bulk upload). See Publication 5884.
A commenter specifically asked that
grouping of charging properties under
section 30C be permitted for registration
purposes. The commenter argued that
requiring the pre-registration on a single
eligible credit property basis would be
unduly burdensome and costly in some
cases. The commenter suggested allowing
taxpayers to bundle multiple projects at
different locations into a single pre-regis-
tration to process and reduce transaction
costs, believing in most cases that it would
reflect the realities of the transfer. The
Treasury Department and the IRS did not
adopt the commenters recommendation
regarding section 30C, as the approach
recommended was determined to be too
subjective, which could lead to differences
in interpretation between taxpayers and
the IRS. As such, the grouping of eligible
credit property continues to depend on the
definition of that eligible credit property
under the relevant Code section and reg-
ulations implementing the underlying eli-
gible credit. In this commenter’s case, this
means the rules in section 30C(c). How-
ever, it is relevant to note the pre-filing
registration portal allows eligible credit
property information to be uploaded by
way of bulk upload for certain credits,
including the section 30C credit. See Pub-
lication 5884.
Commenters sought clarification that
the pre-filing registration process will not
require designation of a qualified clean
hydrogen production facility’s applicable
“lifecycle greenhouse gas emissions rate”

Bulletin No. 2024–25 1703 June 17, 2024
under section 45V. Similar to the issue of
grouping eligible credit properties, the
definition of eligible credit property in
section 6418 is based on the relevant rules
for the underlying eligible credit, and clar-
ification of the definitions contained in
the underlying Code sections for particu-
lar properties is outside the scope of this
rulemaking. Therefore, these final regu-
lations do not make this recommended
change.
A commenter recommended that the
final regulations allow the owner of a
single process train to register the eligi-
ble credit property and the owner and the
disposer(s) or utilizer(s) to each make a
transfer election using the same registra-
tion number for a section 45Q credit. The
commenter also recommended that in
this case the pre-filing registration portal
allow the owner of the single process train
to disclose as part of its pre-filing regis-
tration that the credit or a portion thereof
will be allowed to disposer(s) or utilizer(s)
under a section 45Q(f)(3)(B) election. As
explained in part II.A of this Summary of
Comments and Explanation of Revisions,
§1.6418-2(a)(4)(iii) of these final regula-
tions provides that a section 45Q credit
allowable to an eligible taxpayer because
of an election under section 45Q(f)(3)(B)
is not an eligible credit that can be trans-
ferred because the credit is not determined
with respect to the eligible taxpayer. Thus,
the final regulations do not adopt this rec-
ommendation.
Several commenters sought exceptions
to the yearly registration requirement. A
commenter requested an illustration of
a specified change that would require an
amendment or resubmission. The purpose
of the registration process is to assist with
the administrative needs of the IRS in
tracking the eligible credit property and
the transferred specified credit portion.
Proposed §1.6418-4(c)(2) would have
stated that a registration number is valid
with respect to an eligible taxpayer only
for the taxable year in which the credit is
determined for the eligible credit property
for which the registration is completed,
and for a transferee taxpayer’s taxable
year in which the eligible credit is taken
into account under proposed §1.6418-2(f).
Additionally, proposed §1.6418-4(c)(3)
would have stated that renewal must be
made in accordance with applicable guid-
ance, including attesting that all the facts
previously provided are still correct or
updating any facts. Thus, any changes to
the pre-filing registration process to make
it be more streamlined for renewals will
be addressed in applicable guidance. After
reviewing this comment, the Treasury
Department and the IRS have determined
that a yearly registration process is still
necessary to meet these administrative
needs.
Proposed §1.6418-4(b)(5)(vii)(D)
would have required that, to complete the
pre-filing registration process, registrants
must provide information as to the begin-
ning of construction date and the placed
in service date of the eligible credit prop-
erty. Commenters requested that the final
regulations require registration up to sixty
days before construction has begun as
well as an IRS visit to the jobsite as part
of the registration process for PWA pur-
poses. The Treasury Department and the
IRS have determined that a registration
number should not be given before the eli-
gible credit property is placed in service,
which is an important step to ensuring that
the eligible credit property qualifies for
the eligible credit for which the eligible
taxpayer seeks to make a transfer election.
Because a credit must be determined in
the taxable year of the transfer election,
maintaining the proposed requirement
will ensure that taxpayers are not attempt-
ing to make a transfer election in a year in
which a credit is not determined. Further,
this information will help the IRS prevent
fraud. The Treasury Department and the
IRS have also determined that it is not
necessary for sound tax administration to
require registration or a jobsite visit prior
to construction for PWA purposes. Thus,
these final regulations adopt proposed
§1.6418-4(b)(5)(vii)(D) without change.
A commenter recommended that tax
professionals be allowed to assist in the
registration process on behalf of eligible
taxpayers. The Treasury Department and
the IRS note that the proposed regulations
would not have restricted a taxpayer from
authorizing a representative to apply for a
registration number on behalf of the tax-
payer, and these final regulations similarly
do not do so. See Publication 5884, which
provides that a person who wishes to
access Energy Credits Online on behalf of
a taxpayer must authorize an IRS Energy
Credits Online account by selecting “Start
Authorization.” These final regulations
modify proposed §1.6418-4(c)(5) to clar-
ify that a valid registration number is one
that was assigned to the particular tax-
payer during the pre-registration process.
A commenter requested guidance stat-
ing that subsequent changes in law will
not impact tax credits for which the tax-
payer has already applied in the pre-fil-
ing registration process. The Treasury
Department and the IRS do not adopt this
request. The pre-filing registration process
is not a guarantee that a project will qual-
ify for an eligible credit for which a trans-
fer election may be made, as verification
of initial pre-filing information cannot be
used by the IRS to confirm compliance
with the requirements of an underlying
credit. Compliance with the underlying
credit requirements is reported and ver-
ified in additional detail on the annual
tax return, and, as those requirements are
provided in Code sections outside of sec-
tion 6418, are largely outside the scope of
these final regulations. Generally, for an
ITC, the amount of the credit can be deter-
mined as of the placed in service date,
and for a PTC, the amount of the credit
is generally determined as of the end of
the taxable year. Thus, for either type of
credit, changes in later taxable years to the
underlying Code sections would not affect
an eligible taxpayer’s qualification in the
taxable year the credit was determined.
V. Special Rules
A. Excessive credit transfers
Pursuant to section 6418(g)(2)(A), if
the Secretary determines that there is an
excessive credit transfer to a transferee
taxpayer, then the tax imposed on the
transferee taxpayer by chapter 1 of the
Code (chapter 1) (regardless of whether
such entity would otherwise be subject
to tax under chapter 1) is increased in the
year of such determination by the amount
of the excessive credit transfer plus 20
percent of such excessive credit transfer.
Under section 6418(g)(2)(B), the addi-
tional amount of 20 percent of the exces-
sive credit transfer does not apply if the
transferee taxpayer demonstrates to the
satisfaction of the Secretary that the exces-
sive credit transfer resulted from reason-

June 17, 2024 1704 Bulletin No. 2024–25
able cause. An excessive credit transfer is
defined in section 6418(g)(2)(C) as, with
respect to a facility or property for which
an election is made under section 6418(a)
for any taxable year, an amount equal to
the excess of (1) the amount of the eligible
credit claimed by the transferee taxpayer
with respect to such facility or property
for such taxable year; over (2) the amount
of the eligible credit that, without applica-
tion of section 6418, would be otherwise
allowable under the Code with respect to
such facility or property for such taxable
year.
1. In general
Proposed §1.6418-5(a)(1) would have
provided a general rule that is consistent
with the rule in section 6418(g)(2)(A) for
any specified credit portion transferred to
a transferee taxpayer pursuant to an elec-
tion in proposed §1.6418-2(a) or proposed
§1.6418-3.
2. Taxable year of determination
Proposed §1.6418-5(a)(2) would have
defined the taxable year of determination
as the taxable year that includes the deter-
mination of the excessive credit transfer to
the transferee taxpayer and not the taxable
year during which the eligible credit was
originally determined by the eligible tax-
payer, unless those are the same taxable
years.
A commenter recommended that the
final regulations also describe any fur-
ther procedures that apply with respect
to this IRS determination or the taxable
year of the determination. The commenter
noted that the proposed regulations do
not describe any appeal rights of the tax-
payer of such determination, including the
application of deficiency procedures and
the right to petition the U.S. Tax Court.
The commenter recommended that the
final regulations clarify that appeal rights
and deficiency procedures apply to any
excessive credit transfer determination.
Any excessive credit transfer deter-
mination will be made by the IRS under
established examination procedures and
these final regulations do not except any
taxpayers or any calculations from this
process. An eligible taxpayer or trans-
feree taxpayer may challenge an adverse
determination by the IRS with respect to
an excess credit transfer determination if
the determination creates a tax deficiency,
for which deficiency procedures apply,
including the right to petition the U.S.
Tax Court. For example, if a transferee
taxpayer claimed a transferred specified
credit portion, and the transferred speci-
fied credit portion was subsequently dis-
allowed and determined by the IRS to
be an excessive credit transfer, then the
transferee taxpayer could protest the dis-
allowance before Appeals and ultimately
petition the U.S. Tax Court, if desired.
3. Payments related to excessive credit
transfer
Proposed §1.6418-5(a)(3) would have
provided a rule that any payments made
by a transferee taxpayer to an eligible tax-
payer that directly relate to an excessive
credit transfer (as defined in proposed
§1.6418-5(b)) are not subject to section
6418(b)(2) or proposed §1.6418-2(e).
Several commenters recommended
clarifying the tax consequences to a trans-
feree taxpayer with respect to payments
made to an eligible taxpayer that directly
relate to an excessive credit transfer. In
general, the commenters thought that
proposed §1.6418-5(a)(3) only addressed
the eligible taxpayer side of a transaction
by only referencing section 6418(b)(2).
Specifically, some commenters recom-
mended revising the rule so that section
6418(b)(3), which says that payments
related to the transfer of an eligible credit
are not deductible to the transferee tax-
payer, would not apply in the excessive
credit transfer context. For example, a
commenter raised that amounts paid as
consideration by a transferee taxpayer
related to an excessive credit transfer
should be deductible as an ordinary busi-
ness expense in year of the excess credit
determination, and corresponding indem-
nity or insurance payment received should
be included as ordinary income in the
year the all events test is met (for accrual
method) or in the year of payment (for
cash method). Another commenter stated
that amounts paid by a transferee taxpayer
related to an excessive credit transfer
should be deductible only to the extent
they exceed the amount for which there is
a claim or reimbursement with a reason-
able prospect of recovery. A commenter
also recommended clarifying the amount
of the deduction, if a deduction is possi-
ble. Lastly, a commenter asked that the
final regulations provide that any indem-
nification payments made by an eligible
taxpayer to a transferee taxpayer relating
to an excessive credit transfer be deduct-
ible as an ordinary business expense under
section 162(a) in the year that the liability
to make the payment is taken into account
under section 461, assuming the eligible
taxpayer uses the accrual method.
In response to these comments, these
final regulations revise proposed §1.6418-
5(a)(3) to provide that any payment made
by a transferee taxpayer to an eligible tax-
payer that directly relates to the excessive
credit transfer (as defined in proposed
§1.6418-5(b)) is not subject to section
6418(b)(2), section 6418(b)(3), or pro-
posed §1.6418-2(e). Adding the reference
to section 6418(b)(3) should clarify that a
transferee taxpayer is not precluded from
deducting the portion of the consideration
paid to the eligible taxpayer for a specified
credit portion that relates to an excessive
credit transfer. In addition, these final reg-
ulations revise proposed §1.6418-5(a)(3)
to clarify that the amount of a payment
that directly relates to an excessive credit
transfer is equal to the total consideration
paid in cash by the transferee taxpayer
for its specified credit portion multiplied
by the ratio of the amount of the exces-
sive credit transferred to the transferee
taxpayer to the amount of the transferred
specified credit portion claimed by the
transferee taxpayer. However, determin-
ing the timing and character of any deduc-
tion, or the impact of insurance or indem-
nity payments, is beyond the scope of
these final regulations. General income tax
principles apply to determine the timing
of any deduction to a transferee taxpayer,
or gross income to an eligible taxpayer,
with respect to a payment that directly
relates to an excessive credit transfer.
Similarly, the character of any deduction
to a transferee taxpayer, or gross income
to an eligible taxpayer, with respect to a
payment that directly relates to an exces-
sive credit transfer may be determined
under section 6418 and general income
tax principles. Finally, general income tax
principles apply to determine the income
tax consequences of any insurance pay-

Bulletin No. 2024–25 1705 June 17, 2024
ments received by a transferee taxpayer or
indemnities paid by the eligible taxpayer
to a transferee taxpayer.
4. Reasonable cause
Section 6418(g)(2)(B) provides that,
if a transferee taxpayer demonstrates to
the satisfaction of the Secretary that the
excessive credit transfer resulted from
reasonable cause, the excessive credit
transfer addition to tax described in sec-
tion 6418(g)(2)(A)(ii) will not apply.
Proposed §1.6418-5(a)(4) would have
provided that the determination of rea-
sonable cause will be made based on the
relevant facts and circumstances. Gen-
erally, the most important factor is the
extent of the transferee taxpayer’s efforts
to determine that the amount of specified
credit portion transferred by the eligible
taxpayer to the transferee taxpayer is
not more than the amount of the eligible
credit determined with respect to the eli-
gible credit property for the taxable year
in which the eligible credit was deter-
mined and has not been transferred to any
other taxpayer. Circumstances that may
indicate reasonable cause can include,
but are not limited to, review of the eli-
gible taxpayer’s records with respect to
the determination of the eligible credit
(including documentation evidencing
eligibility for bonus credit amounts),
reasonable reliance on third party expert
reports, reasonable reliance on represen-
tations from the eligible taxpayer that the
total specified credit portion transferred
(including portions transferred to other
transferee taxpayers in a case in which an
eligible taxpayer makes multiple transfer
elections with respect to a single eligible
credit property) does not exceed the total
eligible credit determined with respect to
the eligible credit property for the tax-
able year, and review of audited financial
statements provided to the Securities and
Exchange Commission (and underlying
information), if applicable.
The Treasury Department and the IRS
received several comments regarding the
definition of reasonable cause. For the rea-
sons described further in this part V.A.4 of
the Summary of Comments and Explana-
tion of Revisions, these final regulations
do not adopt the recommendations sub-
mitted by commenters, and the proposed
regulations are finalized without any sub-
stantive changes on this issue.
A few commenters stated that the
proposed regulations defined reasonable
cause subjectively and did not sufficiently
protect transferee taxpayers from an eli-
gible taxpayer’s inadequate controls or
fraud, such as cases in which an eligible
taxpayer provided material, false, or mis-
leading information on which the trans-
feree taxpayer relied. Some commenters
suggested bright-line or safe harbor rules
under which the reasonable cause excep-
tion would be deemed to be satisfied, such
as if an eligible taxpayer provides to a
transferee taxpayer a written certification
that the requirements of a section 6418
transfer have been met, or if a transferee
taxpayer can produce due diligence infor-
mation or attestations or uses a third-party
advisor for its due diligence.
A commenter requested that the final
regulations provide guidance on the defi-
nition of reasonable cause for labor stan-
dards noncompliance, including that state
and local governments should receive rea-
sonable cause relief if a failure is due to
labor noncompliance. Another commenter
recommended transferee taxpayers be
able to rely on project labor agreements
for purposes of determining reasonable
cause.
These final regulations do not adopt
these comments because the determination
of whether an excessive credit transfer was
due to reasonable cause is based on full
consideration of all the facts and circum-
stances. To the extent additional rules are
needed to prevent eligible taxpayers from
providing materially false or misleading
information to transferee taxpayers, or to
the extent additional enforcement mecha-
nisms are needed to prevent this type of
abuse, such a change is beyond the scope
of these final regulations. These final regu-
lations also do not adopt a bright-line rule
or safe harbor identifying any particular
action or omission as the transferee tax-
payer’s deemed satisfaction of the reason-
able cause standard. Guidance regarding
reasonable cause in the context of labor
standards noncompliance is outside the
scope of these final regulations.
The Treasury Department and the IRS
note that section 6418(g)(2)(B) specifi-
cally places a due diligence responsibility
on the transferee taxpayer. As provided
in proposed §1.6418-5(a)(4), the most
important factor in demonstrating reason-
able cause under section 6418 would be
the transferee taxpayer’s efforts in deter-
mining that the eligible taxpayer had the
specified credit portion to transfer. As
acknowledged by one of the comment-
ers, the proposed regulations would have
considered representations by an eligible
taxpayer as part of determining whether
a transferee taxpayer has demonstrated
reasonable cause. Relying solely on an
eligible taxpayer’s representations does
not align with section 6418(g)(2)(B).
Moreover, reasonable cause standards
are already well-established under case
law and administrative and regulatory
authorities. A transferee taxpayer that is
subject to an excessive credit transfer may
assert defenses that are commonly raised
by taxpayers in other situations in which
the IRS has asserted an addition to tax.
Section 1.6664-4, for example, provides
guidance related to reasonable cause in
the context of accuracy-related penalties
under section 6662. Accordingly, these
final regulations do not adopt comment-
ers’ suggestions to create bright-line rules,
safe harbors, or other new standards and
adopt the proposed regulations without
modification.
5. Recapture events
Proposed §1.6418-5(a)(5) clarified that
a recapture event under section 45Q(f)(4)
or 50(a) is not an excessive credit trans-
fer. The Treasury Department and the IRS
did not receive any comments regarding
this clarification, and thus, these final reg-
ulations adopt proposed §1.6418-5(a)(5)
without change, except that, for clarity,
the final regulations add section 49(b) to
the list of recapture events that are not an
excessive credit transfer.
6. Definition of excessive credit transfer
Proposed §1.6418-5(b)(1) would
have defined an excessive credit trans-
fer consistent with section 6418(g)(2)(C)
as meaning, with respect to an eligible
credit property for which a transfer elec-
tion is made under proposed §1.6418-2 or
§1.6418-3 for any taxable year, an amount
equal to the excess of (1) the amount of
the transferred specified credit portion

June 17, 2024 1706 Bulletin No. 2024–25
claimed by the transferee taxpayer with
respect to such eligible credit property for
such taxable year; over (2) the amount of
the eligible credit that, without the appli-
cation of section 6418, would be otherwise
allowable under the Code with respect to
such eligible credit property for such tax-
able year.
Proposed §1.6418-5(b)(2) would have
provided a rule for determining an exces-
sive credit transfer if there are multiple
transferees by treating the transferees as
one. The proposed regulations would have
provided that all transferee taxpayers are
considered one transferee for calculating
whether there was an excessive credit
transfer and the amount of the excessive
credit transfer. If there was an excessive
credit transfer, then the amount of exces-
sive credit transferred to a specific trans-
feree taxpayer would be equal to the total
excessive credit transferred multiplied by
the transferee taxpayer’s portion of the
total credit transferred to all transferee
taxpayers. This rule would be applied on
an eligible credit property basis.
A commenter recommended that the
final regulations adopt a rule allowing an
eligible taxpayer to determine the order of
eligible credits transferred for determin-
ing an excessive credit transfer if there
are multiple transferees. Specifically, the
commenter recommended allowing an
eligible taxpayer to choose the order in
which transferred credits will be treated
as excessive credit transfers. The Treasury
Department and the IRS acknowledge that
an ordering rule could potentially limit the
number of transferee taxpayers to which
an excessive credit transfer determina-
tion is made, rather than applying pro rata
to all transferee taxpayers as provided
in proposed §1.6418-5(b)(2). However,
inclusion of an ordering rule between an
eligible taxpayer and transferee taxpayers
is not described in the definition of exces-
sive credit transfer in section 6418(g)(2)
(C). The definition, by limiting excessive
credit transfers to amounts claimed by a
transferee taxpayer over amounts other-
wise allowable, effectively only applies
to the extent the disallowed credit exceeds
the amount retained by an eligible tax-
payer. For example, if an eligible taxpayer
retained $25X of a $100X eligible credit
and transferred $75X of the same eligi-
ble credit and it was later determined that
only $75X of the eligible credit is other-
wise allowable with respect to the relevant
eligible credit property, the excess credit
transfer would be $0 ($75X - $75X). The
$25X of disallowed credit would be disal-
lowed to the eligible taxpayer. Thus, the
definition of an excessive credit transfer
effectively includes an ordering rule so
that any disallowed eligible credit first
reduces the eligible credit retained by an
eligible taxpayer before applying to any
transferee taxpayer. However, the defini-
tion does not distinguish between differ-
ent transferee taxpayers. Further, adding
an ordering election would add adminis-
trative complexity that does not exist with
a pro rata rule. For example, rules would
be needed on whether the election is made
on a single eligible credit property basis
or for all eligible credit properties, and
the IRS would have to create additional
systems to track that such an election was
made. Also, additional complexity could
arise with respect to tax administration
if there was a disagreement between an
eligible taxpayer and transferee taxpay-
ers as to the order of a transfer. Based on
this reasoning, the Treasury Department
and the IRS do not adopt the comment-
er’s suggestion, and these final regulations
adopt the definition of excessive credit
transfer without change and provide clari-
fying language for calculating the amount
of excessive credit transferred to a specific
transferee taxpayer if there is more than
one transferee taxpayer.
7. Examples illustrating excessive credit
transfers
Proposed §1.6418-5(b)(3) would have
provided three examples to illustrate cases
in which there is no excessive credit trans-
fer, in which there is an excessive credit
transfer, and in which there is an excessive
credit transfer as to multiple transferees.
Consistent with the modifications made
to proposed §1.6418-5(a)(3), as described
in part V.A.3 of this Summary of Com-
ments and Explanation of Revisions, the
final regulations provide additional clari-
fication to each of the three examples in
§1.6418-5(b)(3).
The Treasury Department and the IRS
understand from the comment letters that
partners in a transferor partnership that
decide to retain their share of eligible
credits generated through the partnership
may refuse to consent to the partnership
transferring other partners’ shares of eli-
gible credits because eligible taxpayers
are first liable under the excessive credit
transfer rules up to the amount of the
credit retained. Commenters requested
that the final regulations include an elec-
tion not to apply any disallowed eligible
credit amounts to an eligible taxpayer
(to the extent it retained eligible cred-
its) before triggering an excessive credit
transfer. As previously described, section
6418(g)(2)(C) limits an excessive credit
transfer to the amount claimed by a trans-
feree taxpayer(s) over amounts otherwise
allowable, meaning the rule only applies
to the extent the disallowed credit exceeds
the amount retained by an eligible tax-
payer. After considering this comment,
the Treasury Department and the IRS have
determined that including an election not
to apply the excessive credit transfer rules
in specified circumstances is not consis-
tent with the definition of an excessive
credit transfer in section 6418(g)(2)(C).
Several comments were received seek-
ing clarification on the interaction between
the additions to tax for excessive credit
transfers and penalties for labor standards
noncompliance, as well as recommenda-
tions for additional enforcement and doc-
umentation rules. After considering these
comments, the Treasury Department and
the IRS have decided not to provide fur-
ther clarification in these final regulations.
The additions to tax imposed by section
6418 are applied in addition to other pen-
alties imposed by the Code. Moreover,
the imposition of penalties under section
45(b)(7) and (8) are addressed in the sec-
tion 45 proposed regulations. The Trea-
sury Department and the IRS will con-
tinue to study whether inequities or unfair
burdens exist for taxpayers and potentially
address such situations in future guidance.
B. Recapture
Unlike excessive credit transfers,
recapture of a tax credit occurs if the orig-
inal tax credit reported would have been
correct without the occurrence of a subse-
quent recapture event.
Section 6418(g)(3)(B) provides that
if, during any taxable year, the applicable
investment credit property (as defined in

Bulletin No. 2024–25 1707 June 17, 2024
section 50(a)(5)) is disposed of, or other-
wise ceases to be investment credit prop-
erty with respect to the eligible taxpayer,
before the close of the recapture period
(as described in section 50(a)(1)), then
(i) such eligible taxpayer must provide
notice of such occurrence to the transferee
taxpayer (in such form and manner as the
Secretary prescribes), and (ii) the trans-
feree taxpayer must provide notice of the
recapture amount (as defined in section
50(c)(2)), if any, to the eligible taxpayer
(in such form and manner as the Secre-
tary prescribes). The proposed regulations
would have included a rule that the recap-
ture amount is calculated and taken into
account by the transferee taxpayer.
The proposed regulations would have
provided guidance on the notifications that
are required by the eligible taxpayer and
the transferee taxpayer after a recapture
event, as described in section 6418(g)(3)
(B)(i) and (ii), stating that an eligible tax-
payer is required to provide notification of
a recapture event to a transferee taxpayer,
with such notification including all of the
information necessary for the transferee
taxpayer to calculate the recapture amount
(as defined under section 50(c)(2)).
On November 22, 2023, the Trea-
sury Department and the IRS published
proposed regulations (REG-132569-17)
in the Federal Register (88 FR 82188)
relating to the section 48 credit that sup-
plemented proposed §1.6418-5 to pro-
vide guidance on the notification require-
ments for an eligible taxpayer and that a
transferee taxpayer is responsible for any
amount of tax increase under section 48(a)
(10)(C). These final regulations reserve on
§1.6418-5(f) as proposed in REG-132569-
17 because the Treasury Department and
the IRS continue to consider comments
received regarding the application of
section 48(a)(10)(C). Accordingly, any
comments received on §1.6418-5(f) as
proposed in REG-132569-17 will be sep-
arately addressed as part of that rulemak-
ing.
Commenters recommended that the
final regulations allocate the risk of recap-
ture to the eligible taxpayer for several rea-
sons, including that the eligible taxpayer
would have the greatest ability to cause or
prevent a recapture event. Another com-
menter urged that the final regulations
allocate the risk of recapture to the eligi-
ble taxpayer for recapture events solely
under section 50(a). Other commenters
stated that placing the risk of recapture on
the transferee taxpayer creates increased
transactions costs, reduces the number
of market participants, and distorts the
market value of the transferred credits.
The Treasury Department and the IRS
have determined that the risk of recapture
should be borne by the transferee taxpayer
with respect to its specified credit portion
for all types of recapture events (including
those under sections 49(b) and 45Q(f)(4))
directly relating to an eligible taxpayer
(that is, other than section 50(a) and 49(b)
recapture events involving transfers of
interests by partners in a transferor part-
nership or shareholders in a transferor S
corporation). This determination is con-
sistent with the statutory framework for
recapture under sections 45Q(f)(4), 49(b),
and 50(a), which generally imposes recap-
ture tax on the taxpayer who claimed the
credit, regardless of whether the underly-
ing credit is determined with respect to
such taxpayer (for example, whether the
taxpayer owns the underlying credit prop-
erty). This interpretation is also consistent
with section 6418(a), which treats the
transferee taxpayer (and not the eligible
taxpayer) as the taxpayer for purposes of
the Code with respect to a specified credit
portion, and with section 6418(g)(3)(B)
(ii), which requires the transferee taxpayer
to provide notice of the recapture amount,
if any, to the eligible taxpayer. Therefore,
these final regulations adopt the proposed
rule without change on this issue.
A commenter requested clarification
as to the allocation of recapture liability
between an eligible taxpayer and a trans-
feree taxpayer to the extent the eligible
taxpayer retains any eligible credits and
whether there is an ordering rule applied
similar to an excessive credit transfer. As
discussed in part V.A.5 of this Summary
of Comments and Explanation of Revi-
sions section, proposed §1.6418-5(a)
(5) would have clarified that recapture
tax liability is not treated in the same
manner as an excessive credit transfer
tax liability, and these final regulations
adopt that rule without change. Under the
excessive credit transfer rules, the eligi-
ble taxpayer will be subject to a credit
reduction up to the amount of the eli-
gible credit retained before a transferee
taxpayer’s credit is reduced. However,
the position most consistent with the
statutory language of the multiple Code
sections involved is that the transferee
taxpayer bears a proportionate share of
recapture risk, without looking to the
eligible taxpayer first. Consequently, the
Treasury Department and the IRS have
not made a change to the proposed reg-
ulations allocating recapture risk to the
eligible taxpayer for any retained cred-
its before causing a recapture event to
any transferee taxpayer. However, the
final regulations under §1.6418-5(d)(3)
(i) clarify that, except in the case of a
partner or S corporation shareholder that
has disposed of an interest in a transferor
partnership or transferor S corporation
and is subject to the rules relating to such
disposition under §1.47-6(a)(2) or §1.47-
4(a)(2), respectively, recapture liability
applies proportionately to any transferee
taxpayers and an eligible taxpayer to the
extent an eligible taxpayer has retained
eligible credits determined with respect
to the relevant eligible credit property.
The final regulations also add formulas
for determining the recapture amount for
which a transferee taxpayer and an eligi-
ble taxpayer is responsible for.
In addition, the final regulations clar-
ify the effect of a partner or S corporation
shareholder recapture event on the remain-
ing amount of recapture liability for which
the transferee taxpayer and the transferor
partnership or transferor S corporation is
responsible and provide two examples to
illustrate who is responsible for recap-
ture in the case of a sale of a portion of
an interest in a transferor partnership and
a subsequent sale of the investment credit
property by the transferor partnership.
A commenter stated that the recap-
ture notice requirement under proposed
§1.6418-5(d) could be burdensome, par-
ticularly to smaller taxpayers, due to the
complexity and compliance needed to
prepare the necessary documentation and
notify the respective party of the occur-
rence of a recapture event or the determi-
nation of the recapture amount. The Trea-
sury Department and the IRS note that
section 6418(g)(3)(B)(i) provides these
notification requirements and that the pro-
posed regulations merely implement the
statute. For these reasons, the Treasury
Department and the IRS have determined

June 17, 2024 1708 Bulletin No. 2024–25
that the notification requirements in the
proposed regulations should be retained.
Several commenters requested that
exceptions be provided to the recapture
rules, for example, by limiting the scope
of recapture events, such as if a project
ceases to be credit eligible property, or by
limiting recapture events to those causing
recapture under the former grant program
created under section 1603 of the Amer-
ican Recovery and Reinvestment Tax
Act of 2009 (Public Law 111-5, 123 Stat.
115, 364). Section 6418(g)(3)(B) specifi-
cally provides for recapture in the event
applicable investment credit property (as
defined in section 50(a)(5)) is disposed
of or otherwise ceases to be investment
credit property with respect to the eligible
taxpayer before the end of the recapture
period described in section 50(a)(1). As
such, providing exceptions to the opera-
tion of section 50(a) is beyond the scope of
these final regulations. Consequently, the
Treasury Department and the IRS decline
to make the recommended changes.
Some commenters urged the Trea-
sury Department and the IRS to miti-
gate instances of duplicate recapture of
the same ITC. Specifically, commenters
requested that to the extent an amount of
an eligible ITC has been recaptured by
a partner in a transferor partnership or a
shareholder in a transferor S corporation
under section 50(a) or section 49(b) pur-
suant to §1.6418-3(a)(6), the amount of
potential recapture liability remaining to
a transferee taxpayer should be reduced
accordingly. The Treasury Department
and the IRS agree that a single ITC should
not be subject to duplicate recapture. As
a result, the final regulations clarify that
to the extent a partner in a transferor part-
nership or a shareholder in a transferor S
corporation recognizes an amount of tax
increase under sections 50(a) or 49(b) that
does not result in recapture liability to a
transferee taxpayer pursuant to §1.6418-
3(a)(6), that amount reduces the remain-
ing amount of ITC subject to recapture
for a recapture event caused directly by
the transferor partnership or transferee S
corporation.
Commenters also requested additional
guidance and examples of the recapture
rules, including a recapture event under
§§1.6418-5(e) and 1.45Q-5. For purposes
of recapture, section 6418(g)(3) cross-ref-
erences to section 50(a). Thus, recapture
occurs with respect to the taxable year in
which an investment credit property for
which an eligible credit is determined
is disposed of, or otherwise ceases to be
investment credit property with respect
to the eligible taxpayer before the end
of the recapture period. Section 45Q has
similar requirements in that carbon oxide
that has been sequestered, utilized, or used
and to which a section 45Q credit has
been determined is generally intended to
remain sequestered, utilized, or used for
the entire recapture period. The proposed
regulations would have clarified that the
rules under proposed §§1.6418-5(e) and
1.45Q-5 apply to a transferee taxpayer to
the extent any eligible section 45Q credit
is transferred under section 6418. Based
on the explanations provided in the pre-
amble to the proposed regulations, as
well as this Summary of Comments and
Explanation of Revisions, the Treasury
Department and the IRS have decided not
to provide additional guidance generally
or through examples. However, the final
regulations clarify that recapture liability
applies proportionately to an eligible tax-
payer and any transferee taxpayers to the
extent an eligible taxpayer has retained
any amount of an eligible credit deter-
mined with respect to a component of
carbon capture equipment owned by the
eligible taxpayer within a single process
train described in §1.45Q-2(c)(3).
A commenter requested examples
illustrating the section 49(b) rules causing
recapture to a transferee taxpayer, partic-
ularly in cases in which specified credit
portions are transferred to multiple trans-
feree taxpayers. The Treasury Department
and the IRS believe examples of the inter-
action of sections 49 and 6418 are beyond
the scope of these regulations. As such, no
examples have been added to these final
regulations regarding this interaction.
A commenter stated that credit buyers
will prefer purchasing credits from part-
nerships or S corporations because owners
of partnerships and S corporations may
transfer their interests without triggering
recapture to the transferee taxpayer and
achieve the same tax result as a sale of the
underlying assets. The Treasury Depart-
ment and the IRS acknowledge that the
recapture rules for indirect dispositions
by partners in a transferor partnership or
shareholders in a transferor S corporation
are different than the rules for direct dispo-
sitions by an eligible taxpayer. However,
these differences are generally consistent
with the effect of entity versus aggregate
principles throughout the Code and reg-
ulations. Consequently, no changes are
necessary to the proposed regulations on
this issue.
C. Ineffective Transfers
Proposed §1.6418-5(f) states that an
ineffective transfer election means that no
transfer of an eligible credit has occurred
for purposes of section 6418, including
section 6418(b). The proposed regulations
would have provided a clarification that
an ineffective election is not considered an
excessive credit transfer to the transferee
taxpayer. This means that section 6418
would not apply to the transaction, and the
tax consequences are determined under
any other relevant provisions of the Code.
A commenter requested clarification of
the general tax consequences of a transfer
that was ineffective. The Treasury Depart-
ment and the IRS have reviewed this com-
ment and determined that the proposed
regulations provide sufficient guidance for
taxpayers if an ineffective transfer occurs.
To avoid the risk of not addressing a spe-
cific consequence of an ineffective trans-
fer, the proposed regulations would have
stated that the tax consequences are deter-
mined under any relevant provision of the
Code. Addressing those tax consequences
is outside of section 6418 and is beyond
the scope of these final regulations. Con-
sequently, these final regulations adopt the
rule in proposed §1.6418-5(f) (redesig-
nated as §1.6418-5(g)), without including
specific tax consequences.
A commenter requested that the final
regulations address ineffective transfer
determinations made after the transfer
election deadline and the resulting conflict
given that an eligible taxpayer is entitled
to transfer a tax credit once. The Treasury
Department and the IRS understand this
comment to mean that there is a poten-
tial prohibition on a transfer if the same
eligible taxpayer attempted to transfer
the same eligible credit in relation to an
eligible credit property, but the previous
transaction was deemed to be an ineffec-
tive transaction. If a previous transaction

Bulletin No. 2024–25 1709 June 17, 2024
is unwound because it is deemed to be
an ineffective transaction, then no trans-
fer has occurred. In addition to the appli-
cation of existing tax rules, the eligible
taxpayer would be able to make a trans-
fer election to properly transfer the credit
assuming the eligible taxpayer can satisfy
the requirements for making a transfer
election. Because the proposed regula-
tions would have identified the treatment
of ineffective transactions, these final reg-
ulations are adopted without change.
Another commenter suggested that the
final regulations adopt a rule providing for
reasonable cause relief in the event of an
ineffective transfer election. These final
regulations do not adopt this comment. As
described in the preamble to the proposed
regulations, and previously in this part V.C
of the Summary of Comments and Expla-
nation of Revisions, an ineffective trans-
fer does not result in an excessive credit
transfer to the transferee taxpayer, and so
reasonable cause relief is not necessary.
D. Credit carryforward
The proposed regulations would have
provided special rules relating to the carry-
back and carryforward of transferred spec-
ified credit portions. Proposed §1.6418-
5(g) would have stated that a transferee
taxpayer can apply the rules in section
39(a)(4) of the Code (regarding a 3-year
carryback period for unused current year
business credits) to a specified credit por-
tion to the extent the specified credit por-
tion is described in section 6417(b) (list of
applicable credits, taking into account any
placed in service requirements in section
6417(b)(2), (3), and (5)). The preamble to
the proposed regulations provided clarity
on two complementary issues related to
the carryback of transferred credits stating
(i) if the credit is listed in section 6417(b),
then the credit is an applicable credit,
and (ii) no statutory language prohibits a
transferee taxpayer from using the rule in
section 39(a)(4) with respect to an eligible
credit.
Several commenters asked that the
final regulations confirm that the trans-
feree taxpayer should be able to carryfor-
ward an unused credit amount. These final
regulations provide the requested clarifi-
cation by revising proposed §1.6418-5(g)
(redesignated as §1.6418-5(h)) so that the
language now refers to both the carryback
and carryforward period when describing
application of the rules in section 39(a)(4).
E. Real estate investment trusts
With respect to real estate investment
trusts under section 856 of the Code
(REITs), commenters requested that the
final regulations clarify that eligible cred-
its that have not yet been transferred are
treated as real estate assets, cash, or cash
items and, thus, will not cause a REIT
to fail REIT qualification under sec-
tion 856(c)(4)(A) (section 856(c)(4)(A)
together with section 856(c)(4)(B), the
REIT Asset Test). Another commenter
requested that the final regulations state
that eligible credits that have not been
transferred are disregarded for purposes of
determining whether a REIT satisfies the
REIT Asset Test. Commenters asserted
that guidance is needed to avoid instances
in which a REIT might fail the REIT Asset
Test because it planned to make an elec-
tion to transfer an eligible credit but did
not do so prior to the end of a calendar
quarter, when the REIT’s compliance with
the REIT Asset Test is measured.
The Treasury Department and the IRS
recognize that REITs may be continu-
ously earning and selling eligible credits
and, therefore, need certainty with respect
to this REIT qualification issue. Accord-
ingly, §1.6418-5(i)(1) of these final regu-
lations addresses those comments by pro-
viding that eligible credits that have not
yet been transferred pursuant to section
6418 are disregarded for purposes of the
REIT Asset Test.
The preamble to the proposed regula-
tions stated that under section 6418, the
cash received by an eligible REIT as con-
sideration for the transfer of an eligible
credit is not included in that taxpayer’s
gross income. Because the transaction
does not result in any net income, the
transfer does not pose a prohibited trans-
action tax issue. A commenter stated that,
although this clarification is appreciated,
the final regulations should contain a pro-
vision that the transfer of an eligible credit
pursuant to section 6418 is not a sale of
property for purposes of the “seven sales”
safe harbor in section 857(b)(6)(C)(iii)
(I) or section 857(b)(6)(D)(iv)(I) of the
Code. The commenter further pointed
out that many eligible credit programs
allow a taxpayer to earn a large number
of separately transferable credits. Thus,
the commenter explained, if the transfer
of an eligible credit were a sale of prop-
erty for these purposes, that result could
cause the REIT to have so many sales that
it would be taxed 100 percent on any sale
of real property in which it engaged. The
possibility of that 100 percent tax could
effectively deter REITs from participating
in any eligible credit programs.
The Treasury Department and the IRS
agree that participation in the transfer of
eligible credits under section 6418 should
not burden all of a REIT’s sales of real
property. Accordingly, §1.6418-5(i)(2) of
these final regulations provides that the
transfer of a specified credit portion pursu-
ant to a valid section 6418 election is not
a sale of property for purposes of section
857(b)(6)(C)(iii) and section 857(b)(6)(D)
(iv) and, thus, does not count as one of the
seven sales described in those provisions.
One commenter requested confirma-
tion that receipt of (or the right to receive)
an eligible credit does not result in income
to an eligible taxpayer that is a REIT.
Generally, Federal income tax rules do not
treat a taxpayer as receiving gross income
upon becoming entitled to a credit against
Federal income tax. This general principle
equally applies to an eligible taxpayer,
including a REIT, becoming entitled to an
eligible credit that it may transfer under
section 6418. Accordingly, these final reg-
ulations do not include the requested rule
specifically addressing REITs.
A commenter also requested confir-
mation that the sale of energy under sec-
tions 45 and 45Y is not a dealer sale under
the REIT prohibited transactions rules of
section 857(b)(6). Although, a REIT’s
Federal income tax treatment of the sale
of energy and earning of eligible credits
is outside the scope of these final regu-
lations, the Treasury Department and the
IRS note that the preamble to TD 9784
(81 FR 59849, 59856 (August 31, 2016))
(2016 preamble) stated that until addi-
tional guidance is published in the Inter-
nal Revenue Bulletin, in any taxable year
in which (1) the quantity of excess elec-
tricity transferred to the utility company
during the taxable year from energy-pro-
ducing distinct assets that serve an inher-
ently permanent structure does not exceed

June 17, 2024 1710 Bulletin No. 2024–25
(2) the quantity of electricity purchased
from the utility company during the tax-
able year to serve the inherently perma-
nent structure, the IRS will not treat any
net income resulting from the transfer of
such excess electricity as constituting net
income derived from a prohibited transac-
tion under section 857(b)(6). Any sale of
electricity that is not within the scope of
the statement in the 2016 preamble should
be analyzed on a facts and circumstances
basis to determine whether the sale is sub-
ject to the prohibited transaction rules of
section 857(b)(6).
VI. Other Comments
A. Normalization
The proposed regulations did not
address the impact of the rules described
in section 50(d)(2) (normalization rules)
on eligible credit transfers under section
6418, which only are relevant for cred-
its that are ITCs. Several commenters
requested guidance on the application of
the normalization rules. Some comment-
ers stated that the normalization rules
could not and should not apply to eligi-
ble credit transfers. One commenter sug-
gested that there is no authority to apply
the normalization rules to eligible credit
transfers. Lastly a commenter stated that
the normalization rules do apply to credits
related to public utility property otherwise
subject to the ITC normalization require-
ments because section 6417(g) provides,
in part, that “rules similar to the rules of
section 50” apply for purposes of section
6417. The commenter went on to state that
there is not a similar provision included in
section 6418 to invoke application of the
normalization rules, and the wording of
section 6418(a) has the opposite effect.
The final regulations do not adopt a spe-
cific rule addressing the normalization
rules because it is beyond the scope of the
final regulations. However, the Treasury
Department and the IRS clarify that an
eligible taxpayer is not subject to the nor-
malization rules with respect to any cash
consideration paid by a transferee tax-
payer for a specified credit portion that is
described in section 6418(b)(2). Any por-
tion of an eligible credit that is not trans-
ferred, however, would remain subject to
the normalization rules as applicable.
B. Transaction costs and deductions
The proposed regulations did not
address the Federal income tax treatment
of transaction costs, either for the eligible
taxpayer or the transferee taxpayer but
described specific matters and consider-
ations that the Treasury Department and the
IRS are taking into account in developing
rules outside of these final regulations.
Commenters recommended that the
final regulations clarify the treatment of
transaction costs, including categories of
costs such as: legal and consulting fees;
success-based fees; tax insurance; and
indemnity payments. The treatment of
transaction costs is beyond the scope of
the section 6418 final regulations. Section
6418(b)(2) and (3) only cover the treat-
ment of consideration that is paid for the
transfer of an eligible credit. The treatment
of other costs is generally governed by
other Code sections, and subject to general
Federal income tax principles. However,
the application of other Code sections and
general Federal income tax principles to
determine such treatment may involve the
relation-back of such costs to the credit
transfer transaction and its general char-
acterization under section 6418(a) and
(b). The Treasury Department and the IRS
anticipate issuing further guidance tak-
ing into account the comments received
regarding transaction costs.
Effect on Other Documents
The temporary regulations are removed
effective July 1, 2024.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of Agree-
ment, Review of Treasury Regulations
under Executive Order 12866 (June 9,
2023), tax regulatory actions issued by the
IRS are not subject to the requirements of
section 6(b) of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management
and Budget (OMB) before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information dis-
plays a valid control number.
The collections of information in these
final regulations contain reporting and
recordkeeping requirements. The record-
keeping requirements mentioned within
these final regulations are considered gen-
eral tax records under §1.6001-1(e). These
records are required for the IRS to validate
that transferee taxpayers have met the reg-
ulatory requirements and are entitled to
the transferred specified credit portions.
For PRA purposes, general tax records are
already approved by OMB under 1545-
0074 for individuals and under 1545-0123
for business entities.
These final regulations also men-
tion reporting requirements related to
making transfer elections as detailed in
§§1.6418-2 and 1.6418-3. These transfer
elections will be made by eligible tax-
payers as part of filing a return (such as
the appropriate Form 1040, Form 1120,
Form 1120-S, or Form 1065), including
filling out the relevant source credit form
and completing the Form 3800. The final
regulation in §1.6418-2(b)(5) describes
third-party disclosures, which require eli-
gible taxpayers and transferee taxpayers
to complete transfer election statements
and also require eligible taxpayers to pro-
vide required minimum documentation to
transferee taxpayers as part of making a
transfer election. These forms and third-
party disclosures are approved under
1545-0074 for individuals and 1545-0123
for business entities.
These final regulations also describe
recapture procedures as detailed in
§1.6418-5 that are required by section
6418(g)(3). The reporting of a recapture
event will still be required to be reported
using Form 4255, Recapture of Investment
Credit. This form is approved under 1545-
0074 for individuals and 1545-0123 for
business entities. The final regulation is not
changing or creating new collection require-
ments not already approved by OMB.

Bulletin No. 2024–25 1711 June 17, 2024
These final regulations mention the report-
ing requirement to complete pre-filing regis-
tration with IRS to be able to transfer eligible
credits to a transferee taxpayer as detailed in
§1.6418-4. The pre-filing registration portal is
approved under 1545-2310 for all filers.
The IRS solicited feedback on the
collection requirements for reporting,
recordkeeping, and pre-filing registration.
Although no public comments received by
the IRS were directed specifically at the
PRA or on the collection requirements,
several commenters generally expressed
concerns about the burdens associated
with the documentation requirements con-
tained in the Proposed Rules. As described
in the relevant portions of this preamble,
the Treasury Department and IRS believe
that the documentation requirements are
necessary to administer the transfer of eli-
gible credits under section 6418.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C.
601 et seq.) (RFA) imposes certain require-
ments with respect to Federal rules that are
subject to the notice and comment require-
ments of section 553(b) of the Administra-
tive Procedure Act (5 U.S.C. 551 et seq.)
and that are likely to have a significant eco-
nomic impact on a substantial number of
small entities. Unless an agency determines
that a proposal is not likely to have a sig-
nificant economic impact on a substantial
number of small entities, section 603 of the
RFA requires the agency to present a final
regulatory flexibility analysis (FRFA) of the
final regulations. The Treasury Department
and the IRS have not determined whether
the final regulations will likely have a sig-
nificant economic impact on a substantial
number of small entities. This determina-
tion requires further study. Because there is
a possibility of significant economic impact
on a substantial number of small entities, a
FRFA is provided in these final regulations.
Pursuant to section 7805(f) of the
Code, the proposed regulations were sub-
mitted to the Chief Counsel of Advocacy
of the Small Business Administration, and
no comments were received.
1. Need for and Objectives of the Rule
The final regulations provide greater
clarity to eligible taxpayers that intend to
make an election under section 6418 to
transfer eligible credits. The final regula-
tions also provide guidance to transferee
taxpayers as to the treatment of trans-
ferred eligible credits under section 6418.
The final regulations include needed defi-
nitions, the time and manner to make a
transfer election, and information about
the pre-filing registration process, among
other items. The Treasury Department and
the IRS intend and expect that providing
taxpayers guidance that allows them to
effectively use section 6418 to transfer
eligible credits will beneficially impact
various industries, deliver benefits across
the economy, and reduce economy-wide
greenhouse gas emissions.
In particular, section 6418 allows eli-
gible taxpayers to transfer an eligible
credit (or portion thereof) to a transferee
taxpayer. Allowing eligible taxpayers
without sufficient Federal income tax lia-
bility to use a business tax credit to instead
transfer the tax credit to a taxpayer that
has sufficient tax liability to use the credit
will increase the incentive for taxpayers to
invest in clean energy projects that gen-
erate eligible credits. It will also increase
the amount of cash available to such tax-
payers, thereby reducing the amount of
financing needed for clean energy proj-
ects.
2. Significant Issues Raised by Public
Comments in Response to the IRFA
There were no comments filed that
specifically addressed the Proposed Rules
and policies presented in the IRFA. Addi-
tionally, no comments were filed by the
Chief Counsel of Advocacy of the Small
Business Administration.
3. Affected Small Entities
The RFA directs agencies to provide a
description of, and where feasible, an esti-
mate of, the number of small entities that
may be affected by the final regulations,
if adopted. The Small Business Admin-
istration’s Office of Advocacy estimates
in its 2023 Frequently Asked Questions
that 99.9 percent of American businesses
meet its definition of a small business.
The applicability of these final regulations
does not depend on the size of the busi-
ness, as defined by the Small Business
Administration. As described more fully
in the preamble to these final regulations
and in this FRFA, section 6418 and these
final regulations may affect a variety of
different entities across several different
industries as there are 11 different eligi-
ble credits that may be transferred pursu-
ant to a transfer election. Although there
is uncertainty as to the exact number of
small businesses within this group, the
current estimated number of respondents
to these rules is 50,000 taxpayers. The
Treasury Department and the IRS expect
to receive more information on the impact
on small businesses once taxpayers start
to make transfer elections using the guid-
ance and procedures provided in these
final regulations.
4. Impact of the Rules
The final regulations provide rules for
how taxpayers can take advantage of the
section 6418 credit monetization regime.
Taxpayers that elect to take advantage of
transferability will have administrative
costs related to reading and understand-
ing the rules in addition to recordkeeping
and reporting requirements because of
the pre-filing registration and tax return
requirements. The costs will vary across
different-sized taxpayers and across the
type of project(s) in which such taxpayers
are engaged.
The pre-filing registration process
requires a taxpayer to register itself as
intending to make a transfer election, to
list all eligible credits it intends to trans-
fer, and to list each eligible credit property
that contributed to the determination of
such credits. This process must be com-
pleted to receive a registration number for
each eligible credit property with respect
to which the eligible taxpayer intends to
transfer an eligible credit. On filing the
return, to make a valid transfer election,
the eligible taxpayer and transferee tax-
payer would be required to complete and
attach a transfer election statement. The
transfer election statement is generally a
written document that describes the trans-
fer of a specified credit portion between an
eligible taxpayer and transferee taxpayer.
Further, the eligible taxpayer is required
to provide certain required minimum doc-
umentation to the transferee taxpayer, and
the transferee taxpayer is required to retain

June 17, 2024 1712 Bulletin No. 2024–25
the documentation for as long as it may
be relevant. Many of the other require-
ments, such as completing the relevant
source credit form and completing the
Form 3800 would be required for any tax-
payer that is claiming a general business
credit, regardless of whether the taxpayer
was transferring the credit under section
6418. Although the Treasury Department
and the IRS do not have sufficient data
to determine precisely the likely extent
of the increased costs of compliance, the
estimated burden of complying with the
recordkeeping and reporting requirements
are described in the Paperwork Reduction
Act section of the preamble.
5. Alternatives Considered
The Treasury Department and the IRS
considered alternatives to the final regu-
lations. The final regulation requirements
of pre-filing registration and the addi-
tional requirements to make a valid trans-
fer election were designed to minimize
burden while also minimizing the oppor-
tunity for duplication, fraud, improper
payments, or excessive payments under
section 6418. For example, in adopting
these requirements, the Treasury Depart-
ment and the IRS considered whether
such information could be obtained
strictly at filing of the relevant return.
However, the Treasury Department and
IRS decided that such an option would
increase the opportunity for duplication,
fraud, improper payments or excessive
payments under section 6418. Section
6418(g)(1) specifically authorizes the
IRS to require such information or regis-
tration as the Secretary deems necessary
for purposes of preventing duplication,
fraud, improper payments, or excessive
payments under section 6418 as a condi-
tion of, and prior to, any transfer of any
portion of an eligible credit. As described
in the preamble to these final regulations,
these final rules carry out that Congres-
sional intent as pre-filing registration
allows for the IRS to verify certain infor-
mation in a timely manner and then pro-
cess the annual tax return of the eligible
taxpayer and the transferee taxpayer
with minimal delays. Having a distinc-
tion between eligible taxpayers that are
small businesses versus others making a
transfer election would create a scenario
in which a subset of taxpayers seeking to
transfer eligible credits would not have
been verified or received registration
numbers, potentially delaying return pro-
cessing for both eligible taxpayers and
transferee taxpayers.
Another example is the final regu-
lation requirement that eligible taxpay-
ers and transferee taxpayers complete a
transfer election statement. In determin-
ing to adopt this proposed rule, the Trea-
sury Department and the IRS considered
that such a statement would again mini-
mize opportunity for fraud and decrease
the chance of duplication but would also
benefit a transferee taxpayer by allowing
the filing of its return without having to
wait for an eligible taxpayer to file in all
cases. Further, the contents of the trans-
fer election statement were intended to
be available to eligible taxpayers, such
that the size of the business should not
impact greatly the time needed to prepare
such statements. The Treasury Depart-
ment and the IRS also considered whether
any required documentation was needed
to be provided by eligible taxpayers to
transferee taxpayers, which the transferee
taxpayers are then required to keep for so
long as the contents thereof may become
material in the administration of any inter-
nal revenue law. Again, this requirement
was considered consistent with the goal
of minimizing fraud, as the information
is generally documentation to validate
the existence of the eligible credit prop-
erty, any bonus credits amounts, and the
evidence of credit qualification. Any size
business generating an eligible credit
should have access to such information.
Further the recordkeeping duration is con-
sistent with general recordkeeping rules
under §1.6001-1(e). This final regulation
requirement also will benefit small busi-
nesses that are transferee taxpayers as it
provides a mechanism to receive such
information from the eligible taxpayer.
The Treasury Department and the IRS
solicited comments on the requirements in
the proposed regulations, including specif-
ically, whether there are less burdensome
alternatives that do not increase the risk of
duplication, fraud, improper payments, or
excessive payments under section 6418.
The comments received in response to this
request have been discussed in the preced-
ing paragraphs.
5. Duplicative, Overlapping, or
Conflicting Federal Rules
The final regulations do not duplicate,
overlap, or conflict with any relevant Fed-
eral rules. As discussed above, the final
regulations merely provide procedures
and definitions to allow taxpayers to take
advantage of the ability to transfer eligible
credits. The Treasury Department and the
IRS solicited input from interested mem-
bers of the public about identifying and
avoiding overlapping, duplicative, or con-
flicting requirements. No comments were
received in response to this request.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandate
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a State, local, or tribal govern-
ment, in the aggregate, or by the private
sector, of $100 million (updated annually
for inflation). These final regulations do
not include any Federal mandate that may
result in expenditures by State, local, or
tribal governments, or by the private sec-
tor in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications and do not impose
substantial, direct compliance costs on
State and local governments or preempt
state law within the meaning of the Exec-
utive order.
VI. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consulta-
tion and Coordination With Indian Tribal

Bulletin No. 2024–25 1713 June 17, 2024
Governments) prohibits an agency from
publishing any rule that has tribal impli-
cations if the rule either imposes substan-
tial, direct compliance costs on Indian
tribal governments, and is not required
by statute, or preempts tribal law, unless
the agency meets the consultation and
funding requirements of section 5 of the
Executive order. These final regulations
do not have substantial direct effects on
one or more federally recognized Indian
tribes and does not impose substantial
direct compliance costs on Indian tribal
governments within the meaning of the
Executive order.
VII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs has
designated this rule as a major rule as
defined by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
IRS notices and other guidance cited in
this preamble are published in the Internal
Revenue Bulletin (or Cumulative Bulletin)
and are available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal authors of these final
regulations are James Holmes and Jer-
emy Milton, Office of the Associate
Chief Counsel (Passthroughs and Spe-
cial Industries), IRS. However, other
personnel from the Treasury Depart-
ment and the IRS participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Amendments to the Regulations
Accordingly, the Treasury Department
and the IRS amend 26 CFR part 1 as fol-
lows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry in
numerical order for §§ 1.6418-0 through
1.6418-5 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Sections 1.6418-0 through 1.6418-5
also issued under 26 U.S.C. 6418(g)(1)
and (h).
* * * * *
Par. 2. Section 1.706-4 is amended as
follows:
1. Redesignate paragraphs (e)(2)
(ix) through (xi) as paragraphs (e)(2)(x)
through (xii).
2. Add new paragraph (e)(2)(ix).
3. Revise and republish paragraph (g).
The addition, revision and republica-
tion read as follows:
§1.706-4 Determination of distributive
share when a partner’s interest varies.
* * * * *
(e) * * *
(2) * * *
(ix) Any specified credit portion
transferred pursuant to section 6418 and
§§1.6418-1 through 1.6418-5;
* * * * *
(g) Applicability date. (1) Except
with respect to paragraph (c)(3) of this
section, this section applies for partner-
ship taxable years that begin on or after
August 3, 2015. The rules of paragraph
(c)(3) of this section apply for taxable
years of partnerships other than existing
publicly traded partnerships that begin on
or after August 3, 2015. For purposes of
the immediately preceding sentence, an
existing publicly traded partnership is a
partnership described in section 7704(b)
that was formed prior to April 14, 2009.
For purposes of this effective date provi-
sion, the termination of a publicly traded
partnership under section 708(b)(1)(B)
due to the sale or exchange of 50 percent
or more of the total interests in partner-
ship capital and profits is disregarded in
determining whether the publicly traded
partnership is an existing publicly traded
partnership.
(2) Paragraph (e)(2)(ix) of this section
applies to taxable years ending on or after
April 30, 2024.
Par. 3. Sections 1.6418-0 through
1.6418-5 are added to read as follows:
Sec.
* * * * *
1.6418-0 Table of contents.
1.6418-1 Transfer of eligible credits.
1.6418-2 Rules for making transfer elec-
tions.
1.6418-3 Additional rules for partnerships
and S corporations.
1.6418-4 Additional information and reg-
istration.
1.6418-5 Special rules.
* * * * *
§1.6418-0 Table of contents.
This section lists the captions contained
in §§1.6418-1 through 1.6418-5.
§1.6418-1 Transfer of eligible credits.
(a) Transfer of eligible credits.
(b) Eligible taxpayer.
(c) Eligible credit.
(d) Eligible credit property.
(e) Guidance.
(f) Paid in cash.
(g) Section 6418 regulations.
(h) Specified credit portion.
(i) Statutory references.
(j) Transfer election.
(k) Transferee partnership.
(l) Transferee S corporation.
(m) Transferee taxpayer.
(n) Transferor partnership.
(o) Transferor S corporation.
(p) Transferred specified credit portion.
(q) U.S. territory.
(r) Applicability date.
§1.6418-2 Rules for making transfer
elections.
(a) Transfer election.
(b) Manner and due date of making a
transfer election.
(c) Limitations after a transfer election
is made.
(d) Determining the eligible credit.
(e) Treatment of payments made in
connection with a transfer election.
(f) Transferee taxpayer’s treatment of
eligible credit.
(g) Applicability date.

June 17, 2024 1714 Bulletin No. 2024–25
§1.6418-3 Additional rules for
partnerships and S corporations.
(a) Rules applicable to both partner-
ships and S corporations.
(b) Rules applicable to partnerships.
(c) Rules applicable to S corporations.
(d) Transfer election by a partnership
or an S corporation.
(e) Examples.
(f) Applicability date.
§1.6418-4 Additional information and
registration.
(a) Pre-filing registration and election.
(b) Pre-filing registration requirements.
(c) Registration number.
(d) Applicability date.
§1.6418-5 Special rules.
(a) Excessive credit transfer tax
imposed.
(b) Excessive credit transfer defined.
(c) Basis reduction under section 50(c).
(d) Notification and impact of recap-
ture under section 50(a) or 49(b).
(e) Notification and impact of recap-
ture under section 45Q(f)(4).
(f) Notification and impact of recapture
under section 48(a)(10)(C).
(g) Impact of an ineffective transfer
election by an eligible taxpayer.
(h) Carryback and carryforward.
(i) Rules applicable to real estate
investment trusts.
(j) Applicability date.
§1.6418-1 Transfer of eligible credits.
(a) Transfer of eligible credits. An
eligible taxpayer may make a transfer
election under §1.6418-2(a) to transfer
any specified portion of an eligible credit
determined with respect to any eligible
credit property of such eligible taxpayer
for any taxable year to a transferee tax-
payer in accordance with section 6418 of
the Code and the section 6418 regulations
(defined in paragraph (g) of this section).
Paragraphs (b) through (q) of this section
provide definitions of terms for purposes
of applying section 6418 and the section
6418 regulations. See §1.6418-2 for rules
and procedures under which all transfer
elections must be made, limitations to
making transfer elections, the treatment of
payments made in connection with trans-
fer elections, and the treatment of eligible
credits transferred to transferee taxpayers.
See §1.6418-3 for special rules pertain-
ing to transfer elections made by partner-
ships or S corporations. See §1.6418-4 for
pre-filing registration requirements and
other information required to make any
transfer election effective. See §1.6418-5
for special rules related to the imposition
of tax on excessive credit transfers, basis
reductions, required notifications and
impacts of the recapture of transferred
credits, and rules regarding carrybacks
and carryforwards.
(b) Eligible taxpayer. The term eligible
taxpayer means any taxpayer (as defined
in section 7701(a)(14) of the Code), other
than one described in section 6417(d)(1)
(A) and §1.6417-1(b).
(c) Eligible credit—(1) In general. The
term eligible credit is a credit described
in paragraph (c)(2) of this section deter-
mined for a taxable year with respect to
a single eligible credit property of an eli-
gible taxpayer but does not include any
business credit carryforward or business
credit carryback determined under section
39 of the Code.
(2) Separately determined credit
amounts. The amount of any credit
described in this paragraph (c)(2) is the
entire amount of the credit separately
determined with respect to each single
eligible credit property of the eligible
taxpayer and includes any bonus credit
amounts described in paragraph (c)(3) of
this section determined with respect to
that single eligible credit property. The
eligible credits described in this paragraph
(c)(2) are:
(i) Alternative fuel vehicle refueling
property. So much of the credit for alter-
native fuel vehicle refueling property
allowed under section 30C of the Code
that, pursuant to section 30C(d)(1), is
treated as a credit listed in section 38(b) of
the Code (section 30C credit).
(ii) Renewable electricity production.
The renewable electricity production
credit determined under section 45(a) of
the Code (section 45 credit).
(iii) Carbon oxide sequestration. The
credit for carbon oxide sequestration
determined under section 45Q(a) of the
Code (section 45Q credit).
(iv) Zero-emission nuclear power
production. The zero-emission nuclear
power production credit determined under
section 45U(a) of the Code (section 45U
credit).
(v) Clean hydrogen production. The
clean hydrogen production credit deter-
mined under section 45V(a) of the Code
(section 45V credit).
(vi) Advanced manufacturing produc-
tion. The advanced manufacturing pro-
duction credit determined under section
45X(a) of the Code (section 45X credit).
(vii) Clean electricity production. The
clean electricity production credit deter-
mined under section 45Y(a) of the Code
(section 45Y credit).
(viii) Clean fuel production. The clean
fuel production credit determined under
section 45Z(a) of the Code (section 45Z
credit).
(ix) Energy. The energy credit deter-
mined under section 48 of the Code (sec-
tion 48 credit).
(x) Qualifying advance energy project.
The qualifying advanced energy project
credit determined under section 48C of
the Code (section 48C credit).
(xi) Clean electricity. The clean elec-
tricity investment credit determined under
section 48E of the Code (section 48E
credit).
(3) Bonus credit amounts. The bonus
credit amounts described in this paragraph
(c)(3) are:
(i) In the case of a section 30C credit,
the increased credit amounts for which the
requirements under section 30C(g)(2)(A)
and (3) are satisfied.
(ii) In the case of a section 45 credit,
the increased credit amounts for which the
requirements under section 45(b)(7)(A)
(8), (9), and (11) are satisfied.
(iii) In the case of a section 45Q credit,
the increased credit amounts for which the
requirements under section 45Q(h)(3) and
(4) are satisfied.
(iv) In the case of a section 45U credit,
the increased credit amount for which the
requirements under section 45U(d)(2) are
satisfied.
(v) In the case of a section 45V credit,
the increased credit amounts for which the
requirements under section 45V(e)(3) and
(4) are satisfied.
(vi) In the case of a section 45Y credit,
the increased credit amounts for which

Bulletin No. 2024–25 1715 June 17, 2024
the requirements under section 45Y(g)(7),
(9), (10), and (11) are satisfied.
(vii) In the case of a section 45Z credit,
the increased credit amounts for which the
requirements under section 45Z(f)(6) and
(7) are satisfied.
(viii) In the case of a section 48 credit,
the increased credit amounts for which
the requirements under section 48(a)(10),
(11), (12), (14), and (e) are satisfied.
(ix) In the case of a section 48C credit,
the increased credit amounts for which the
requirements under section 48C(e)(5) and
(6) are satisfied.
(x) In the case of a section 48E credit,
the increased credit amounts for which the
requirements under section 48E(a)(3)(A),
(B), (d)(3), (d)(4), and (h) are satisfied.
(d) Eligible credit property. The term
eligible credit property means each of the
units of property of an eligible taxpayer
described in paragraphs (d)(1) through (11)
of this section with respect to which the
amount of an eligible credit is determined:
(1) In the case of a section 30C credit, a
qualified alternative fuel vehicle refueling
property described in section 30C(c).
(2) In the case of a section 45 credit,
a qualified facility described in section
45(d).
(3) In the case of a section 45Q credit,
a component of carbon capture equipment
within a single process train described in
§1.45Q-2(c)(3).
(4) In the case of a section 45U credit, a
qualified nuclear power facility described
in section 45U(b)(1).
(5) In the case of a section 45V credit, a
qualified clean hydrogen production facil-
ity described in section 45V(c)(3).
(6) In the case of a section 45X credit, a
facility that produces eligible components,
as described in guidance under sections
48C and 45X.
(7) In the case of a section 45Y credit,
a qualified facility described in section
45Y(b)(1).
(8) In the case of a section 45Z credit,
a qualified facility described in section
45Z(d)(4).
(9) Section 48 property—(i) In gen-
eral. In the case of a section 48 credit
and except as provided in paragraph (d)
(9)(ii) of this section, an energy property
described in section 48.
(ii) Pre-filing registration and elec-
tions. At the option of an eligible taxpayer,
and to the extent consistently applied for
purposes of the pre-filing registration
requirements of §1.6418-4 and the elec-
tion requirements of §§1.6418-2 through
1.6418-3, an energy project as described
in section 48(a)(9)(A)(ii) and defined in
guidance.
(10) In the case of a section 48C credit,
an eligible property described in section
48C(c)(2).
(11) In the case of a section 48E credit,
a qualified facility as defined in section
48E(b)(3) or, in the case of a section 48E
credit relating to a qualified investment
with respect to energy storage technology,
an energy storage technology described in
section 48E(c)(2).
(e) Guidance. The term guidance
means guidance published in the Federal
Register or Internal Revenue Bulletin, as
well as administrative guidance such as
forms, instructions, publications, or other
guidance on the IRS.gov website. See
§§601.601 and 601.602 of this chapter.
(f) Paid in cash. The term paid in cash
means a payment in United States dollars
that—
(1) Is made by cash, check, cashier’s
check, money order, wire transfer, auto-
mated clearing house (ACH) transfer, or
other bank transfer of immediately avail-
able funds;
(2) Is made within the period beginning
on the first day of the eligible taxpayer’s
taxable year during which a specified
credit portion is determined and ending
on the due date for completing a trans-
fer election statement (as provided in
§1.6418-2(b)(5)(iii)); and
(3) May include a transferee taxpay-
er’s contractual commitment to purchase
eligible credits with United States dollars
in advance of the date a specified credit
portion is transferred to such transferee
taxpayer if all payments of United States
dollars are made in a manner described in
paragraph (f)(1) of this section during the
time period described in paragraph (f)(2)
of this section.
(g) Section 6418 regulations. The
term section 6418 regulations means
§§1.6418-1 through 1.6418-5.
(h) Specified credit portion. The term
specified credit portion means a propor-
tionate share (including all) of an eligible
credit determined with respect to a sin-
gle eligible credit property of the eligi-
ble taxpayer that is specified in a transfer
election. A specified credit portion of an
eligible credit must reflect a proportion-
ate share of each bonus credit amount
that is taken into account in calculating
the entire amount of eligible credit deter-
mined with respect to a single eligible
credit property.
(i) Statutory references—(1) Chapter
1. The term chapter 1 means chapter 1 of
the Code.
(2) Code. The term Code means the
Internal Revenue Code.
(3) Subchapter K. The term subchapter
K means subchapter K of chapter 1.
(j) Transfer election. The term transfer
election means an election under section
6418(a) of the Code to transfer to a trans-
feree taxpayer a specified portion of an
eligible credit determined with respect to
an eligible credit property in accordance
with the section 6418 regulations.
(k) Transferee partnership. The term
transferee partnership means a partner-
ship for Federal tax purposes that is a
transferee taxpayer.
(l) Transferee S corporation. The term
transferee S corporation means an S cor-
poration within the meaning of section
1361(a) that is a transferee taxpayer.
(m) Transferee taxpayer. The term
transferee taxpayer means any taxpayer
that is not related (within the meaning of
section 267(b) or 707(b)(1) of the Code)
to the eligible taxpayer making the trans-
fer election to which an eligible taxpayer
transfers a specified credit portion of an
eligible credit.
(n) Transferor partnership. The term
transferor partnership means a partner-
ship for Federal tax purposes that is an
eligible taxpayer that makes a transfer
election.
(o) Transferor S corporation. The term
transferor S corporation means an S cor-
poration within the meaning of section
1361(a) that is an eligible taxpayer that
makes a transfer election.
(p) Transferred specified credit por-
tion. The term transferred specified credit
portion means the specified credit portion
that is transferred from an eligible tax-
payer to a transferee taxpayer pursuant to
a transfer election.
(q) U.S. territory. The term U.S. terri-
tory means the Commonwealth of Puerto
Rico, Guam, the U.S. Virgin Islands,

June 17, 2024 1716 Bulletin No. 2024–25
American Samoa, and the Commonwealth
of the Northern Mariana Islands.
(r) Applicability date. This section
applies to taxable years ending on or after
April 30, 2024. For taxable years ending
before April 30, 2024, taxpayers, how-
ever, may choose to apply the rules of this
section and §§1.6418-2, -3, and -5, pro-
vided the taxpayers apply the rules in their
entirety and in a consistent manner.
§1.6418-2 Rules for making transfer
elections.
(a) Transfer election—(1) In general.
An eligible taxpayer can make a trans-
fer election as provided in this section.
If a valid transfer election is made by an
eligible taxpayer for any taxable year,
the transferee taxpayer specified in such
election (and not the eligible taxpayer) is
treated as the taxpayer for purposes of the
Code with respect to the specified credit
portion. This paragraph (a) provides rules
on the number of transfers permitted,
rules for determining the eligible taxpayer
in certain ownership situations, and rules
describing circumstances under which no
transfer election is allowed. Paragraph
(b) of this section provides specific rules
regarding the scope, manner, and timing
of a transfer election. Paragraph (c) of this
section provides rules regarding limita-
tions applicable to transfer elections. Para-
graph (d) of this section provides rules
regarding an eligible taxpayer’s deter-
mination of an eligible credit. Paragraph
(e) of this section provides the treatment
of payments in connection with a transfer
election. Paragraph (f) of this section pro-
vides rules regarding a transferee taxpay-
er’s treatment of an eligible credit follow-
ing a transfer.
(2) Multiple transfer elections permit-
ted. An eligible taxpayer may make mul-
tiple transfer elections to transfer one or
more specified credit portion(s) to multi-
ple transferee taxpayers, provided that the
aggregate amount of specified credit por-
tions transferred with respect to any single
eligible credit property does not exceed
the amount of the eligible credit deter-
mined with respect to the eligible credit
property.
(3) Transfer election in certain owner-
ship situations—(i) Disregarded entities.
If an eligible taxpayer is the sole owner
(directly or indirectly) of an entity that is
disregarded as separate from such eligible
taxpayer for Federal income tax purposes
and such entity directly holds an eligible
credit property, the eligible taxpayer may
make a transfer election in the manner
provided in this section with respect to any
eligible credit determined with respect to
such eligible credit property.
(ii) Undivided ownership interests.
If an eligible taxpayer is a co-owner of
an eligible credit property through an
arrangement properly treated as a tenan-
cy-in-common for Federal income tax
purposes, or through an organization that
has made a valid election under section
761(a) of the Code, then the eligible tax-
payer’s undivided ownership share of the
eligible credit property will be treated for
purposes of section 6418 as a separate eli-
gible credit property owned by such eli-
gible taxpayer, and the eligible taxpayer
may make a transfer election in the man-
ner provided in this section for any eligi-
ble credit(s) determined with respect to
such eligible credit property.
(iii) Members of a consolidated group.
A member of a consolidated group (as
defined in §1.1502-1) is required to make
a transfer election in the manner pro-
vided in this section to transfer any eligi-
ble credit determined with respect to the
member. See §1.1502-77 (providing rules
regarding the status of the common parent
as agent for its members).
(iv) Partnerships and S corporations.
A partnership or an S corporation that
determines an eligible credit with respect
to any eligible credit property held directly
by such partnership or S corporation may
make a transfer election in the manner
provided in §1.6418-3(d) with respect to
eligible credits determined with respect to
such eligible credit property.
(v) Grantors or others treated as owners
of a trust. If an eligible taxpayer is a grantor
or any other person that is treated as the
owner of any portion of a trust as described
in section 671 of the Code, then the eligible
taxpayer may make a transfer election in the
manner provided in this section for eligible
credits determined with respect to any eligi-
ble credit property held directly by the por-
tion of the trust that the eligible taxpayer is
treated as owning under section 671.
(4) Circumstances under which no
transfer election can be made—(i) Prohi-
bition on election or transfer with respect
to progress expenditures. No transfer
election can be made with respect to any
amount of an eligible credit that is allowed
for progress expenditures pursuant to
rules similar to the rules of section 46(c)
(4) and (d) (as in effect on the day before
the enactment of the Revenue Reconcilia-
tion Act of 1990).
(ii) No election allowed if eligible credit
transferred for non-cash consideration.
No transfer election is allowed if an eli-
gible taxpayer receives any consideration
other than cash (as defined in §1.6418-
1(f)) in connection with the transfer of a
specified credit portion.
(iii) No election allowed if eligible
credits not determined with respect to
taxpayer. No transfer election is allowed
for eligible credits that are not determined
with respect to an eligible taxpayer as
described in paragraph (d) of this section.
For example, a section 45Q credit allow-
able to an eligible taxpayer because of an
election made under section 45Q(f)(3)
(B), or a section 48 credit allowable to an
eligible taxpayer because of an election
made under section 50(d)(5) and §1.48-
4, although described in §1.6418-1(c)(2),
is not an eligible credit that can be trans-
ferred by the taxpayer because such credit
is not determined with respect to the eligi-
ble taxpayer.
(b) Manner and due date of making a
transfer election—(1) In general. An eli-
gible taxpayer must make a transfer elec-
tion to transfer a specified credit portion of
an eligible credit on the basis of a single
eligible credit property. For example, an
eligible taxpayer that determines eligible
credits with respect to two eligible credit
properties would need to make a separate
transfer election with respect to any spec-
ified credit portion of the eligible credit
determined with respect to each eligible
credit property. Any transfer election must
be consistent with the eligible taxpayer’s
pre-filing registration under §1.6418-4.
(2) Specific rules for certain eligi-
ble credits. In the case of any section 45
credit, section 45Q credit, section 45V
credit, or section 45Y credit that is an eli-
gible credit, the rules in paragraph (b)(2)
(i) and (ii) of this section apply.
(i) Separate eligible credit property. A
transfer election must be made separately
with respect to each eligible credit prop-

Bulletin No. 2024–25 1717 June 17, 2024
erty described in §1.6418-1(d)(2), (3), (5),
and (7), as applicable, for which an eligi-
ble credit is determined.
(ii) Time period. A transfer election
must be made for each taxable year an
eligible taxpayer elects to transfer speci-
fied credit portions with respect to such an
eligible credit property during the 10-year
period beginning on the date such eligi-
ble credit property was originally placed
in service (or, in the case of a section
45Q credit, for each taxable year during
the 12-year period beginning on the date
the single process train of carbon capture
equipment was originally placed in ser-
vice).
(3) Manner of making a valid transfer
election. A transfer election is made by
an eligible taxpayer on the basis of each
specified credit portion with respect to
a single eligible credit property that is
transferred to a transferee taxpayer. To
make a valid transfer election, an eligible
taxpayer, as part of filing an annual tax
return (or a return for a short year within
the meaning of section 443 of the Code
(short year return)), must include the fol-
lowing—
(i) A properly completed relevant
source credit form for the eligible credit
(such as Form 7207, Advanced Manu-
facturing Production Credit, if making a
transfer election for a section 45X credit)
for the taxable year that the eligible credit
was determined, including the registra-
tion number received during the required
pre-filing registration (as described in
§1.6418-4) related to the eligible credit
property with respect to which a trans-
ferred eligible credit was determined;
(ii) A properly completed Form 3800,
General Business Credit (or its succes-
sor), including reductions necessary
because of the transferred eligible credit
as required by the form and instructions
and the registration number received
during the required pre-filing registration
(as described in §1.6418-4) related to the
eligible credit property with respect to
which a transferred eligible credit was
determined;
(iii) A schedule attached to the Form
3800 (or its successor) showing the
amount of eligible credit transferred for
each eligible credit property (such as for
a section 45X election, the relevant lines
that include the eligible credit property
reported on Form 7207), except as other-
wise provided in guidance;
(iv) A transfer election statement as
described in paragraph (b)(5) of this sec-
tion; and
(v) Any other information related to the
election specified in guidance.
(4) Due date and original return
requirement of a transfer election. (i) In
general. A transfer election by an eligible
taxpayer with respect to a specified por-
tion of an eligible credit must be made on
an original return (including a superseding
return or any revisions made on a super-
seding return) not later than the due date
(including extensions of time) for the orig-
inal return of the eligible taxpayer for the
taxable year for which the eligible credit
is determined. No transfer election may
be made for the first time on an amended
return, withdrawn on an amended return,
or made or withdrawn by filing an
administrative adjustment request under
section 6227 of the Code. A numerical
error with respect to a properly claimed
transfer election may be corrected on an
amended return or by filing an adminis-
trative adjustment request under section
6227 if necessary; however, the eligible
taxpayer’s original return, which must be
signed under penalties of perjury, must
contain all of the information, including a
registration number, required by the sec-
tion 6418 regulations. In order to correct
an error on an amended return or admin-
istrative adjustment request under sec-
tion 6227, an eligible taxpayer must have
made an error in the information included
on the original return such that there is
a substantive item to correct; an eligible
taxpayer cannot correct a blank item or an
item that is described as being “available
upon request.” There is no late-election
relief available under §§ 301.9100-1 or
301.9100-3 of this chapter for a transfer
election that is not timely filed; however,
relief under §301.9100-2(b) may apply if
the eligible taxpayer has not received an
extension of time to file a return after the
original due date, has timely filed a return,
takes corrective action under §301.9100-
2(c) within the six-month extension
period, and meets the procedural require-
ments outlined in §301.9100-2(d).
(ii) Amending the amount of the eligi-
ble credit reported—(A) In general. If an
eligible taxpayer, after making a transfer
election in accordance with paragraph (b)
(3) of this section on an original return
in accordance with this paragraph (b)
(4)(i) of this section, determines that the
amount of the eligible credit reported on
the eligible taxpayer’s original return is
incorrect, the eligible taxpayer may timely
file an amended return, or administrative
adjustment request under section 6227, if
applicable, adjusting the amount of eligi-
ble credit.
(B) Amending the amount of the
credit determined to reflect an increased
amount. To the extent an eligible taxpayer
corrects the amount of an eligible credit
to reflect an increase in the amount of the
eligible credit reported, such amount must
be reflected on the credit source forms
filed with the amended return, or admin-
istrative adjustment request under section
6227, if applicable, but cannot be reflected
by either the eligible taxpayer or any
transferee taxpayer as a transferred spec-
ified credit portion on the transfer election
statement.
(C) Amending the amount of the credit
determined to reflect a decreased amount.
To the extent an eligible taxpayer corrects
the amount of the eligible credit to reflect
a decrease in the amount of the eligible
credit reported, such amount must be
reflected on the credit source forms filed
with the amended return or administrative
adjustment request, if applicable, and the
transfer election statement reducing the
amount of the credit reported in accor-
dance with the following—
(I) The amount of such decrease first
reduces the amount if any, of the eligible
credit not transferred by the eligible tax-
payer; and
(II) Any portion of the amount of such
decrease that remains after applying the
reduction described in paragraph (b)(4)(ii)
(C)(I) of this section, reduces the amount
reported by the transferee taxpayer, or if
the eligible credit was transferred to more
than one transferee taxpayer, reduces
the amount of each transferee taxpayer’s
specified credit portion on a pro rata basis.
(D) Treatment of cash consideration.
In the case of a decrease in the amount
of the credit determined by the eligible
taxpayer, any amount of the cash consid-
eration retained by the eligible taxpayer
after making an adjustment in accordance
with paragraph (b)(4)(ii)(C) of this section

June 17, 2024 1718 Bulletin No. 2024–25
that does not directly relate to the remain-
ing specified credit portion must not be
excluded from gross income as described
in paragraph (e)(2) of this section.
(iii) Examples. The examples in this
paragraph (b)(4)(iii) illustrate the applica-
tion of paragraphs (b)(6)(i) and (ii) of this
section.
(A) Example 1. A, a U.S. C corporation for
Federal income tax purposes (as defined in section
1361(a)(2) of the Code), qualifies as an eligible tax-
payer and determines a section 45V clean hydrogen
tax credit of $100X in year 1. At the end of year 1, A
transfers the entire $100X of the section 45V credit
to B. A timely makes a transfer election and properly
reports the transaction in accordance with §1.6418-
2(b) on its original return. In year 2, A concludes that
the amount of section 45V credit determined in year
1 was $120X. A may file an amended return increas-
ing the amount of the credit reported by $20X on the
appropriate credit source forms. A cannot increase
the amount of the credit reported on the transfer elec-
tion statement, and B cannot increase the amount of
credit claimed on its return.
(B) Example 2. Same facts as Example 1 except
that, in year 2, A concludes that the amount of sec-
tion 45V credit determined in year 1 was $80X. On
an amended return, A decreases the amount of the
credit reported by $20X on the appropriate credit
source forms. A should then reduce the amount of the
credit reported on the transfer election statement. To
avoid a determination of an excessive credit transfer,
B should file a qualified amended return pursuant
to §1.6664-2(c)(3) reducing the amount of credit
claimed on its return by $20X.
(C) Example 3. C, a U.S. C corporation for
Federal income tax purposes (as defined in section
1361(a)(2) of the Code), qualifies as an eligible tax-
payer and determines a section 45Y clean electric-
ity production tax credit of $100X in year 1. At the
end of year 1, C transfers $80X of the 45Y credit
determined to D, E, and F, with D receiving $40X,
E receiving $32X, and F receiving $80X. C timely
makes the transfer election and properly reports
the transaction in accordance with §1.6418-2(b) on
its original return. In year 2, C concludes that the
amount of section 45Y credit determined in year
1 was $60X. C files an amended return decreasing
the amount of the credit reported by $40X on the
appropriate credit source forms to reflect $60X of
section 45Y credit on its credit source forms. As a
result of the $40X decrease in the credit determined,
C reduces the $20X of section 45Y credit retained
by C to $0X, and reduces the amount of section 45Y
credit transferred to D, E, and F to $30X, $24X, and
$6X, respectively (their respective pro rata shares
of the reduced amount). Each of D, E, and F should
file a qualified amended return under §1.6664-2(c)
(3) reducing the amount of the credit claimed on
their returns to avoid a determination of an excessive
credit transfer.
(5) Transfer election statement—(i) In
general. A transfer election statement is a
written document that describes the trans-
fer of a specified credit portion between an
eligible taxpayer and transferee taxpayer.
Unless otherwise provided in guidance, an
eligible taxpayer and transferee taxpayer
must each attach a transfer election state-
ment to their respective return as required
under paragraphs (b)(3)(iv) and (f)(4)(ii) of
this section. Unless otherwise provided in
guidance, an eligible taxpayer and transferee
taxpayer can use any document (such as a
purchase and sale agreement) that meets the
conditions in paragraph (b)(5)(ii) of this sec-
tion but must label the document a “Transfer
Election Statement” before attaching such
labeled document to their respective returns.
The information required in paragraph (b)
(5)(ii) of this section does not otherwise
limit any other information that the eligible
taxpayer and transferee taxpayer may agree
to provide in connection with the transfer of
any specified credit portion. The statement
must be signed under penalties of perjury
by an individual with authority to legally
bind the eligible taxpayer. The statement
must also include the written consent of an
individual with authority to legally bind the
transferee taxpayer.
(ii) Information required in transfer
election statement. A transfer election
statement must, at a minimum, include
each of the following:
(A) Name, address, and taxpayer
identification number of the transferee
taxpayer and the eligible taxpayer. If the
transferee taxpayer or eligible taxpayer is
a member of a consolidated group, then
only include information for the group
member that is the transferee taxpayer
or eligible taxpayer (if different from the
return filer).
(B) A statement that provides the nec-
essary information and amounts to allow
the transferee taxpayer to take into account
the specified credit portion with respect to
the eligible credit property, including—
(1) A description of the eligible credit
(for example, advanced manufacturing
production credit for a section 45X trans-
fer election), the total amount of the credit
determined with respect to the eligible
credit property, and the amount of the
specified credit portion;
(2) The taxable year of the eligible tax-
payer and the first taxable year in which
the specified credit portion will be taken
into account by the transferee taxpayer;
(3) The amount(s) of the cash consid-
eration and date(s) on which paid by the
transferee taxpayer; and
(4) The registration number related to
the eligible credit property.
(C) Attestation that the eligible tax-
payer (or any member of its consolidated
group) is not related to the transferee tax-
payer (or any member of its consolidated
group) within the meaning of section
267(b) or 707(b)(1).
(D) A statement or representation from
the eligible taxpayer that it has or will com-
ply with all requirements of section 6418,
the section 6418 regulations, and the provi-
sions of the Code applicable to the eligible
credit, including, for example, any require-
ments for bonus credit amounts described
in §1.6418-1(c)(3) (if applicable).
(E) A statement or representation from
the eligible taxpayer and the transferee
taxpayer acknowledging the notification
of recapture requirements under section
6418(g)(3) and the section 6418 regula-
tions (if applicable).
(F) A statement or representation from
the eligible taxpayer that the eligible tax-
payer has provided the required minimum
documentation (as described in paragraph
(b)(5)(iv) of this section) to the transferee
taxpayer.
(iii) Timing of transfer election state-
ment. A transfer election statement can
be completed at any time after the eligi-
ble taxpayer and transferee taxpayer have
sufficient information to meet the require-
ments of paragraph (b)(5)(ii) of this sec-
tion, but the transfer election statement
cannot be completed for any year after the
earlier of:
(A) The filing of the eligible taxpayer’s
return for the taxable year for which the
specified credit portion is determined with
respect to the eligible taxpayer; or
(B) The filing of the return of the
transferee taxpayer for the year in which
the specified credit portion is taken into
account.
(iv) Required minimum documentation.
The eligible taxpayer must provide to a
transferee taxpayer the following mini-
mum documentation—
(A) Information that validates the
existence of the eligible credit property,
which could include evidence prepared by
a third party (such as a county board or
other governmental entity, a utility, or an
insurance provider);
(B) If applicable, documentation sub-
stantiating that the eligible taxpayer has

Bulletin No. 2024–25 1719 June 17, 2024
satisfied the requirements to include
any bonus credit amounts (as defined in
§1.6418-1(c)(3)) in the eligible credit that
was part of the transferred specified credit
portion; and
(C) Evidence of the eligible taxpayer’s
qualifying costs in the case of a transfer of
an eligible credit that is part of the invest-
ment credit or the amount of qualifying
production activities and sales amounts,
as relevant, in the case of a transfer of an
eligible credit that is a production credit.
(v) Transferee recordkeeping require-
ment. Consistent with §1.6001-1(e),
the transferee taxpayer must retain the
required minimum documentation pro-
vided by the eligible taxpayer as long as
the contents thereof may become material
in the administration of any internal rev-
enue law.
(c) Limitations after a transfer elec-
tion is made—(1) Irrevocable. A transfer
election with respect to a specified credit
portion is irrevocable.
(2) No additional transfers. A speci-
fied credit portion may only be transferred
pursuant to a transfer election once. A
transferee taxpayer cannot make a trans-
fer election of any specified credit portion
transferred to the transferee taxpayer.
(d) Determining the eligible credit—
(1) In general. An eligible taxpayer may
only transfer eligible credits determined
with respect to the eligible taxpayer (para-
graph (a)(4) of this section disallows
transfer elections in other situations). An
eligible credit is determined with respect
to an eligible taxpayer if the eligible tax-
payer owns the underlying eligible credit
property and conducts the activities giving
rise to the credit or, in the case of section
45X (under which ownership of eligible
credit property is not required), is consid-
ered (under the regulations under section
45X) the taxpayer with respect to which
the section 45X credit is determined. All
rules that relate to the determination of the
eligible credit, such as the rules in sections
49 and 50(b) of the Code, apply to the eli-
gible taxpayer and therefore can limit the
amount of eligible credit determined with
respect to an eligible credit property that
can be transferred. Rules relating to the
amount of an eligible credit that is allowed
to be claimed by an eligible taxpayer, such
as the rules in sections 38(c) or 469 of
the Code, do not limit the eligible credit
determined, but do apply to a transferee
taxpayer as described in paragraph (f)(3)
of this section.
(2) Application of section 49 at-risk
rules to determination of eligible cred-
its for partnerships and S corporations.
Any amount of eligible credit determined
with respect to investment credit property
held directly by a transferor partnership
or transferor S corporation that is eligible
credit property (eligible investment credit
property) must be determined by the
partnership or S corporation taking into
account the section 49 at-risk rules at the
partner or shareholder level as of the close
of the taxable year in which the eligible
investment credit property is placed in
service. Thus, if the credit base of an eligi-
ble investment credit property is limited to
a partner or an S corporation shareholder
by section 49, then the amount of the eli-
gible credit determined by the transferor
partnership or transferor S corporation
is also limited. A transferor partnership
or transferor S corporation that transfers
any specified credit portion with respect
to an eligible investment credit property
must request from each of its partners or
shareholders, respectively, that is subject
to section 49, the amount of such partner’s
or shareholder’s nonqualified nonrecourse
financing with respect to the eligible
investment credit property as of the close
of the taxable year in which the property is
placed in service. Additionally, the trans-
feror partnership or transferor S corpora-
tion must attach to its tax return for the
taxable year in which the eligible invest-
ment credit property is placed in service,
the amount of each partner’s or share-
holder’s section 49 limitation with respect
to any specified credit portion trans-
ferred with respect to the eligible invest-
ment credit property. Changes to at-risk
amounts under section 49 for partners or
S corporation shareholders after the close
of the taxable year in which the eligible
investment credit property is placed in
service do not impact the eligible credit
determined by the transferor partnership
or transferor S corporation, but do impact
the partner(s) or S corporation sharehold-
er(s) as described in §1.6418-3(a)(6)(ii).
(e) Treatment of payments made in
connection with a transfer election—(1)
In general. An amount paid by a trans-
feree taxpayer to an eligible taxpayer is
in connection with a transfer election with
respect to a specified credit portion only if
it is paid in cash (as defined in §1.6418-
1(f)), directly relates to the specified credit
portion, and is not described in §1.6418-
5(a)(3) (describing payments related to an
excessive credit transfer).
(2) Not includible in gross income. Any
amount paid to an eligible taxpayer that is
described in paragraph (e)(1) of this sec-
tion is not includible in the gross income
of the eligible taxpayer.
(3) Not deductible. No deduction is
allowed under any provision of the Code
with respect to any amount paid by a
transferee taxpayer that is described in
paragraph (e)(1) of this section.
(4) Anti-abuse rule—(i) In general. A
transfer election of any specified credit
portion, and therefore the transfer of that
specified credit portion to a transferee tax-
payer, may be disallowed, or the Federal
income tax consequences of any transac-
tion(s) effecting such a transfer may be
recharacterized, when the parties to the
transaction have engaged in the transac-
tion or a series of transactions with a prin-
cipal purpose of avoiding any Federal tax
liability beyond the intent of section 6418.
For example, an amount of cash paid by a
transferee taxpayer will not be considered
as paid in connection with the transfer of
a specified credit portion under paragraph
(e)(1) of this section if a principal purpose
of a transaction or series of transactions
is to allow an eligible taxpayer to avoid
gross income. Conversely, an amount of
cash paid by a transferee taxpayer will be
considered paid in connection with the
transfer of a specified credit portion under
paragraph (e)(1) of this section if a prin-
cipal purpose of a transaction or series
of transactions is to increase a Federal
income tax deduction of a transferee tax-
payer.
(ii) Example 1. Taxpayer A, an eligible taxpayer,
generates $100 of an eligible credit with respect to
an eligible credit property in the course of its trade or
business. Taxpayer A also provides services to cus-
tomers. Taxpayer A offers Customer B, a transferee
taxpayer that cannot deduct the cost of the services,
the opportunity to be transferred $100 of eligible
credit for $100 while receiving Taxpayer A’s ser-
vices for free. Taxpayer A normally charges $20 for
the same services without the purchase of the eligible
credit, and an arm’s length price of the eligible credit
without regard to other commercial relationships
is $80 paid in cash for $100 of the eligible credit.
Taxpayer A is engaged in a transaction in which it is

June 17, 2024 1720 Bulletin No. 2024–25
undercharging for services to Customer B to avoid
recognizing $20 of gross income. This transaction
is subject to recharacterization under the anti-abuse
rule in paragraph (e)(4) of this section, and Taxpayer
A will be treated as transferring $100 of the eligible
credit for $80, and have $20 of gross income from
the services provided to Customer B.
(iii) Example 2. Taxpayer C, an eligible taxpayer,
generates $100 of an eligible credit with respect to
an eligible credit property in the course of its trade
or business. Taxpayer C also sells property to cus-
tomers. Taxpayer C offers Customer D, a transferee
taxpayer that can deduct the purchase of property, the
opportunity to receive the $100 of eligible credit for
$20 while purchasing Taxpayer C’s property for $80.
Taxpayer C normally charges $20 for the same prop-
erty without the transfer of the eligible credit, and
an arm’s length price of the eligible credit without
regard to other commercial relationships is $80 paid
in cash for $100 of the eligible credit. Taxpayer C
is willing to accept the higher price for the property
because Taxpayer C has a net operating loss carry-
over to offset any taxable income from the transac-
tion. This transaction is subject to recharacterization
under the anti-abuse rule under paragraph (e)(4) of
this section, and Taxpayer C will be treated as sell-
ing the property for $20 and transferring $100 of the
eligible credit for $80, and Customer D will have a
$20 deduction related to the purchase of the property
instead of $80.
(f) Transferee taxpayer’s treatment of
eligible credit—(1) Taxable year in which
credit taken into account—(i) In general.
In the case of any specified credit portion
transferred to a transferee taxpayer pursu-
ant to a transfer election under this section,
the transferee taxpayer takes the specified
credit portion into account in the trans-
feree taxpayer’s first taxable year ending
with or ending after the taxable year of
the eligible taxpayer with respect to which
the eligible credit was determined. Thus,
to the extent the taxable years of an eligi-
ble taxpayer and a transferee taxpayer end
on the same date, the transferee taxpayer
will take the specified credit portion into
account in that taxable year. To the extent
the taxable years of an eligible taxpayer
and a transferee taxpayer end on different
dates, the transferee taxpayer will take the
specified credit portion into account in the
transferee taxpayer’s first taxable year that
ends after the taxable year of the eligible
taxpayer.
(ii) Rule for 52–53-week taxable years.
For purposes of determining the taxable
year in which a credit is taken into account
under section 6418(d) and paragraph (f)(1)
(i) of this section, a 52–53-week taxable
year of an eligible taxpayer and transferee
taxpayer is deemed to end on or close on
the last day of the calendar month nearest
to the last day of the 52–53-week taxable
year, as the case may be.
(2) No gross income for a transferee
taxpayer upon claiming a transferred
specified credit portion. A transferee tax-
payer does not have gross income upon
claiming a transferred specified credit por-
tion even if the amount of cash paid to the
eligible taxpayer was less than the amount
of the transferred specified credit portion,
assuming all other requirements of section
6418 are met. For example, a transferee
taxpayer who paid $9X for $10X of a
specified credit portion that the transferee
taxpayer then claims on its return does
not result in the $1X difference being
included in the gross income of the trans-
feree taxpayer.
(3) Transferee treated as the eligible
taxpayer—(i) In general. A transferee
taxpayer (and not the eligible taxpayer)
is treated as the taxpayer for purposes of
the Code with respect to the transferred
specified credit portion. An eligible tax-
payer must apply the rules necessary to
determine the amount of an eligible credit
prior to making the transfer election for a
specified credit portion, and therefore a
transferee taxpayer does not re-apply rules
that relate to a determination of an eligi-
ble credit, such as the rules in sections 49
or 50(b). However, a transferee taxpayer
must apply rules that relate to computing
the amount of the specified credit portion
that is allowed to be claimed in the taxable
year by the transferee taxpayer, such as the
rules in section 38 or 469, as applicable.
(ii) Application of section 469. A spec-
ified credit portion transferred to a trans-
feree taxpayer is treated as determined in
connection with the conduct of a trade or
business and, if applicable, such trans-
ferred specified credit portion is subject
to the rules in section 469. In applying
section 469, unless a transferee taxpayer
owns an interest in the eligible taxpayer’s
trade or business at the time the work was
done, the fact that the specified credit por-
tion is treated as determined in connection
with the conduct of a trade or business
does not cause the transferee taxpayer to
be considered to own an interest in the
eligible taxpayer’s trade or business at
the time the work was done and does not
change the characterization of the trans-
feree taxpayer’s participation (or lack
thereof) in the eligible taxpayer’s trade
or business by using any of the grouping
rules under §1.469-4(c).
(4) Transferee taxpayer requirements
to take into account a transferred speci-
fied credit portion. In order for a transferee
taxpayer to take into account in a taxable
year (as described in paragraph (f)(1) of
this section) a specified credit portion that
was transferred by an eligible taxpayer, as
part of filing a return (or short year return),
an amended return, or a request for an
administrative adjustment under section
6227 of the Code, the transferee taxpayer
must include the following—
(i) A properly completed Form 3800,
General Business Credit (or its succes-
sor), to take into account the transferred
specified credit portion as a current gen-
eral business credit, and including all reg-
istration number(s) related to the trans-
ferred specified credit portion;
(ii) The transfer election statement
described in paragraph (b)(5) of this sec-
tion attached to the return; and
(iii) Any other information related to
the transfer election specified in guidance.
(g) Applicability date. This section
applies to taxable years ending on or after
April 30, 2024. For taxable years ending
before April 30, 2024, taxpayers, how-
ever, may choose to apply the rules of this
section and §§1.6418-1, -3, and -5, pro-
vided the taxpayers apply the rules in their
entirety and in a consistent manner.
§1.6418-3 Additional rules for
partnerships and S corporations.
(a) Rules applicable to both partner-
ships and S corporations—(1) Partner-
ships and S corporations as eligible tax-
payers and transferee taxpayers. Under
section 6418, a partnership or an S corpo-
ration may qualify as a transferor partner-
ship or a transferor S corporation and may
elect to make a transfer election to trans-
fer a specified credit portion to a trans-
feree taxpayer. A partnership or an S cor-
poration may also qualify as a transferee
partnership or a transferee S corporation.
This section provides rules applicable to
transferor partnerships and transferor S
corporations and transferee partnerships
and transferee S corporations. Paragraph
(b) of this section provides rules applica-
ble solely to partnerships. Paragraph (c)
of this section provides rules applicable

Bulletin No. 2024–25 1721 June 17, 2024
solely to S corporations. Paragraph (d)
of this section provides guidelines for the
manner and due date for which a partner-
ship or an S corporation makes an election
under section 6418(a). Paragraph (e) of
this section contains examples illustrat-
ing the operation of the provisions of this
section. Except as provided in this section,
the general rules under section 6418 and
the section 6418 regulations apply to part-
nerships and S corporations.
(2) Treatment of cash received for a
specified credit portion. In the case of any
specified credit portion determined with
respect to any eligible credit property held
directly by a partnership or an S corpora-
tion, if such partnership or S corporation
makes a transfer election with respect to
such specified credit portion—
(i) Any amount of cash payment
received as consideration for the trans-
ferred specified credit portion will be
treated as tax exempt income for purposes
of sections 705 and 1366 of the Code; and
(ii) A partner’s distributive share
of such tax exempt income will be as
described in paragraphs (b)(1) and (2) of
this section.
(3) No partner or shareholder level
transfers. In the case of an eligible credit
property held directly by a partnership or
an S corporation, no transfer election by
any partner or S corporation shareholder
is allowed under §1.6418-2 or this section
with respect to any specified credit portion
determined with respect to such eligible
credit property.
(4) Disregarded entity ownership. In
the case of an eligible credit property held
directly by an entity disregarded as sepa-
rate from a partnership or an S corpora-
tion for Federal income tax purposes, such
eligible credit property will be treated as
held directly by the partnership or S cor-
poration for purposes of making a transfer
election.
(5) Treatment of tax exempt income.
Tax exempt income resulting from the
receipt of consideration for the transfer of
a specified credit portion by a transferor
partnership or transferor S corporation
is treated as arising from an investment
activity and not from the conduct of a
trade or business within the meaning of
section 469(c)(1)(A). As such, any tax
exempt income is not treated as passive
income to any direct or indirect partners
or shareholders who do not materially
participate within the meaning of section
469(c)(1)(B).
(6) Certain recapture events not requir-
ing notice—(i) Indirect dispositions under
section 50—(A) Treatment of transferor
partnership or transferor S corporation
and transferee taxpayer. For purposes of
section 6418(g)(3)(B) only, the disposition
of a partner’s interest under §1.47-6(a)(2)
or an S corporation shareholder’s interest
under §1.47-4(a)(2) in an eligible taxpayer
that is treated as a transferor partnership or
transferor S corporation is disregarded. As
such, provided the investment credit prop-
erty that is eligible credit property owned
by the transferor partnership or transferor
S corporation is not disposed of, and con-
tinues to be investment credit property
with respect to such transferor partnership
or transferor S corporation, a transferor
partnership or transferor S corporation is
not required to provide notice to a trans-
feree taxpayer of an interest disposition
by the partner or shareholder because the
disposition does not result in recapture
under section 6418(g)(3)(B) to which the
transferee taxpayer is liable, and thus, the
transferee taxpayer does not have to cal-
culate a recapture amount.
(B) Treatment of partner or share-
holder. A partner or an S corporation
shareholder that has disposed of an inter-
est in a transferor partnership or transferor
S corporation is subject to the rules relat-
ing to such disposition under §1.47-6(a)
(2) or §1.47-4(a)(2), respectively. Any
recapture to a disposing partner is calcu-
lated based on the partner’s share of the
basis (or cost) of the section 38 property
to which the specified credit portion was
determined in accordance with §1.46-3(f).
Any recapture to a disposing shareholder
is calculated based on the shareholder’s
pro rata share of the basis (or cost) of the
section 38 property to which the specified
credit portion was determined in accor-
dance with §1.48-5.
(ii) Changes in at-risk amounts under
section 49—(A) Treatment of transferor
partnership or transferor S corporation
and transferee taxpayer. For purposes
of section 6418 only, a change in the
nonqualified nonrecourse financing (as
defined in section 49(a)(1)(D)) amount
of any partner or shareholder of a trans-
feror partnership or transferor S corpo-
ration, respectively, after the close of
the taxable year in which the investment
credit property is placed in service and the
specified credit portion is determined, is
disregarded. A transferor partnership or
transferor S corporation is not required to
provide notice to a transferee taxpayer of
the change because the change does not
cause recapture under section 6418(g)(3)
(B) to which the transferee taxpayer is lia-
ble, and thus, the transferee taxpayer does
not have to calculate a recapture amount.
(B) Treatment of partner or share-
holder. A partner or shareholder in a trans-
feror partnership or transferor S corpo-
ration, respectively, must apply the rules
under section 49 at the partner or share-
holder level if there is a change in nonqual-
ified nonrecourse financing with respect to
the partner or shareholder after the close
of the taxable year in which the invest-
ment credit property is placed in service
and the specified credit portion is deter-
mined. If there is an increase in nonqual-
ified nonrecourse financing to a partner,
any adjustment under the rules of section
49(b) is calculated based on the partner’s
share of the basis (or cost) of the section
38 property to which the specified credit
portion was determined in accordance
with §1.46-3(f). If there is an increase in
nonqualified nonrecourse financing to a
shareholder, any adjustment under the
rules of section 49(b) is calculated based
on the shareholder’s pro rata share of the
basis (or cost) of the section 38 property
to which the specified credit portion was
determined in accordance with §1.48-5. If
there is a decrease in nonqualified nonre-
course financing, any increase in the credit
base is taken into account by the partner or
shareholder as provided under section 49,
and any resulting credit is not eligible for
transfer under section 6418.
(b) Rules applicable to partnerships—
(1) Allocations of tax exempt income
amounts generally. A transferor partner-
ship must generally determine a part-
ner’s distributive share of any tax exempt
income resulting from the receipt of con-
sideration for the transfer based on such
partner’s proportionate distributive share
of the eligible credit that would otherwise
have been allocated to such partner absent
the transfer of the specified credit portion
(otherwise eligible credit). A partner’s
distributive share of an otherwise eligi-

June 17, 2024 1722 Bulletin No. 2024–25
ble credit is determined under §§1.46-3(f)
and 1.704-1(b)(4)(ii). Tax exempt income
resulting from the receipt of consideration
for the transfer of a specified credit por-
tion by a transferor partnership is treated
as received or accrued, including for
purposes of section 705 of the Code, as
of the date the specified credit portion is
determined with respect to the transferor
partnership (such as, for investment credit
property, the date the property is placed in
service).
(2) Special rule for allocations of tax
exempt income amounts and eligible cred-
its for an election to transfer less than all
eligible credits determined with respect to
an eligible credit property. In the event
a transferor partnership elects to transfer
one or more specified credit portions of
less than all eligible credits determined
with respect to an eligible credit prop-
erty held directly by the partnership, the
partnership may allocate any tax exempt
income resulting from the receipt of con-
sideration for the specified credit por-
tion(s) in accordance with the rules in this
paragraph (b)(2).
(i) First, the partnership must deter-
mine each partner’s distributive share of
the otherwise eligible credits with respect
to such eligible credit property in accor-
dance with paragraph (b)(1) of this section
(partner’s eligible credit amount).
(ii) Thereafter, the transferor part-
nership may determine, in any manner
described in the partnership agreement, or
as the partners may agree, the portion of
each partner’s eligible credit amount to be
transferred, and the portion of each part-
ner’s eligible credit amount to be retained
and allocated to such partner. The part-
nership may allocate to each partner its
agreed upon share of eligible credits, tax
exempt income resulting from the receipt
of consideration for the specified credit
portion(s), or both, as the case may be,
provided that—
(A) The amount of eligible credits allo-
cated to each partner cannot exceed such
partner’s eligible credit amount; and
(B) Each partner is allocated its propor-
tionate share of tax exempt income result-
ing from the transfer(s).
(iii) Each partner’s proportionate share
of tax exempt income resulting from the
transfer(s) is equal to the total amount
of tax exempt income resulting from the
transfer(s) of the specified credit por-
tion(s) by the partnership multiplied by a
fraction—
(A) The numerator of which is such
partner’s eligible credit amount minus
the amount of eligible credits actually
allocated to such partner with respect to
the eligible credit property for the taxable
year; and
(B) The denominator of which is the
specified credit portion(s) transferred by
the partnership with respect to the eligible
credit property for the taxable year.
(3) Transferor partnerships in tiered
structures. If a partnership (upper-tier
partnership) is a direct or indirect partner
of a transferor partnership and directly or
indirectly receives—
(i) An allocation of an eligible credit,
the upper-tier partnership is not an eligible
taxpayer under section 6418 with respect
to any eligible credit allocated by a trans-
feror partnership; or
(ii) An allocation of tax exempt income
resulting from the receipt of consideration
for the transfer of a specified credit portion
by a transferor partnership, the upper-tier
partnership must determine its partners’
distributive shares of such tax exempt
income in proportion to the partners’ dis-
tributive shares of the otherwise eligible
credit as provided in paragraph (b)(1) of
this section.
(4) Partnership as a transferee tax-
payer—(i) Eligibility under section 6418.
A partnership may qualify as a transferee
partnership to the extent it is not related
(within the meaning of section 267(b)
or 707(b)(1)) to an eligible taxpayer. A
transferee partnership is subject to the no
additional transfer rule in §1.6418-2(c)
(2), however, an allocation of a transferred
specified credit portion to a direct or indi-
rect partner of a transferee partnership
under section 704(b) is not a transfer for
purposes of section 6418.
(ii) Treatment of a cash payment for
a transferred specified credit portion. A
cash payment by a transferee partnership
as consideration for a transferred specified
credit portion is treated as an expenditure
described in section 705(a)(2)(B).
(iii) Allocations of transferred specified
credit portions. A transferee partnership
must determine each partner’s distributive
share of any transferred specified credit
portion based on such partner’s distribu-
tive share of the nondeductible expenses
for the taxable year used to fund the pur-
chase of such transferred specified credit
portion. Each partner’s distributive share
of the nondeductible expenses used to
fund the purchase of any transferred spec-
ified credit portion is determined by the
partnership agreement, or, if the partner-
ship agreement does not provide for the
allocation of nondeductible expenses paid
pursuant to section 6418, then the alloca-
tion of the specified credit portion is based
on the transferee partnership’s general
allocation of nondeductible expenses.
(iv) Transferred specified credit por-
tion treated as an extraordinary item.
A transferred specified credit portion is
treated as an extraordinary item and must
be allocated among the partners of a trans-
feree partnership as of the time the trans-
fer of the specified credit portion to the
transferee partnership is treated as occur-
ring in accordance with this paragraph (b)
(4)(iv) and §1.706-4(e)(1) and (e)(2)(ix).
If the transferee partnership and eligible
taxpayer have the same taxable years, the
transfer of a specified credit portion to a
transferee partnership is treated as occur-
ring on the first date that the transferee
partnership makes a cash payment to the
eligible taxpayer as consideration for the
specified credit portion. If the transferee
partnership and eligible taxpayer have
different taxable years, the transfer of a
specified credit portion to a transferee
partnership is treated as occurring on the
later of–
(A) The first date of the taxable year
that the transferee partnership takes the
specified credit portion into account under
section 6418(d); or
(B) The first date that the transferee
partnership makes a cash payment to the
eligible taxpayer for the specified credit
portion.
(v) Transferee partnerships in tiered
structures. If an upper-tier partnership
is a direct or indirect partner of a trans-
feree partnership and directly or indirectly
receives an allocation of a transferred
specified credit portion, the upper-tier
partnership is not an eligible taxpayer
under section 6418 with respect to the
transferred specified credit portion. The
upper-tier partnership’s distributive share
of the transferred specified credit portion
is treated as an extraordinary item to the

Bulletin No. 2024–25 1723 June 17, 2024
upper-tier partnership and must be allo-
cated among the partners of the upper-tier
partnership as of the time the transfer of
the specified credit portion to the trans-
feree partnership is treated as occurring
in accordance with paragraph (b)(4)(iv) of
this section and §1.706-4(e)(1) and (e)(2)
(ix), regardless of whether the transferee
partnership and upper-tier partnership
have different taxable years under section
706(b). The upper-tier partnership must
report the credits to its partners in accor-
dance with guidance.
(c) Rules applicable to S corpora-
tions—(1) Pro rata shares of tax exempt
income amounts. Each shareholder of a
transferor S corporation must take into
account such shareholder’s pro rata share
(as determined under section 1377(a)
of the Code) of any tax exempt income
resulting from the receipt of consideration
for the transfer. Tax exempt income result-
ing from the receipt of consideration for
the transfer of a specified credit portion
by a transferor S corporation is treated
as received or accrued, including for pur-
poses of section 1366, as of the date the
specified credit portion is determined with
respect to the transferor S corporation
(such as, for investment credit property,
the date the property is placed in service).
(2) S corporation as a transferee tax-
payer—(i) Eligibility under section 6418.
An S corporation may qualify as a trans-
feree taxpayer to the extent it is not related
(within the meaning of section 267(b) or
707(b)(1)) to an eligible taxpayer (trans-
feree S corporation). A transferee S corpo-
ration is subject to the no additional trans-
fer rule in §1.6418-2(c)(2), however, an
allocation of a transferred specified credit
portion to a direct or indirect shareholder
of a transferee S corporation is not a trans-
fer for purposes of section 6418.
(ii) Treatment of a cash payment for a
transferred specified credit portion. A cash
payment by a transferee S corporation as
consideration for a transferred specified
credit portion is treated as an expenditure
described in section 1367(a)(2)(D) of the
Code.
(iii) Pro rata shares of transferred spec-
ified credit portions. Each shareholder of
a transferee S corporation must take into
account such shareholder’s pro rata share
(as determined under section 1377(a)) of
any transferred specified credit portion.
If the transferee S corporation and eligi-
ble taxpayer have the same taxable years,
the transfer of a specified credit portion
is treated as occurring to a transferee S
corporation during the transferee S corpo-
ration’s permitted year (as defined under
sections 444 and 1378(b)) that the trans-
feree S corporation first makes a cash
payment as consideration to the eligible
taxpayer for the specified credit portion.
If the transferee S corporation and eligi-
ble taxpayer have different taxable years,
then the transfer of a specified credit por-
tion is treated as occurring to a transferee
S corporation during the transferee S cor-
poration’s first permitted year (as defined
under sections 444 and 1378(b)) ending
with or after, the taxable year of the eligi-
ble taxpayer to which the transferred spec-
ified credit portion was determined.
(d) Transfer election by a partnership
or an S corporation—(1) In general. A
partnership or an S corporation may make
a transfer election to transfer a specified
credit portion under section 6418 if it files
an election in accordance with the rules
set forth in this paragraph (d). A transfer
election is made on the basis of an eligi-
ble credit property and only applies to the
specified credit portion identified in the
transfer election by such partnership or S
corporation in the taxable year for which
the election is made.
(2) Manner and due date of making a
transfer election. A transfer election for
a specified credit portion must be made
in the manner provided in §1.6418-2(b)
(1) through (3). All documents required
in §1.6418-2(b)(1) through (3) must be
attached to the partnership or S corpo-
ration return for the taxable year during
which the transferred specified credit
portion was determined. For the transfer
election to be valid, the return must be
filed not later than the time prescribed
by §§1.6031(a)-1(e) and 1.6037-1(b)
(including extensions of time) for filing
the return for such taxable year. No trans-
fer election may be made for the first time
on an amended return, withdrawn on an
amended return, or made or withdrawn
by filing an administrative adjustment
request under section 6227 of the Code.
A numerical error with respect to a prop-
erly claimed transfer election may be
corrected on an amended return or by fil-
ing an administrative adjustment request
under section 6227 if necessary; however,
the partnership or S corporation’s original
return, which must be signed under pen-
alties of perjury, must contain all of the
information, including a registration num-
ber, required by these final regulations. In
order to correct an error on an amended
return or administrative adjustment
request under section 6227, a partnership
or an S corporation must have made an
error in the information included on the
original return such that there is a substan-
tive item to correct; a partnership or an S
corporation cannot correct a blank item or
an item that is described as being “avail-
able upon request.” There is no late-elec-
tion relief available under §§ 301.9100-1
or 301.9100-3 of this chapter for a trans-
fer election that is not timely filed; how-
ever, relief under §301.9100-2(b) may
apply if the partnership or S corporation
has not received an extension of time to
file a return after the original due date,
has timely filed a return, takes corrective
action under §301.9100-2(c) within the
six-month extension period, and meets
the procedural requirements outlined in
§301.9100-2(d).
(3) Irrevocable election. A transfer
election by a partnership or an S corpora-
tion is irrevocable.
(e) Examples. The examples in this
paragraph (e) illustrate the application of
paragraphs (a)(6), (b), and (c) of this sec-
tion.
(1) Example 1. Transfer of all eligible credits
by a transferor partnership—(i) Facts. A and B
each contributed $150X of cash to AB partnership
for the purpose of investing in energy property. The
partnership agreement provides that A and B share
equally in all items of income, gain, loss, deduction,
and credit of AB partnership. AB partnership invests
$300X in an energy property in accordance with sec-
tion 48 and places the energy property in service on
date X in year 1. As of the end of year 1, AB part-
nership has $90X of eligible credits under section
48 with respect to the energy property. Before AB
partnership files its tax return for year 1, AB part-
nership transfers the $90X of eligible credits to an
unrelated transferee taxpayer, Transferee Taxpayer X
for $80X and executes a transfer election statement
with Transferee Taxpayer X.
(ii) Analysis. Under §1.6418-3(b)(1), AB part-
nership allocates the tax exempt income resulting
from the transfer of the specified credit portion
proportionately among the partners based on each
partner’s distributive share of the otherwise eligible
section 48 credit as determined under §§1.46-3(f)
and 1.704-1(b)(4)(ii). Under §1.46-3(f)(2), each
partner’s share of the basis of the energy property
is determined in accordance with the ratio in which

June 17, 2024 1724 Bulletin No. 2024–25
the partners divide the general profits (or taxable
income) of the partnership. Under the AB partner-
ship agreement, A and B share partnership profits
equally. Thus, each partner’s share of the basis of
the energy property under §1.46-3(f) and distributive
share of the otherwise eligible credits under §1.704-
1(b)(4)(ii) is 50 percent. The transfer made pursuant
to section 6418(a) causes AB partnership’s eligible
credits under section 48 with respect to the energy
property to be reduced to zero, and the consider-
ation of $80X received by AB partnership for the
transferred specified credit portion is treated as tax
exempt income. Because the tax exempt income is
allocated in the same proportion as the otherwise eli-
gible credit would have been allocated, A and B will
each be allocated $40X of tax exempt income. Each
of partner A’s and partner B’s basis in its partnership
interest and capital account will be increased by
$40X. Also in year 1, the basis in the energy property
held by AB partnership and with respect to which the
credit is calculated is reduced under section 50(c)(3)
by 50 percent of the amount of the credit so deter-
mined, or $45X. A’s and B’s basis in their partnership
interests and capital accounts will be appropriately
adjusted to take into account adjustments made to the
energy property under section 50(c)(5) and §1.704-
1(b)(2)(iv)(j). The tax exempt income received or
accrued by AB partnership as a result of the trans-
ferred specified credit portion is treated as received
or accrued, including for purposes of section 705, as
of date X in year 1, which is the date the transferred
specified credit portion was determined with respect
to AB partnership.
(2) Example 2. Recapture to a transferor part-
nership—(i) Facts. Assume the same facts as in
paragraph (e)(1)(i) of this section (Example 1),
except in year 3, within the recapture period related
to the energy property, A reduces its proportionate
interest in the general profits of the partnership by 50
percent causing a recapture event to A under §1.47-
6(a)(2). The energy property is not disposed of by
AB partnership and continues to be energy property
with respect to AB partnership.
(ii) Analysis. AB partnership should not provide
notice of recapture to Transferee Taxpayer X as
a result of the recapture event under §1.47-6(a)(2)
with respect to A. Transferee Taxpayer X is not liable
for any recapture amount. A, however, is subject to
recapture as provided in §1.47-6(a)(2) and based on
its share of the basis (or cost) of the energy property
to which the eligible credits were determined under
§1.46-3(f)(2).
(3) Example 3. Transfer of a portion of eligible
credits by a transferor partnership—(i) Facts. C and
D each contributed cash to CD partnership for the
purpose of investing in a qualified wind facility. The
partnership agreement provides that until a flip point,
C is allocated 99 percent of all items of income, gain,
loss, deduction and credit of CD partnership and D
is allocated the remaining 1 percent of such items.
After the flip point, C is allocated 5 percent of all
items of income, gain, loss, deduction and credit of
CD Partnership and D is allocated 95 percent of such
items. CD partnership invests in a qualified wind
facility and places the facility in service in year 1.
CD partnership generates $100X of credit under
section 45(a) for year 1. Before the due date for CD
partnership’s year 1 tax return (with extension), C
and D agree that D’s share of the eligible credit will
be transferred, and C will be allocated its share of
eligible credit. CD partnership transfers $1X of the
eligible credit to an unrelated transferee taxpayer for
$1X. The flip point has not been reached by the end
of year 1.
(ii) Analysis. Under paragraph (b)(2) of this sec-
tion, CD partnership must first determine each part-
ner’s eligible credit amount, which is equal to such
partner’s distributive share of the otherwise eligible
section 45(a) credit as determined under §1.704-
1(b)(4)(ii). Under §1.704-1(b)(4)(ii), for an eligible
credit that is not an investment tax credit, alloca-
tions of credit are deemed to be in accordance with
the partner’s interest in the partnership if the credit
is allocated in the same proportion as the partners’
distributive share of the receipts that give rise to the
credit. The CD partnership agreement provides that
until the flip point, C is allocated 99 percent of all
items of income, gain, loss, deduction and credit of
CD partnership and D is allocated the remaining 1
percent of such items. Assuming all requirements of
the safe harbor provided for in Revenue Procedure
2007-65, 2007-2 CB 967 are met, CD partnership’s
allocations of the otherwise eligible credits would
be respected as in accordance with section 704(b).
Thus, partner C’s and partner D’s distributive share
of the otherwise eligible credit is 99 percent and 1
percent, respectively. C and D have agreed to sell
D’s eligible credit amount of $1X for full value and
to allocate to C its eligible credit amount of $99X.
The transfer made pursuant to section 6418(a) causes
CD partnership’s eligible credits under section 45(a)
with respect to the wind facility to be reduced to
$99X, and the consideration of $1X received by CD
partnership is treated as tax exempt income. D is
allocated $1X of tax exempt income from the trans-
fer of the eligible credits, and C is allocated $99X
of eligible credits under section 45(a) with respect
to the wind facility. Neither C nor D is allocated
more eligible credits than its eligible credit amount.
Additionally, D is allocated an amount of tax exempt
income equal to $1X x (1 – 0)/1 and C is allocated
none of the tax exempt income. The allocations of
eligible credits and tax exempt income are permissi-
ble allocations under paragraph (b)(2) of this section.
(4) Example 4. Upper-tier partnership of a trans-
feror partnership—(i) Facts. E, F, and G each con-
tributed $100X of cash to EFG partnership for the
purpose of investing in an energy property. E, F, and
G are partnerships for Federal income tax purposes.
The partnership agreement provides that E, F and
G share equally in all items of income, gain, loss,
and deduction of EFG partnership. EFG partnership
invests $300X in an energy property in accordance
with section 48 and places the energy property in
service in year 1. As of the end of year 1, EFG part-
nership has $90X of eligible credits under section 48
with respect to the energy property. Before the due
date for EFG partnership’s year 1 tax return (with
extension), E, F and G agree that E’s share of the
eligible credits will be transferred, and F and G will
each be allocated their shares of eligible credits (or
basis). EFG partnership transfers $30X of the eli-
gible credits to an unrelated transferee taxpayer for
$25X. Assuming the allocations to E, F and G of
the eligible credits and tax exempt income resulting
from the receipt of cash for the transferred specified
credit portion are permissible allocations under para-
graph (b)(2) of this section, E is allocated $25X of
tax exempt income from the transfer of the eligible
credits and F and G are each allocated $30X of eligi-
ble credits with respect to the energy property.
(ii) Analysis. E must allocate the $25X of tax
exempt income to its partners as if it had retained
its share of the eligible credits. Under §1.46-3(f)(2),
each partner’s share of the basis of the section 48
energy property is determined in accordance with the
ratio in which the partners divide the general profits
(or taxable income) of the partnership. The E part-
nership agreement provides for equal allocations of
income, gain, deduction, and loss to its partners, and
thus, E partnership must allocate the otherwise eligi-
ble credits in the same manner. Therefore, E partner-
ship must allocate the $25X of tax exempt income
equally among its partners. In accordance with para-
graph (b)(3)(i) of this section, F and G do not qualify
as an eligible taxpayer for purposes of section 6418
and thus, are not permitted to make a transfer election
for any portion of the $30X of eligible credit allo-
cated to them by EFG partnership. Under §1.46-3(f)
(2), each partner’s share of the basis of the section 48
energy property is determined in accordance with the
ratio in which the partners divide the general profits
(or taxable income) of the partnership. The F and G
partnership agreements provide for equal allocations
of income, gain, deduction, and loss to its partners,
and F and G must allocate the basis from the energy
property to their partners in the same manner.
(5) Example 5. Transferee partnership—(i)
Facts. Y and Z each contributed $50X of cash to YZ
partnership for the purpose of purchasing eligible
section 45 credits under section 6418. The partner-
ship agreement provides that all items of income,
gain, loss, deduction, and credit are shared equally
among Y and Z. The partnership agreement also pro-
vides that any nondeductible expenses used to fund
the purchase of any transferred specified credit por-
tion will be shared equally among Y and Z. On date
X in year 1, YZ partnership qualifies as a transferee
taxpayer and makes a cash payment of $80X to an
eligible taxpayer for $100X of a transferred speci-
fied credit portion. The eligible credits will be deter-
mined with respect to the eligible taxpayer as of the
end of year 1. Both YZ partnership and the eligible
taxpayer are calendar year taxpayers.
(ii) Analysis. The cash payment of $80X made
by YZ partnership for the transferred specified credit
portion is treated as a nondeductible expenditure
under section 705(a)(2)(B). Under paragraph (b)(4)
(iii) of this section, YZ partnership must determine
each partner’s distributive share of the transferred
specified credit portion based on such partner’s dis-
tributive share of the nondeductible expenses for the
taxable year used to fund the purchase of such trans-
ferred specified credit portion. The YZ partnership
agreement provides that nondeductible expenses
used to fund the purchase of any transferred specified
credit portion will be shared equally among Y and Z
and thus, the transferred specified credit portion is
also shared equally among Y and Z. The transferred
specified credit portion is treated as an extraordinary
item under §1.706-4(e)(2)(ix) that is deemed to occur
on date X in year 1. As of date X in year 1, each of
Y and Z are allocated $40X of a section 705(a)(2)
(B) expenditure with respect to the cash payment for

Bulletin No. 2024–25 1725 June 17, 2024
the transferred specified credit portion and $50X of
transferred section 45 credits.
(6) Example 6. Upper-tier partnership of a trans-
feree partnership—(i) Facts. Assume the same facts
as in paragraph (e)(5)(i) of this section (Example 5),
except Y is a partnership for Federal tax purposes,
and Z is a U.S. C corporation for Federal tax pur-
poses (as defined in section 1361(a)(2) of the Code).
(ii) Analysis. In accordance with paragraph (b)(4)
(v) of this section, Y does not qualify as an eligible
taxpayer for purposes of section 6418 for that portion
of the transferred specified credit portion allocated
to it by YZ partnership. Under paragraph (b)(4)(iii)
of this section, Y must determine each partner’s dis-
tributive share of the transferred specified credit por-
tion based on such partner’s distributive share of the
nondeductible expenses for the taxable year used to
fund the purchase of such transferred specified credit
portion. The Y partnership agreement provides that
all items of income, gain, loss, deduction, and credit
are shared equally. The partnership agreement also
provides that any nondeductible expenses used to
fund the purchase of any specified credit portion are
shared equally. Thus, the transferred specified credit
portion must be shared equally among the partners of
Y. Y’s distributive share of the transferred specified
credit portion is treated as an extraordinary item to Y
and must be allocated among the partners of Y as of
date X in year 1, which is when the item is deemed to
occur to YZ partnership, regardless of whether Y and
YZ partnership have the same taxable years under
section 706(b).
(7) Example 7. Transferor S corporation—(i)
Facts. V and W each contributed $150X of cash
to an S corporation for the purpose of investing in
energy property. The S corporation invests $300X
in an energy property in accordance with section 48
and places the energy property in service on date X
in year 1. As of the end of year 1, the S corporation
has $90X of eligible credits under section 48 with
respect to the energy property. Before the due date
for the S corporation’s year 1 tax return (with exten-
sion), the S corporation transfers the $90X of eligible
credits to an unrelated transferee taxpayer for $80X.
(ii) Analysis. The transfer made pursuant to
section 6418(a) causes the S corporation’s eligible
credits under section 48 with respect to the energy
property to be reduced to zero, and the consider-
ation of $80X received by the S corporation for the
transferred specified credit portion is treated as tax
exempt income. Under paragraph (c)(1) of this sec-
tion, each of V and W must take into account its pro
rata share (as determined under section 1377(a)) of
any tax exempt income resulting from the receipt of
consideration for the transfer of the eligible credit,
or $40X. Under section 1367(a)(1)(A), each of the
shareholder’s basis in its stock will be increased by
$40X. Also in year 1, the basis in the energy prop-
erty with respect to which the credit is calculated is
reduced under section 50(c)(3) by 50 percent of the
amount of the credit so determined, or $45X. The tax
exempt income received or accrued by the S corpo-
ration as a result of the transfer of the specified credit
portion is treated as received or accrued, including
for purposes of section 1366, as of date X in year
1, which is the date the transferred specified credit
portion was determined with respect to the transferor
S corporation.
(8) Example 8. Transferee S corporation—(i)
Facts. J and K each contributed $50X of cash to an
S corporation for the purpose of purchasing eligible
section 48 credits under section 6418. At the begin-
ning of year 2, the S corporation qualifies as a trans-
feree taxpayer and makes a cash payment of $80X to
an eligible taxpayer for $100X of a transferred spec-
ified credit portion. The transferred specified credit
portion was determined with respect to the eligible
taxpayer for energy property placed in service in
year 1. Both the S corporation and the eligible tax-
payer are calendar year taxpayers.
(ii) Analysis. The cash payment of $80X made
by the S corporation for the transferred specified
credit portion is treated as an expenditure described
in section 1367(a)(2)(D). Each of J and K must take
into account its pro rata share (as determined under
section 1377(a)) of the transferred specified credit
portion. The transferred specified credit portion is
deemed to arise for purposes of sections 1366 and
1377 during year 2 of the S corporation. For year 2,
each of J and K take into account $40X of a section
1367(a)(2)(D) expenditure with respect to the cash
payment for the transferred specified credit portion
and $50X of transferred section 48 credits.
(f) Applicability date. This section
applies to taxable years ending on or after
April 30, 2024. For taxable years ending
before April 30, 2024, taxpayers, how-
ever, may choose to apply the rules of this
section and §§1.6418-1, -2, and -5, pro-
vided the taxpayers apply the rules in their
entirety and in a consistent manner.
§1.6418-4 Additional information and
registration.
(a) Pre-filing registration and election.
As a condition of, and prior to, any speci-
fied credit portion being transferred by an
eligible taxpayer to a transferee taxpayer
pursuant to an election under §1.6418-2,
or a specified credit portion being trans-
ferred by a partnership or an S corporation
pursuant to §1.6418-3, the eligible tax-
payer is required to satisfy the pre-filing
registration requirements in paragraph
(b) of this section. An eligible taxpayer
that does not obtain a registration number
under paragraph (c)(1) of this section, and
report the registration number on its return
pursuant to paragraph (c)(5) of this sec-
tion, is ineligible to make a transfer elec-
tion for a specified credit portion under
§1.6418-2 or §1.6418-3, with respect to
the eligible credit determined with respect
to the specific eligible credit property for
which the eligible taxpayer has failed to
obtain and report a registration number.
However, completion of the pre-filing reg-
istration requirements and receipt of a reg-
istration number does not, by itself, mean
the eligible taxpayer is eligible to transfer
any specified credit portion determined
with respect to the eligible credit property.
(b) Pre-filing registration require-
ments—(1) Manner of pre-filing registra-
tion. Unless otherwise provided in guid-
ance, eligible taxpayers must complete
the pre-filing registration process elec-
tronically through an IRS electronic portal
and in accordance with the instructions
provided therein.
(2) Pre-filing registration and election
for members of a consolidated group.
A member of a consolidated group (as
defined in §1.1502-1) is required to com-
plete pre-filing registration to transfer any
eligible credit determined with respect to
the member. See §1.1502-77 (providing
rules regarding the status of the common
parent as agent for its members).
(3) Timing of pre-filing registration. An
eligible taxpayer must satisfy the pre-fil-
ing registration requirements of this para-
graph (b) and receive a registration num-
ber under paragraph (c) of this section
prior to making a transfer election under
§1.6418-2 or §1.6418-3 for a specified
credit portion on the taxpayer’s return for
the taxable year at issue.
(4) Each eligible credit property must
have its own registration number. An eli-
gible taxpayer must obtain a registration
number for each eligible credit property
with respect to which a transfer election
of a specified credit portion is made.
(5) Information required to complete
the pre-filing registration process. Unless
modified in future guidance, an eligible
taxpayer is required to provide the follow-
ing information to the IRS to complete the
pre-filing registration process:
(i) The eligible taxpayer’s general
information, including its name, address,
taxpayer identification number, and type
of legal entity;
(ii) Any additional information
required by the IRS electronic portal, such
as information establishing that the entity
is an eligible taxpayer;
(iii) The taxpayer’s taxable year, as
determined under section 441;
(iv) The type of annual tax return(s)
normally filed by the eligible taxpayer,
or that the eligible taxpayer does not nor-
mally file an annual tax return with the
IRS;

June 17, 2024 1726 Bulletin No. 2024–25
(v) The type of eligible credit(s) for
which the eligible taxpayer intends to
make a transfer election;
(vi) Each eligible credit property that
the eligible taxpayer intends to use to
determine a specified credit portion for
which the eligible taxpayer intends to
make a transfer election;
(vii) For each eligible credit property
listed in paragraph (b)(5)(vi) of this sec-
tion, any further information required by
the IRS electronic portal, such as—
(A) The type of eligible credit property;
(B) Physical location (that is, address
and coordinates (longitude and latitude) of
the eligible credit property);
(C) Supporting documentation relating to
the construction or acquisition of the eligible
credit property (such as State, Indian Tribal,
or local government permits to operate the
eligible credit property, certifications, evi-
dence of ownership that ties to a land deed,
lease, or other documented right to use and
access any land or facility upon which the
eligible credit property is constructed or
housed, and U.S. Coast Guard registration
numbers for offshore wind vessels);
(D) The beginning of construction
date, and the placed in service date of the
eligible credit property; and
(E) Any other information that the eli-
gible taxpayer believes will help the IRS
evaluate the registration request;
(viii) The name of a contact person for
the eligible taxpayer. The contact person
is the person whom the IRS may contact if
there is an issue with the registration. The
contact person must either:
(A) Possess legal authority to bind the
eligible taxpayer; or
(B) Must provide a properly executed
power of attorney on Form 2848, Power
of Attorney and Declaration of Represen-
tative;
(ix) A penalties of perjury statement,
effective for all information submitted
as a complete application, and signed by
a person with personal knowledge of the
relevant facts that is authorized to bind the
registrant; and
(x) Any other information the IRS
deems necessary for purposes of pre-
venting duplication, fraud, improper pay-
ments, or excessive payments under this
section that is provided in guidance.
(c) Registration number—(1) In gen-
eral. The IRS will review the registration
information provided and will issue a sep-
arate registration number for each eligible
credit property for which the eligible tax-
payer provided sufficient verifiable infor-
mation.
(2) Registration number is only valid
for one taxable year. A registration num-
ber is valid with respect to an eligible tax-
payer only for the taxable year in which
the credit is determined for the eligible
credit property for which the registration is
completed, and for a transferee taxpayer’s
taxable year in which the eligible credit is
taken into account under §1.6418-2(f).
(3) Renewing registration numbers. If
an election to transfer an eligible credit
will be made with respect to an eligible
credit property for a taxable year after a
registration number under this section has
been obtained, the eligible taxpayer must
renew the registration for that subsequent
taxable year in accordance with applicable
guidance, including attesting that all the
facts previously provided are still correct
or updating any facts.
(4) Amendment of previously submit-
ted registration information if a change
occurs before the registration number
is used. As provided in instructions to
the pre-filing registration portal, if spec-
ified changes occur with respect to one
or more applicable credit properties for
which a registration number has been
previously obtained, but not yet used, an
eligible taxpayer must amend the reg-
istration (or may need to submit a new
registration) to reflect these new facts.
For example, if the owner of a facility
previously registered for a transfer elec-
tion under §1.6418-2 or §1.6418-3 for
eligible credits determined with respect
to that facility and the facility undergoes
a change of ownership (incident to a cor-
porate reorganization or an asset sale)
such that the new owner has a different
employer identification number (EIN)
than the owner who obtained the origi-
nal registration, the original owner of the
facility must amend the original registra-
tion to disassociate its EIN from the eli-
gible credit property and the new owner
must submit separately an original regis-
tration (or if the new owner previously
registered other credit properties, must
amend its original registration) to associ-
ate the new owner’s EIN with the previ-
ously registered eligible credit property.
(5) Reporting of registration number
by an eligible taxpayer and a transferee
taxpayer—(i) Eligible taxpayer reporting.
As part of making a valid transfer election
under §1.6418-2 or §1.6418-3, an eligi-
ble taxpayer must include the registration
number of the eligible credit property on
the eligible taxpayer’s return (as provided
in §1.6418-2(b) or §1.6418-3(d)) for the
taxable year the specified credit portion
was determined. The IRS will treat a
transfer election as ineffective if an eligi-
ble taxpayer fails to include the registra-
tion number of the eligible credit property
on the eligible taxpayer’s return.
(ii) Transferee taxpayer reporting. A
transferee taxpayer must report the reg-
istration number received (as part of the
transfer election statement as described in
§1.6418-2(b) or otherwise) from a trans-
feror taxpayer on the Form 3800, General
Business Credit, as part of the return for
the taxable year that the transferee tax-
payer takes the transferred specified credit
portion into account. The specified credit
portion will be disallowed to the trans-
feree taxpayer if the transferee taxpayer
does not include the registration number
on the return.
(d) Applicability date. This section
applies to taxable years ending on or after
April 30, 2024.
§1.6418-5 Special rules.
(a) Excessive credit transfer tax
imposed—(1) In general. If any specified
credit portion that is transferred to a trans-
feree taxpayer pursuant to an election in
§1.6418-2(a) or §1.6418-3 is determined
to be an excessive credit transfer (as
defined in paragraph (b) of this section),
the tax imposed on the transferee taxpayer
by chapter 1 (regardless of whether such
entity would otherwise be subject to chap-
ter 1 tax) for the taxable year in which such
determination is made will be increased
by an amount equal to the sum of—
(i) The amount of such excessive credit
transfer; and
(ii) An amount equal to 20 percent of
such excessive credit transfer.
(2) Taxable year of the determination.
The taxable year of the determination for
purposes of paragraph (a)(1) of this section
is the taxable year during which the exces-
sive credit transfer determination is made

Bulletin No. 2024–25 1727 June 17, 2024
and not the taxable year during which the
eligible credit was originally determined
by the eligible taxpayer, unless those are
the same taxable years.
(3) Payments related to excessive
credit transfer. Any payments made by a
transferee taxpayer to an eligible taxpayer
that directly relate to the excessive credit
transfer (as defined in paragraph (b) of this
section) are not subject to section 6418(b)
(2), section 6418(b)(3), or §1.6418-2(e).
The amount of a payment that directly
relates to the excessive credit transfer is
equal to the total consideration paid in
cash by the transferee taxpayer for the
specified credit portion multiplied by the
ratio of the amount of the excessive credit
transferred to the transferee taxpayer to
the amount of the transferred specified
credit portion claimed by the transferee
taxpayer.
(4) Reasonable cause. Paragraph (a)
(1)(ii) of this section does not apply if
the transferee taxpayer demonstrates to
the satisfaction of the IRS that the exces-
sive credit transfer resulted from reason-
able cause. Determination of reasonable
cause is made based on the relevant facts
and circumstances. Generally, the most
important factor is the extent of the trans-
feree taxpayer’s efforts to determine that
the amount of specified credit portion
transferred by the eligible taxpayer to the
transferee taxpayer is not more than the
amount of the eligible credit determined
with respect to the eligible credit property
for the taxable year in which the eligible
credit was determined and has not been
transferred to any other taxpayer. Circum-
stances that may indicate reasonable cause
can include, but are not limited to, review
of the eligible taxpayer’s records with
respect to the determination of the eligible
credit (including documentation evidenc-
ing eligibility for bonus credit amounts),
reasonable reliance on third party expert
reports, reasonable reliance on represen-
tations from the eligible taxpayer that the
total specified credit portion transferred
(including portions transferred to other
transferee taxpayers if an eligible taxpayer
makes multiple transfer elections with
respect to a single credit property) does
not exceed the total eligible credit deter-
mined with respect to the eligible credit
property for the taxable year, and review
of audited financial statements provided to
the Securities and Exchange Commission
(and underlying information), if applica-
ble.
(5) Recapture events. A recapture event
under section 45Q(f)(4), 49(b), or 50(a) is
not an excessive credit transfer.
(b) Excessive credit transfer defined—
(1) In general. The term excessive credit
transfer means, with respect to an eligible
credit property for which a transfer elec-
tion is made under §1.6418-2 or §1.6418-3
for any taxable year, an amount equal to
the excess of—
(i) The amount of the transferred spec-
ified credit portion claimed by the trans-
feree taxpayer with respect to such eligi-
ble credit property for such taxable year;
over
(ii) The amount of the eligible credit
that, without the application of section
6418, would be otherwise allowable under
the Code with respect to such eligible
credit property for such taxable year.
(2) Multiple transferees treated as one.
All transferee taxpayers are considered
as one transferee for calculating whether
there was an excessive credit transfer and
the amount of the excessive credit trans-
fer. If there was an excessive credit trans-
fer, then the amount of excessive credit
transferred to a specific transferee tax-
payer is equal to the total excessive credit
transferred multiplied by the ratio of the
transferee taxpayer’s portion of the total
specified credit to the total specified credit
portions transferred to all transferees. The
rule in this paragraph (b)(2) is applied on
an eligible credit property basis, as appli-
cable.
(3) Examples. The following examples
illustrate the rules of this paragraph (b):
(i) Example 1 – No excessive credit transfer. Tax-
payer A claims $40x of an eligible credit and trans-
fers $60x of an eligible credit to Transferee Taxpayer
B related to a single facility that was expected to gen-
erate $100x of such eligible credit. In a subsequent
year it is determined that the facility only generated
$60x of such eligible credit. There is no excessive
credit transfer in this case because the amount of the
eligible credit claimed by Transferee Taxpayer B of
$60x is equal to the amount of the credit that would
be otherwise allowable with respect to such facility
for the taxable year the transfer occurred. Taxpayer A
is disallowed the $40x of the eligible credit claimed.
(ii) Example 2 – Excessive credit transfer. Same
facts as in paragraph (b)(3)(i) of this section (Exam-
ple 1) except that Taxpayer A transfers $75x of the
$100x of eligible credit to Transferee Taxpayer B in
exchange for a cash payment of $67.5x. Taxpayer
A claims $25x of the eligible credit and Transferee
Taxpayer B claims $75x of the eligible credit. In
this situation, a $40x reduction in credit results in
a $15x excessive credit transfer to Transferee Tax-
payer B because the amount of the credit claimed by
Transferee Taxpayer B ($75x) exceeds the amount of
credit otherwise allowable with respect to the facil-
ity ($60x) by $15x. Therefore, Transferee Taxpayer
B’s tax is increased for the determination year by
$18x, which is equal to the amount of the excessive
credit transfer plus 20 percent of the excessive credit
transfer as provided in paragraph (a) of this section
and section 6418(g)(2)(A). If Transferee Taxpayer
B can show reasonable cause as provided in para-
graph (a)(4) of this section and section 6418(g)(2)
(B), then Transferee Taxpayer B will only have a tax
increase of $15x. Taxpayer A is disallowed the $25x
of the eligible credit claimed. Under paragraph (a)
(3) of this section, the portion of the cash payment of
$67.5x made by Transferee Taxpayer B that is attrib-
utable to the excessive credit transfer is $13.5x and
is equal to Transferee Taxpayer B’s cash payment of
$67.5x multiplied by the ratio of the excessive credit
transfer ($15x) to the transferred specified credit
portion claimed by Transferee Taxpayer B ($75x).
Pursuant to paragraph (a)(3) of this section, the
payment of $13.5x made to Taxpayer A from Trans-
feree Taxpayer B that directly relate to the excessive
credit transfer are not subject to section 6418(b)(2),
6418(b)(3), or §1.6418-2(e).
(iii) Example 3 – Excessive credit with multi-
ple transferees. Same facts as in paragraph (b)(3)
(i) of this section (Example 1) except that Taxpayer
A transfers $50x of the eligible credit to Transferee
Taxpayer B and $30x of the eligible credit to Trans-
feree Taxpayer C. In exchange for transfer of the
credit, Transferee Taxpayer B made a cash payment
of $45x and Transferee Taxpayer C made a cash pay-
ment of $27x. Taxpayer A claims $20x of the eligible
credit, Transferee Taxpayer B claims $50x of the eli-
gible credit, and Transferee Taxpayer C claims $30x
of the eligible credit. In this situation, because there
are multiple transferees, all transferees are treated as
one transferee for determining the excessive credit
transfer amount under paragraph (b)(2) of this sec-
tion. There is a total excessive credit transfer of
$20x because the amount of the credit claimed by
the transferees in total ($80x) exceeds the amount of
credit otherwise allowable with respect to the facility
($60x) by $20x. The excessive credit transfer to Tax-
payer B is equal to ($50x/$80x * $20x) = $12.5x, and
the excessive credit transfer to Taxpayer C is equal to
($30x/$80x * $20x) = $7.5x. Therefore, Transferee
Taxpayer B and Transferee Taxpayer C are subject to
the provisions in paragraph (a) of this section. Trans-
feree Taxpayer B’s and Transferee Taxpayer C’s tax
is increased for the determination year by the respec-
tive excessive credit transfer amount and 20 percent
of the excessive credit transfer amount ($15x for
Transferee Taxpayer B and $9x for Transferee Tax-
payer C) as provided in paragraph (a) of this section
and section 6418(g)(2)(A). If Transferee Taxpayer B
or Transferee Taxpayer C can show reasonable cause
as provided in paragraph (a)(4) of this section and
section 6418(g)(2)(B), then the tax increase will only
be $12.5x or $7.5x, respectively. Taxpayer A is dis-
allowed the $20x of eligible credit claimed. Under
paragraph (a)(3) of this section, the portion of the
cash payment of $45x made by Transferee Taxpayer

June 17, 2024 1728 Bulletin No. 2024–25
B that is attributable to its portion of the excessive
credit transfer is $11.25x and is equal to Transferee
Taxpayer B’s cash payment of $45x multiplied by the
ratio of the excessive credit transfer ($12.5x) to the
transferred specified credit portion claimed by Trans-
feree Taxpayer B ($50x). Similarly, the portion of the
cash payment of $27x made by Transferee Taxpayer
C that is attributable to its portion of the excessive
credit transfer is $6.75x and is equal to Transferee
Taxpayer C’s cash payment of $27x multiplied by
the ratio of the excessive credit transfer ($7.5x) to the
transferred specified credit portion claimed by Trans-
feree Taxpayer B ($30x).Pursuant to paragraph (a)
(3) of this section, the payments made to Taxpayer A
by Transferee Taxpayer B ($11.25x) and Transferee
Taxpayer C ($6.75x) that directly relate to the exces-
sive credit transfer are not subject to section 6418(b)
(2), 6418(b)(3), or §1.6418-2(e).
(c) Basis reduction under section 50(c).
In the case of any transfer election under
§1.6418-2 or §1.6418-3 with respect to
any specified credit portion described in
§1.6418-1(c)(2)(ix) through (xi), section
50(c) will apply to the applicable invest-
ment credit property (as defined in section
50(a)(6)(A)) as if such credit was allowed
to the eligible taxpayer.
(d) Notification and impact of recapture
under section 50(a)—(1) In general. In
the case of any election under §1.6418-2
or §1.6418-3 with respect to any specified
credit portion described in §1.6418-1(c)
(2)(ix) through (xi), if, during any tax-
able year, the applicable investment credit
property (as defined in section 50(a)(6)
(A)) is disposed of, or otherwise ceases to
be investment credit property with respect
to the eligible taxpayer, before the close of
the recapture period (as described in sec-
tion 50(a)(1)(A)), other than as described
in §1.6418-3(a)(6), such eligible taxpayer
and the transferee taxpayer must follow
the notification process in paragraph (d)
(2) of this section, with recapture impact-
ing the transferee taxpayer and eligible
taxpayer as described in paragraph (d)(3)
of this section. Rules similar to the rules
of this paragraph (d) apply in determining
the amount of and liability for any section
49(b) recapture as between an eligible tax-
payer and the transferee taxpayer.
(2) Notification requirements—(i)
Eligible taxpayer. The eligible taxpayer
must provide notice of the occurrence of
recapture to the transferee taxpayer. This
notice must provide all information neces-
sary for a transferee taxpayer to correctly
compute the recapture amount (as defined
under section 50(c)(2)), and the notifi-
cation must occur in sufficient time to
allow the transferee taxpayer to compute
the recapture amount by the due date of
the transferee taxpayer’s return (without
extensions) for the taxable year in which
the recapture event occurs. The eligi-
ble taxpayer and transferee taxpayer can
contract with respect to the form of the
notice and any specific time periods that
must be met, so long as the terms of the
contractual arrangement do not conflict
with the requirements of this paragraph
(d)(2)(i). Any additional information that
is required or other specific time periods
that must be met may be prescribed by the
IRS in guidance issued with respect to this
notification requirement.
(ii) Transferee taxpayer. The trans-
feree taxpayer must provide notice of
the recapture amount (as defined in sec-
tion 50(c)(2)), if any, to the eligible tax-
payer. This must occur in sufficient time
to allow the eligible taxpayer to calculate
any basis adjustment with respect to the
investment credit property by the due date
of the eligible taxpayer’s return (without
extensions) for the taxable year in which
the recapture event occurs. The eligible
taxpayer and transferee taxpayer can con-
tract with respect to the form of the notice
and any specific time periods that must
be met, so long as the terms of the con-
tractual arrangement do not conflict with
the requirements of this paragraph (d)(2)
(ii). Any additional information that is
required or other specific time periods that
must be met may be provided in guidance
prescribed by the IRS issued with respect
to this notification requirement.
(3) Impact of recapture—(i) Section
50(a) recapture event. Except as provided
in paragraph (d)(3)(iii) of this section,
the transferee taxpayer is responsible for
any amount of tax increase under section
50(a) upon the occurrence of a recapture
event, provided that if an eligible taxpayer
retains any amount of an eligible credit
determined with respect to an invest-
ment credit property directly held by the
eligible taxpayer, the amount of the tax
increase under section 50(a) that the eligi-
ble taxpayer is responsible for is equal to
the recapture amount multiplied by a frac-
tion, the numerator of which is the total
credit amount that the eligible taxpayer
retained, and the denominator of which
is the total credit amount determined for
the eligible credit property. The amount of
the tax increase under section 50(a) that
the eligible transferee is responsible for is
equal to the recapture amount multiplied
by a fraction, the numerator of which is
the specified credit portion transferred to
the transferee taxpayer, and the denomi-
nator of which is the total credit amount
determined for the eligible credit property.
(ii) Impact of section 50(a) recapture
event on basis of investment credit prop-
erty held by eligible taxpayer. The eligi-
ble taxpayer must increase the basis of the
investment credit property (immediately
before the event resulting in such recap-
ture) by an amount equal to the recapture
amount provided to the eligible taxpayer
by the transferee taxpayer under para-
graph (d)(2)(ii) of this section and the
recapture amount on any credit amounts
retained by the eligible taxpayer in accor-
dance with section 50.
(iii) Impact of partner or shareholder
recapture under §1.6418-3(a)(6). To the
extent that a partner in a transferor part-
nership or a shareholder in a transferor
S corporation recognizes an amount of
tax increase under section 50(a) or sec-
tion 49(b) (that is, a recapture amount)
for an investment tax credit determined
with respect to investment credit property
held directly by the transferor partnership
or transferor S corporation that does not
result in recapture liability to a transferee
taxpayer pursuant to §1.6418-3(a)(6), that
amount reduces the remaining recapture
amount under paragraph (d)(3)(i) of this
section with respect to the investment
credit property, and thus reduces the
remaining recapture amounts to which a
transferee taxpayer and eligible taxpayer
(to the extent of retained credit amounts
that have not be previously recaptured)
is liable. The amount of the reduction to
the transferee taxpayer is proportionate
to the amount of the tax increase for the
transferred specified credit portion (based
on the partner’s or shareholder’s distribu-
tive share or pro rata share of tax exempt
income, respectively, resulting from the
transfer).
(iv) Example (1). Impact of transferor partner
recapture event to transferee taxpayer—(A) Facts.
A, B, C, and D are equal partners in ABCD part-
nership, a partnership for Federal tax purposes that
accounts for tax items on a calendar year basis. The
partnership agreement provides that A, B, C and
D share equally in all items of income, gain, loss,
deduction, and credit of ABCD partnership. ABCD

Bulletin No. 2024–25 1729 June 17, 2024
partnership invests $1,000x in an energy property
in accordance with section 48 and places the energy
property in service on September 30, 2024. As of the
end of 2024, ABCD partnership has $300x of eligi-
ble credits under section 48 with respect to energy
property. Under §1.6418-3(b)(2)(iv), each of A’s,
B’s, C’s, and D’s distributive shares of the other-
wise eligible section 48 credits is determined under
§§1.46-3(f) and 1.704-1(b)(4)(ii) and is equal to
$75x (based on each of A, B, C and D being allo-
cated $250x of basis). Before the due date for ABCD
partnership’s 2024 tax return (with extension), A,
B, C, and D agree that with respect to A’s $75x dis-
tributive share of the otherwise eligible section 48
credits, $60x of eligible credits will be transferred
and $15x of eligible credits (or $50x basis) will be
allocated to A. A, B, C and D also agree that B, C,
and D will each be allocated their respective $75x
of the $250x of section 48 eligible credits (or basis).
On November 15, 2024, ABCD partnership transfers
$60x of its eligible section 48 investment credits to
Y, an unrelated taxpayer. On January 1, 2025, A sells
50 percent of its interest in ABCD partnership, which
results in recapture under §1.47-6(a)(2).
(B) Analysis – recapture from partner A’s dis-
position. Pursuant to §1.6418-3(a)(6)(i), A is sub-
ject to the rules relating to recapture caused by the
disposition of its interest under §1.47-6(a)(2), and
A calculates recapture based on half of its share of
the basis of the investment credit property ($125x of
basis) because A disposed of 50 percent of its inter-
est in ABCD partnership. This results in a recapture
amount of $37.5x to A (that is, the amount of the tax
increase that A is responsible for due to the recap-
ture event). Of the $37.5x recapture amount, $7.5x
relates to $15x of credits retained by A, and $30x
relates to the $60x of A’s distributive share of the
otherwise eligible section 48 credits that were trans-
ferred. This recapture event reduces the total poten-
tial recapture with respect to the investment credit
property from $300x to $262.5x. Y is not subject to
recapture because of partner A’s disposition, but, if a
recapture event with respect to the energy property
takes place at a later date, the rules in §1.6418-5(d)
(3)(i) will take partner A’s disposition and recapture
amount into account when determining Y’s recapture
amount at that date.
(v) Example (2). Impact of recapture from ABCD
partnership’s disposition of the investment credit
property — (A) Facts. Same facts as Example (1),
except that on October 15, 2025, ABCD partnership
sells the investment credit property to an unrelated
third party.
(B) Analysis – recapture event from ABCD part-
nership’s disposition. As a result of ABCD partner-
ship’s disposition of the energy property to a third
party after one year, but before two years after plac-
ing the energy property into service, under section
50(a)(1)(B), the recapture percentage is 80 percent.
This means that 80 percent of the remaining $262.5x
of eligible section 48 credits (or $210x) is subject to
recapture. Because ABCD partnership retained eligi-
ble credits related to the energy property, the $210x
recapture amount, which is the amount of the tax
increase under section 50(a), must be split between
ABCD partnership and Y. Under §1.6418-5(d)(3)
(i), ABCD partnership must recapture $186x of the
$210x credit amount, which is determined by mul-
tiplying the $210x by a fraction, the numerator of
which is $232.5x ($240x of retained eligible credits
less $7.5x of retained eligible credits already recap-
tured by A) and the denominator of which is $262.5x
($300x of total credits determined for the energy
property less $37.5x credits recaptured with respect
to A’s distributive share of the otherwise eligible
section 48 credits transferred by ABCD partnership
to Y and A’s distributive share of the eligible cred-
its retained by A). Also under §1.6418-5(d)(3)(i), Y
has a $24x recapture amount determined by multi-
plying the $210x recapture amount by a fraction, the
numerator of which is $30x ($60x specified credit
portion transferred to Y less the $30x recaptured by
A that relates to A’s distributive share of the other-
wise eligible section 48 credits transferred by ABCD
partnership to Y), and the denominator of which is
$262.5x ($300x of total credits determined for the
energy property less $37.5x credits recaptured with
respect to A’s distributive share of the otherwise eli-
gible section 48 credits transferred by ABCD part-
nership to Y and A’s distributive share of the eligible
credits retained by A).
(e) Notification and impact of recap-
ture under section 45Q(f)(4)—(1) In gen-
eral. In the case of any election under
§1.6418-2 or §1.6418-3 with respect to
any specified credit portion described in
§1.6418-1(c)(2)(iii), if, during any tax-
able year, there is recapture of any section
45Q credit allowable with respect to any
qualified carbon oxide that ceases to be
captured, disposed of, or used as a tertiary
injectant in a manner consistent with sec-
tion 45Q, before the close of the recapture
period (as described in §1.45Q-5(f)), such
eligible taxpayer and the transferee tax-
payer must follow the notification process
in paragraph (e)(2) of this section with
recapture impacting the transferee tax-
payer as described in paragraph (e)(3) of
this section.
(2) Notification requirements. The
notification requirements for the eligi-
ble taxpayer are the same as for an eligi-
ble taxpayer that must report a recapture
event as described in paragraph (d)(2)(i)
of this section, except that the recapture
amount that must be computed is defined
in §1.45Q-5(e).
(3) Impact of recapture. The transferee
taxpayer is responsible for any amount
of tax increase under section 45Q(f)(4)
and §1.45Q-5 upon the occurrence of a
recapture event, provided that if an eli-
gible taxpayer retains any amount of an
eligible credit determined with respect to
a component of carbon capture equipment
owned by the eligible taxpayer within a
single process train described in §1.45Q-
2(c)(3), the amount of the tax increase
under section 45Q(f)(4) that the eligible
taxpayer is responsible for is equal to the
recapture amount multiplied by a fraction,
the numerator of which is the total credit
amount that the eligible taxpayer retained,
and the denominator of which is the total
credit amount determined for the eligible
credit property. The amount of the tax
increase under section 45Q(f)(4) that the
transferee taxpayer is responsible for is
equal to the recapture amount multiplied
by a fraction, the numerator of which is
the specified credit portion transferred to
the transferee taxpayer, and the denomi-
nator of which is the total credit amount
determined for the eligible credit property.
(f) [Reserved].
(g) Impact of an ineffective transfer
election by an eligible taxpayer. An inef-
fective transfer election means that no
transfer of an eligible credit has occurred
for purposes of section 6418, includ-
ing section 6418(b). Section 6418 does
not apply to the transaction and the tax
consequences are determined under any
other relevant provisions of the Code. For
example, an ineffective election results if
an eligible taxpayer tries to elect to trans-
fer a specified credit portion, but the eligi-
ble taxpayer did not register and receive
a registration number with respect to the
eligible credit property (or otherwise sat-
isfy the requirements for making a trans-
fer election under the section 6418 regula-
tions) with respect to which the specified
credit portion was determined.
(h) Carryback and carryforward. A
transferee taxpayer can apply the rules in
section 39(a)(4) of the Code (regarding
the carryback and carryforward period
for applicable credits) to a specified credit
portion to the extent the specified credit
portion is described in section 6417(b) (list
of applicable credits, taking into account
any placed in service requirements in sec-
tion 6417(b)(2), (3), and (5)).
(i) Rules applicable to real estate
investment trusts—(1) Treatment of eligi-
ble credits prior to transfer. If a real estate
investment trust has eligible credits that
it may transfer, the value of those credits
is not included in either the numerator or
denominator in determining the value of
the REIT’s total assets in section 856(c)
(4) of the Code.
(2) Treatment of eligible credit transfer
for purposes of section 857 safe harbor

June 17, 2024 1730 Bulletin No. 2024–25
rules. The transfer of a specified credit
portion pursuant to a valid transfer elec-
tion under section 6418 is not a sale for
purposes of section 857(b)(6)(C)(iii) and
section 857(b)(6)(D)(iv) of the Code.
(j) Applicability date. This section
applies to taxable years ending on or after
April 30, 2024. For taxable years ending
before April 30, 2024, taxpayers, how-
ever, may choose to apply the rules of this
section and §§1.6418-1 through -3 pro-
vided the taxpayers apply the rules in their
entirety and in a consistent manner.
§1.6418-4T [Removed]
Par. 4. Section 1.6418-4T is removed.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: April 18, 2024
Aviva Aron-Dine,
Acting Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register April 25,
2024, 8:45 a.m., and published in the issue of the
Federal Register for April 30, 2024, 89 FR 34770)
26 CFR 300.11: Fee for obtaining a preparer tax
identification number
T.D. 9997
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 300
Preparer Tax Identification
Number (PTIN) User Fee
Update
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations relating to the imposition
of certain user fees on tax return prepar-
ers. The final regulations adopt without
change the text of interim final and pro-
posed regulations that reduced the user
fee to apply for or renew a preparer tax
identification number (PTIN) from $21
to $11. The final regulations affect indi-
viduals who apply for or renew a PTIN.
The Independent Offices Appropriation
Act of 1952 authorizes the charging of
user fees.
DATES: Effective date: These regulations
are effective on June 14, 2024.
Applicability date: For date of applica-
bility, see § 300.11(d).
FOR FURTHER INFORMATION
CONTACT: Concerning the final reg-
ulations, Jamie Song at (202) 317-6845;
concerning cost methodology, Michael
A. Weber at (202) 803-9738 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to 26 CFR part 300 – User Fees. On Octo-
ber 4, 2023, the Department of the Trea-
sury (Treasury Department) and the IRS
published in the Federal Register (88 FR
68525) a notice of proposed rulemaking
(proposed regulations) by cross-reference
to an interim final rule (REG-106203-23)
proposing amendments to regulations
under 26 CFR part 300. On the same date,
the Treasury Department and the IRS
published in the Federal Register (88 FR
68456) an interim final rule (TD 9980)
that reduced the PTIN user fee from $21
per application or application for renewal
to $11, plus the fee payable directly to a
third-party contractor. The interim final
rule and the proposed regulations took into
account the February 2023 memorandum
opinion of the United States District Court
for the District of Columbia in Steele v.
United States, 657 F.Supp.3d 23 (D.D.C.
2023). The preamble to the interim final
rule contains a detailed explanation of the
legal background and user fee calculations
regarding the amendments to these regu-
lations. No public hearing was requested
or held, and no comments were received
on the proposed regulations. These final
regulations therefore adopt the text of the
interim final rule and proposed regulations
without change.
Special Analyses
I. Regulatory Planning and Review
The OMB’s Office of Information and
Regulatory Analysis has determined that
these final regulations are not significant
and are not subject to review under sec-
tion 6(b) of Executive Order 12866, as
amended.
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6), it is hereby
certified that these final regulations will
not have a significant economic impact
on a substantial number of small entities.
Accordingly, a regulatory flexibility
analysis is not required. These regula-
tions affect all individuals who prepare
or assist in preparing all or substantially
all of a tax return or claim for refund
for compensation. Only individuals, not
businesses, can have a PTIN. Thus, the
economic impact of these regulations
on any small entity generally will be a
result of an individual tax return pre-
parer who is required to have a PTIN
owning a small business or a small busi-
ness otherwise employing an individual
tax return preparer who is required to
have a PTIN. The Treasury Department
and the IRS estimate that approximately
847,555 individuals will apply annually
for an initial or renewal PTIN. Although
these regulations will likely affect a
substantial number of small entities, the
economic impact on those entities is not
significant. These regulations establish
an $11 fee per application or applica-
tion for renewal (plus the fee payable
directly to the third-party contractor),
which is a reduction from the previ-
ously established fee, and will therefore
not have a significant economic impact
on small entities. Accordingly, a regula-
tory flexibility analysis is not required.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires that
agencies assess anticipated costs and ben-
efits and take certain other actions before
issuing a final rule that includes any Fed-
eral mandate that may result in expendi-

Bulletin No. 2024–25 1731 June 17, 2024
tures in any one year by a State, local, or
Tribal government, in the aggregate, or by
the private sector, of $100 million in 1995
dollars, updated annually for inflation.
These final regulations do not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector in excess of
that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications and do not impose
substantial direct compliance costs on
State and local governments or preempt
State law within the meaning of the Exec-
utive order.
V. Submission to Small Business
Administration
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking and the
interim final rule that preceded these final
regulations was submitted to the Chief
Counsel for the Office of Advocacy of the
Small Business Administration for com-
ment on its impact on small business. No
comments were received on the proposed
regulations or the interim final rule.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs des-
ignated this rule as not a major rule, as
defined by 5 U.S.C. 804(2).
Drafting Information
The principal author of these regula-
tions is Jamie Song, Office of the Asso-
ciate Chief Counsel (Procedure and
Administration). Other personnel from
the Treasury Department and the IRS par-
ticipated in the development of the regu-
lations.
List of Subjects in 26 CFR Part 300
Estate taxes, Excise taxes, Fees, Gift
taxes, Income taxes, Reporting and
recordkeeping requirements.
PART 300—USER FEES
Accordingly, the interim rule amending
26 CFR part 300, which was published
at 88 FR 68456 on October 4, 2023, is
adopted as final without change.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: April 28, 2024.
Aviva R. Aron-Dine,
Acting Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register May 14,
2024, 8:45 a.m., and published in the issue of the
Federal Register for May 15, 2024, 26 FR 42362)

June 17, 2024 1732 Bulletin No. 2024–25
Part III
Updated Static Mortality
Tables for Defined Benefit
Pension Plans for 2025
Notice 2024-42
PURPOSE
This notice specifies updated static
mortality tables to be used for defined
benefit pension plans under § 430(h)(3)
(A) of the Internal Revenue Code (Code)
and section 303(h)(3)(A) of the Employee
Retirement Income Security Act of 1974,
Pub. L. No. 93-406, as amended (ERISA).
These updated static mortality tables,
which are being issued pursuant to the
regulations under § 430(h)(3)(A) of the
Code, apply for purposes of calculating
the funding target and other items for val-
uation dates occurring during the 2025
calendar year.
This notice also includes a modified
unisex version of the mortality tables
for use in determining minimum pres-
ent value under § 417(e)(3) and section
205(g)(3) of ERISA for distributions with
annuity starting dates that occur during
stability periods beginning in the 2025
calendar year.
BACKGROUND
Mortality Tables for Purposes of § 430
Section 412 of the Code provides min-
imum funding requirements that generally
apply for defined benefit plans. Section
412(a)(2) provides that § 430 sets forth
the minimum funding requirements that
apply to defined benefit plans that are not
multiemployer plans or CSEC plans. Sec-
tion 430(a) defines the minimum required
contribution for such a plan by reference
to the plan’s funding target for the plan
year. Under § 430(d)(1), a plan’s funding
target for a plan year generally is the pres-
ent value of all benefits accrued or earned
under the plan as of the first day of that
plan year.
Section 430(h)(3) provides rules
regarding the mortality tables that gener-
ally are used under § 430. Under § 430(h)
(3)(A), except as provided in § 430(h)(3)
(C) or (D), the Secretary is to prescribe by
regulation mortality tables to be used in
determining any present value or making
any computation under § 430. Those tables
are to be based on the actual experience of
pension plans and projected trends in that
experience. Section 430(h)(3)(B) requires
the Secretary to revise any table in effect
under § 430(h)(3)(A) at least every 10
years to reflect the actual experience of
pension plans and projected trends in that
experience. Pursuant to that instruction,
on October 20, 2023, the Department of
the Treasury and the Internal Revenue
Service issued TD 9983, 88 FR 72357,
which amends the regulations to provide
updated base mortality tables and mortal-
ity improvement rates that apply for valu-
ation dates occurring on or after January
1, 2024.
Section 430(h)(3)(C) provides that,
upon request by a plan sponsor and
approval by the Secretary, substitute
mortality tables that meet the applicable
requirements may be used in lieu of the
standard mortality tables provided under
§ 430(h)(3)(A). Section 430(h)(3)(D)
provides for the use of separate mortality
tables with respect to certain individuals
who are entitled to benefits on account of
disability.
Section 1.430(h)(3)-1 provides rules
regarding the mortality tables used under
§ 430(h)(3)(A) for valuation dates occur-
ring on or after January 1, 2024. The mor-
tality tables used under § 430(h)(3)(A)
are based on the tables in the Pri-2012
Private Retirement Plans Mortality Tables
Report,
1
adjusted for mortality improve-
ment. Section 1.430(h)(3)-1(d) sets forth
base mortality tables with a base year of
2012.
Section 1.430(h)(3)-1(a)(1) permits
plan sponsors to apply the projection
of mortality improvement in either of
two ways: through use of generational
mortality tables or through use of static
mortality tables (available only to small
plans described in § 1.430(h)-1(c)(1)
(ii)) that are updated annually to reflect
expected improvements in mortality.
Section 1.430(h)(3)-1(b)(1)(iii)(A) pro-
vides that, for valuation dates occurring in
years after January 1, 2024, the mortality
improvement rates used to develop these
mortality tables are the 2024 Adjusted
Scale MP-2021 Rates. These rates, which
are incorporated by reference under
§ 1.430(h)(3)-1(b)(1)(iv)(A), are available
at http://www.irs.gov/retirement-plans/
pension-plan-mortality-tables. In addi-
tion, Note 1 to § 1.430(h)(3)-1(c)(1)(iv)
states that the static mortality tables for
valuation dates occurring in later calen-
dar years will be published in the Internal
Revenue Bulletin.
Application of § 430 Mortality Tables to
Other Funding Rules
Section 431 provides the minimum
funding standards for multiemployer
plans described in § 414(f) that are subject
to § 412. Section 431(c)(6)(D)(iv) pro-
vides that the Secretary may by regulation
prescribe mortality tables to be used in
determining current liability for purposes
of § 431(c)(6)(B). Section 1.431(c)(6)-1
provides that the same mortality assump-
tions that apply for purposes of § 430(h)
(3)(A) and § 1.430(h)(3)-1(a)(2) are used
to determine a multiemployer plan’s cur-
rent liability for purposes of applying
the full-funding rules of § 431(c)(6). For
this purpose, either the generational mor-
tality tables or the static mortality tables
are permitted to be used without regard to
whether the plan is a small plan.
Section 433 provides the minimum
funding standards for CSEC plans
described in § 414(y). Section 433(h)(3)
(B)(i) provides that the Secretary may by
regulation prescribe mortality tables to
be used in determining current liability
for purposes of § 433(c)(7)(C). Section
1.433(h)(3)-1(a) provides that the mortal-
ity tables described in § 430(h)(3)(A) are
to be used to determine current liability
under § 433(c)(7)(C). For this purpose,
either the generational mortality tables or
1
The Pri-2012 Private Retirement Plans Mortality Tables Report is available at https://www.soa.org/49c106/globalassets/assets/files/resources/experience-studies/2019/pri-2012-mortality-ta-
bles-report.pdf.

Bulletin No. 2024–25 1733 June 17, 2024
the static mortality tables are permitted to
be used without regard to whether the plan
is a small plan.
Application of Mortality Tables for
Minimum Present Value Requirements
under § 417(e)(3)
Section 417(e)(3) generally provides
that the present value of certain acceler-
ated forms of benefit under a qualified
pension plan (including single-sum dis-
tributions) must not be less than the pres-
ent value of the accrued benefit using
applicable interest rates and the appli-
cable mortality table. Section 417(e)(3)
(B) defines the term “applicable mortal-
ity table” as the mortality table specified
for the plan year under § 430(h)(3)(A)
(without regard to § 430(h)(3)(C) or (D)),
modified as appropriate by the Secretary.
Under § 1.417(e)-1(d)(2)(i), the applica-
ble mortality table for a calendar year is
the mortality table that is prescribed by
the Commissioner in guidance published
in the Internal Revenue Bulletin.
Rev. Rul. 2007-67, 2007-2 CB 1047,
provides that, except as otherwise stated
in future guidance, the applicable mortal-
ity table under § 417(e)(3) is a static mor-
tality table set forth in published guidance
that is developed based on a fixed blend
of 50 percent of the static male combined
mortality rates and 50 percent of the static
female combined mortality rates used
under § 1.430(h)(3)-1. Rev. Rul. 2007-67
also provides that the applicable mortality
table for a calendar year applies to distri-
butions with annuity starting dates that
occur during stability periods that begin
during that calendar year.
STATIC MORTALITY TABLES FOR
2025
The static mortality tables that apply
under § 430(h)(3)(A) for valuation dates
occurring during 2025 are set forth in the
appendix to this notice. The mortality
rates in these tables have been developed
from the methodology and base mortal-
ity rates set forth in § 1.430(h)(3)-1(c)
and (d), respectively, using the mortality
improvement rates set forth in the 2024
Adjusted Scale MP-2021 Rates.
The static mortality table that applies
under § 417(e)(3) for distributions with
annuity starting dates occurring during
stability periods beginning in 2025 is set
forth in the appendix to this notice in the
column labeled “417(e).” The mortality
rates in this table are derived from the
mortality tables specified under § 430(h)
(3)(A) for 2025 in accordance with the
procedures set forth in Rev. Rul. 2007-67.
Drafting Information
The principal authors of this notice are
Arslan Malik and Linda S. F. Marshall of
the Office of the Associate Chief Coun-
sel (Employee Benefits, Exempt Orga-
nizations, and Employment Taxes). For
further information regarding this notice,
contact Arslan Malik or Linda Marshall at
(202) 317-6700 (not a toll-free number).

June 17, 2024 1734 Bulletin No. 2024–25
APPENDIX
Mortality Tables for 2025
Valuation Dates Occurring During 2025 and
Distributions Subject to § 417(e)(3) with Annuity Starting Dates During Stability
Periods Beginning in 2025
430(h)(3)(A) Static Tables
Age MalesFemales 417(e)
0 0.003530.00304 0.00329
1 0.000250.00021 0.00023
2 0.000170.00013 0.00015
3 0.000120.00010 0.00011
4 0.000110.00008 0.00010
5 0.000090.00007 0.00008
6 0.000080.00006 0.00007
7 0.000080.00006 0.00007
8 0.000060.00005 0.00006
9 0.000050.00005 0.00005
10 0.000050.00005 0.00005
11 0.000050.00006 0.00006
12 0.000080.00006 0.00007
13 0.000100.00007 0.00009
14 0.000130.00008 0.00011
15 0.000170.00008 0.00013
16 0.000210.00009 0.00015
17 0.000250.00010 0.00018
18 0.000290.00010 0.00020
19 0.000330.00010 0.00022
20 0.000360.00010 0.00023
21 0.000360.00010 0.00023
22 0.000370.00011 0.00024
23 0.000370.00013 0.00025
24 0.000390.00014 0.00027
25 0.000390.00014 0.00027
26 0.000410.00014 0.00028
27 0.000420.00016 0.00029
28 0.000440.00016 0.00030
29 0.000460.00017 0.00032
30 0.000480.00018 0.00033
31 0.000500.00019 0.00035
32 0.000530.00021 0.00037
33 0.000560.00023 0.00040
34 0.000580.00024 0.00041
35 0.000610.00026 0.00044
36 0.000640.00028 0.00046

Bulletin No. 2024–25 1735 June 17, 2024
37 0.000670.00031 0.00049
38 0.000690.00032 0.00051
39 0.000720.00035 0.00054
40 0.000730.00037 0.00055
41 0.000750.00039 0.00057
42 0.000760.00041 0.00059
43 0.000790.00043 0.00061
44 0.000800.00045 0.00063
45 0.000830.00047 0.00065
46 0.000870.00051 0.00069
47 0.000910.00054 0.00073
48 0.000970.00058 0.00078
49 0.001030.00064 0.00084
50 0.001120.00070 0.00091
51 0.001230.00079 0.00101
52 0.001360.00089 0.00113
53 0.001520.00101 0.00127
54 0.001720.00114 0.00143
55 0.002040.00136 0.00170
56 0.002510.00169 0.00210
57 0.002930.00193 0.00243
58 0.003410.00223 0.00282
59 0.003940.00256 0.00325
60 0.004540.00297 0.00376
61 0.005190.00341 0.00430
62 0.006100.00406 0.00508
63 0.006980.00474 0.00586
64 0.007680.00532 0.00650
65 0.008540.00614 0.00734
66 0.009490.00702 0.00826
67 0.010460.00779 0.00913
68 0.011540.00864 0.01009
69 0.012730.00960 0.01117
70 0.014080.01074 0.01241
71 0.015630.01207 0.01385
72 0.017360.01357 0.01547
73 0.019340.01528 0.01731
74 0.021580.01729 0.01944
75 0.024150.01959 0.02187
76 0.027080.02223 0.02466
77 0.030450.02520 0.02783
78 0.034330.02856 0.03145
79 0.038820.03229 0.03556
80 0.044080.03686 0.04047
81 0.049690.04125 0.04547

June 17, 2024 1736 Bulletin No. 2024–25
82 0.056050.04614 0.05110
83 0.063230.05161 0.05742
84 0.071370.05777 0.06457
85 0.080660.06477 0.07272
86 0.091150.07282 0.08199
87 0.102950.08197 0.09246
88 0.116150.09244 0.10430
89 0.130690.10416 0.11743
90 0.146500.11723 0.13187
91 0.163170.13071 0.14694
92 0.180220.14477 0.16250
93 0.197580.15936 0.17847
94 0.214990.17426 0.19463
95 0.232320.18953 0.21093
96 0.250650.20589 0.22827
97 0.269240.22289 0.24607
98 0.288130.24064 0.26439
99 0.307500.25903 0.28327
100 0.327010.27800 0.30251
101 0.346520.29740 0.32196
102 0.365770.31688 0.34133
103 0.384700.33639 0.36055
104 0.403300.35579 0.37955
105 0.420900.37505 0.39798
106 0.438000.39383 0.41592
107 0.454240.41213 0.43319
108 0.469750.42960 0.44968
109 0.484580.44636 0.46547
110 0.493790.46232 0.47806
111 0.494920.47751 0.48622
112 0.496060.49181 0.49394
113 0.497210.49790 0.49756
114 0.498450.49880 0.49863
115 0.499600.49970 0.49965
116 0.499800.49985 0.49983
117 0.499900.49995 0.49993
118 0.499950.50000 0.49998
119 0.500000.50000 0.50000
120 1.000001.00000 1.00000

Bulletin No. 2024–25 1737 June 17, 2024
Section 59A Qualified
Derivative Payments
Reporting Extension
Notice 2024-43
I. PURPOSE
This Notice announces that the Depart-
ment of the Treasury (“Treasury Depart-
ment”) and the Internal Revenue Service
(“IRS”) intend to amend the regulations
under sections 59A and 6038A to defer the
applicability date of certain provisions of
the regulations relating to the reporting of
qualified derivative payments (“QDPs”)
until taxable years beginning on or after
January 1, 2027.
II. BACKGROUND
On December 6, 2019, the Treasury
Department and the IRS published TD
9885 in the Federal Register (84 FR
66968), which contains final regulations
addressing the base erosion and anti-abuse
tax (“BEAT”) of section 59A (the “2019
final regulations”). The 2019 final regu-
lations generally apply to taxable years
ending on or after December 17, 2018.
The 2019 final regulations included rules
under sections 59A and 6038A addressing
the reporting of QDPs, which are not base
erosion payments.
Under §1.59A-6(b)(2)(i), a payment
does not qualify as a QDP unless the tax-
payer reports the information required in
§1.6038A-2(b)(7)(ix) for the taxable year.
Section 1.6038A-2(b)(7)(ix) requires a
taxpayer subject to the BEAT to report
on Form 8991 (Tax on Base Erosion Pay-
ments of Taxpayers with Substantial Gross
Receipts) the aggregate amount of QDPs
for the taxable year and make a represen-
tation that all payments satisfy the require-
ments of §1.59A-6(b)(2). If a taxpayer
fails to satisfy the reporting requirements
of §1.59A-6(b)(2)(i) with respect to any
payments, §1.59A-6(b)(2)(ii) (the report-
ing failure exclusion) provides that those
payments are not eligible for the QDP
exception described in §1.59A-3(b)(3)
(ii) and are base erosion payments unless
another exception applies.
Section 1.6038A-2(b)(7)(ix) applies to
taxable years beginning on or after June
7, 2021. Section 1.6038A-2(g). Before
§1.6038A-2(b)(7)(ix) is applicable (the
“transition period”), a taxpayer is treated
as satisfying the QDP reporting require-
ments to the extent that the taxpayer
reports the aggregate amount of QDPs on
Form 8991, Schedule A, provided that the
taxpayer reports this amount in good faith.
See §1.59A-6(b)(2)(iv) and §1.6038A-
2(g).
In Notice 2022-30, 2022-28 I.R.B.
70, the Treasury Department and the IRS
announced the intention to extend the tran-
sition period through taxable years begin-
ning on or after January 1, 2025, while the
Treasury Department and the IRS study
the interaction of the QDP exception, the
BEAT netting rule in §1.59A-2(e)(3)(vi),
and the QDP reporting requirements in
§§1.59A-6 and 1.6038A-2(b)(7)(ix). The
Treasury Department and the IRS have
not yet issued regulations amending the
applicability date of §1.6038A-2(g). The
Treasury Department and the IRS con-
tinue to study these provisions and have
determined that it is appropriate to further
extend the transition period.
III. AMENDED APPLICABILITY
DATE
The Treasury Department and the IRS
intend to amend §1.6038A-2(g) to pro-
vide that §1.6038A-2(b)(7)(ix) will apply
to taxable years beginning on or after Jan-
uary 1, 2027. Until §1.6038A-2(b)(7)(ix)
applies, the rules described in §1.59A-
6(b)(2)(iv) that apply during the transition
period will continue to apply.
IV. TAXPAYER RELIANCE
Taxpayers may rely on the provisions
of this Notice before the issuance of
the amendments to the final regulations
described in section III of this Notice.
V. EFFECT ON OTHER
DOCUMENTS
Notice 2022-30 is modified, and as so
modified, is superseded.
VI. DRAFTING INFORMATION
The principal author of this notice
is Sheila Ramaswamy of the Office of
Associate Chief Counsel (International).
For further information regarding this
notice contact Sheila Ramaswamy at (202)
317-6938 (not a toll-free number).
Extension of the Phase-in
Period for the Enforcement
and Administration of
Section 871(m)
Notice 2024-44
I. PURPOSE
This Notice provides taxpayers with
additional guidance for complying with
the final regulations with respect to div-
idend equivalents under sections 871(m),
1441, 1461, and 1473 of the Internal
Revenue Code (the Code) (collectively
referred to as the section 871(m) regula-
tions) in 2025,
1
2026, and 2027. Specifi-
cally, this Notice extends the transition
relief provided in Notice 2022-37, 2022-
37 I.R.B. 234, for two years, as described
in more detail below. The Department of
the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) intend
to amend the section 871(m) regulations
to delay the effective/applicability date of
certain rules in those final regulations.
The anti-abuse rule provided in §1.871-
15(o) will continue to apply during the
phase-in years described in this Notice.
As a result, a transaction that would not
otherwise be treated as a section 871(m)
transaction (including as a result of this
Notice) may be a section 871(m) transac-
tion under §1.871-15(o).
2

1
Unless otherwise provided, all references to years refer to calendar years.
2
The terms used in this Notice have the meanings provided in the section 871(m) regulations.

June 17, 2024 1738 Bulletin No. 2024–25
II. BACKGROUND
On June 14, 2010, the Treasury
Department and the IRS published Notice
2010-46, which addresses potential over-
withholding in the context of securities
lending and sale-repurchase agreements.
Notice 2010-46 provides a two-part solu-
tion to the problem of overwithholding on
a chain of dividends and dividend equiva-
lents. First, it provides an exception from
withholding for payments to a qualified
securities lender (QSL). Second, it pro-
vides a proposed framework to credit for-
ward prior withholding on a chain of sub-
stitute dividends paid pursuant to a chain
of securities loans or stock repurchase
agreements. The QSL regime requires
a person that agrees to act as a QSL to
comply with certain withholding and doc-
umentation requirements. The Treasury
Department and the IRS permitted with-
holding agents to rely on transition rules
described in Notice 2010-46, Part III,
until guidance was developed that would
include documentation and substantiation
of withholding.
On September 18, 2015, the Federal
Register published final regulations and
temporary regulations (TD 9734, 80 FR
56866) (2015 final regulations and 2015
temporary regulations, respectively). The
2015 final regulations finalized a portion
of a 2013 notice of proposed rulemak-
ing (78 FR 73128). The 2015 temporary
regulations were based on comments
received with respect to the 2013 notice
of proposed rulemaking and were accom-
panied by a notice of proposed rulemak-
ing cross-referencing the 2015 temporary
regulations (80 FR 56415). The Treasury
Department and the IRS stated in the
preamble to the 2015 temporary regula-
tions that the final qualified derivatives
dealer (“QDD”) regulations would sup-
plant the proposed regulatory framework
described in Notice 2010-46. 80 FR at
56878.
On July 18, 2016, the Treasury Depart-
ment and the IRS published Notice 2016-
42, 2016-29 I.R.B. 67, which contained
the proposed qualified intermediary agree-
ment (QI Agreement) that included provi-
sions relating to the QDD regime and reit-
erated the intent to replace the proposed
regulatory framework described in Notice
2010-46 with the QDD regime.
On December 19, 2016, the Treasury
Department and the IRS published Notice
2016-76, which provided for the phased-in
application of certain provisions of the
section 871(m) regulations to allow for
the orderly implementation of those final
regulations and announced that taxpayers
may continue to rely on Notice 2010-46
until January 1, 2018.
On January 17, 2017, the Treasury
Department and the IRS published Rev-
enue Procedure 2017-15, 2017-3 I.R.B.
437, which sets forth the final QI Agree-
ment (2017 QI Agreement), including the
requirements and obligations applicable to
QDDs, and provided that taxpayers may
continue to rely on Notice 2010-46 during
2017. The 2017 QI Agreement expired on
December 31, 2022.
On January 24, 2017, the Federal
Register published final regulations and
temporary regulations (TD 9815, 82 FR
8144) (2017 final regulations and 2017
temporary regulations, respectively, and
together, the 2017 regulations). The 2017
final regulations finalized the 2015 notice
of proposed rulemaking (80 FR 56415)
that was issued in conjunction with the
2015 temporary regulations. On the same
day, the Federal Register also published
a notice of proposed rulemaking cross-ref-
erencing the 2017 temporary regulations
(82 FR 8172), with correcting amend-
ments published in the Federal Regis-
ter on October 26, 2017 (82 FR 49508)
(together, the 2017 proposed regulations).
The effective/applicability dates in
the 2017 regulations reflect the phased-in
application described in Notice 2016-
76. See Treas. Reg. §1.871-15(r). Also,
consistent with Notice 2016-76 and
other announcements, the “Effect on
Other Documents” section of the pre-
amble to the 2017 regulations obsoleted
Notice 2010-46 as of January 1, 2018. In
response to a comment requesting that the
QSL regime remain, the preamble to the
2017 regulations noted that “[w]hile the
Treasury Department and the IRS under-
stand that the QSL regime was administra-
tively more convenient for taxpayers than
the QI regime, it created administrability
problems, particularly with respect to ver-
ification, for the IRS. That regime is being
replaced by incorporating the QDD rules
into the existing QI framework, including
the specific rules for pooled reporting on
Form 1042-S, and the QI requirements for
compliance review and certification.” 82
FR at 8153.
On August 21, 2017, the Treasury
Department and the IRS published Notice
2017-42, 2017-34 I.R.B. 212, which
extended certain transition relief.
On February 5, 2018, the Treasury
Department and the IRS published Notice
2018-5, 2018-6 I.R.B. 341, which permit-
ted withholding agents to apply the tran-
sition rules from Notice 2010-46 in 2018
and 2019.
On October 1, 2018, the Treasury
Department and the IRS published Notice
2018-72, 2018-40 I.R.B. 522, which fur-
ther extended certain transition relief and
permitted withholding agents to apply the
transition rules from Notice 2010-46 in
2020.
On December 17, 2019, the Federal
Register published final regulations (TD
9887, 84 FR 68790), which finalized the
2017 proposed regulations.
On January 13, 2020, the Treasury
Department and the IRS published
Notice 2020-2, 2020-3 I.R.B. 327, which
extended the phase-in period described in
Notice 2018-72 through 2022.
On September 12, 2022, the Treasury
Department and the IRS published Notice
2022-37, 2022-37 I.R.B. 234, which
extended the phase-in period described in
Notice 2020-2 through 2024.
On December 27, 2022, the Treasury
Department and the IRS published Rev-
enue Procedure 2022-43, 2022-52 I.R.B.
570, which sets forth the new QI Agree-
ment (2023 QI Agreement), including the
requirements and obligations applicable
to QDDs and the relevant transition rules
for the phase-in period in Notice 2022-37
applicable to QDDs and to QIs acting as
QSLs in 2023 and 2024.
This Notice further extends the
phase-in period described in Notice 2022-
37 through 2026.
The Treasury Department and the IRS
continue to evaluate the section 871(m)
regulations and will take into account
comments already received, and welcome
any additional comments regarding tax
policy considerations, legal authority for,
and the IRS administrative feasibility of
any suggested modifications to the section
871(m) regulations. The Treasury Depart-
ment and the IRS intend to provide suffi-

Bulletin No. 2024–25 1739 June 17, 2024
cient time for taxpayers and withholding
agents to implement any changes to the
section 871(m) regulations.
III. EXTENSION OF THE PHASE-IN
YEAR FOR DELTA-ONE AND NON-
DELTA-ONE TRANSACTIONS
This section describes the extension
to the phased-in application of the sec-
tion 871(m) regulations to delta-one and
non-delta-one transactions. This Notice
does not apply to any transaction that is
a section 871(m) transaction pursuant to
§1.871-15(d)(1) (providing that before
January 1, 2017, a notional principal con-
tract (NPC) is a specified NPC if certain
factors are present).
The Treasury Department and the IRS
have determined that it is appropriate for
taxpayers and withholding agents to delay
the implementation of certain provisions
in the section 871(m) regulations for non-
delta-one transactions, including transac-
tions that are combined transactions under
§1.871-15(n). Therefore, the Treasury
Department and the IRS intend to revise
the effective/applicability date for §1.871-
15(d)(2) and (e) to provide that these rules
will not apply to any payment made with
respect to any non-delta-one transaction
issued before January 1, 2027. As noted
in Part I of this Notice, the anti-abuse rule
continues to apply to the phased-in appli-
cation of the section 871(m) regulations,
including for the purpose of determining
whether a transaction is a delta-one trans-
action.
Notice 2016-76 provided that the IRS
will take into account the extent to which
the taxpayer or withholding agent made
a good faith effort to comply with the
section 871(m) regulations with respect
to delta-one transactions in 2017 and
non-delta-one transactions in 2018 when
it enforces the section 871(m) regula-
tions. As a result of extensions in Notice
2017-42, Notice 2018-72, Notice 2020-2,
and Notice 2022-37 (together, the Prior
Notices), the good faith effort standard
applies to (1) any delta-one transaction in
2017 through 2024, and (2) any non-del-
ta-one transaction that is a section 871(m)
transaction pursuant to §1.871-15(d)(2) or
(e) in 2025. This Notice further extends
the periods during which the enforcement
standards provided by Notice 2022-37
will apply. Consistent with this extension,
the IRS will take into account the extent to
which the taxpayer or withholding agent
made a good faith effort to comply with
the section 871(m) regulations in enforc-
ing the section 871(m) regulations for (1)
any delta-one transaction in 2017 through
2026, and (2) any non-delta-one transac-
tion that is a section 871(m) transaction
pursuant to §1.871-15(d)(2) or (e) in 2027.
Similarly, for purposes of the IRS’s
enforcement and administration of the
QDD rules in the section 871(m) regula-
tions and the relevant provisions of the
2023 QI Agreement, this Notice extends
through 2026 the period during which the
IRS will take into account the extent to
which the QDD made a good faith effort
to comply with the section 871(m) regu-
lations and the relevant provisions of the
2023 QI Agreement. In addition, the IRS
will consider a QDD to satisfy the obli-
gations that apply specifically to a QDD
under its 2023 QI Agreement for years
before 2027 provided that the QDD makes
a good faith effort to comply with the rel-
evant provisions of the 2023 QI Agree-
ment, to the extent applicable to the QDD.
IV. EXTENSION OF THE
SIMPLIFIED STANDARD FOR
DETERMINING WHETHER
TRANSACTIONS ARE COMBINED
TRANSACTIONS
Notice 2016-76 and the Prior Notices
provided a simplified standard for with-
holding agents to determine whether trans-
actions are combined transactions entered
into in 2017 through 2024. Specifically, a
withholding agent is required to combine
transactions entered into in those years
for purposes of determining whether the
transactions are section 871(m) transac-
tions only when the transactions are over-
the-counter transactions that are priced,
marketed, or sold in connection with each
other. Withholding agents are not required
to combine any transactions that are listed
securities entered into in those years.
This Notice further extends the period
during which this simplified standard for
combined transactions applies to include
2025 and 2026. Transactions that are
entered into in 2017 through 2026 that
are combined under this simplified stan-
dard will continue to be treated as com-
bined transactions for future years and
will not cease to be combined transactions
as a result of applying §1.871-15(n) or
disposing of less than all of the potential
section 871(m) transactions that are com-
bined under this rule. Transactions that are
entered into in 2017 through 2026 that are
not combined under this simplified stan-
dard will not become combined transac-
tions as a result of applying §1.871-15(n)
to these transactions in future years, unless
a reissuance or other event causes the
transactions to be retested to determine
whether they are section 871(m) trans-
actions. See §1.871-15(g)(2) (providing
that the delta of a potential section 871(m)
transaction generally is determined on the
earlier of when the transaction is (1) priced
or (2) issued); see also §1.871-15(a)(6)
(defining the term “issue” to include “an
issuance as a result of a deemed exchange
pursuant to section 1001”). This simpli-
fied standard applies only to withholding
agents and does not apply to taxpayers
that are long parties to potential section
871(m) transactions. As noted in Part I of
this Notice, the anti-abuse rule continues
to apply to the phased-in application of the
section 871(m) regulations, including for
the purpose of determining whether multi-
ple transactions should be combined.
V. EXTENSION OF PHASE-
IN RELIEF FOR QUALIFIED
DERIVATIVES DEALERS
Section 1.871-15T(q)(1) of the 2015
temporary regulations provided that when
a QDD received a dividend or dividend
equivalent payment and the QDD was
contractually obligated to make an offset-
ting dividend equivalent payment on the
same underlying security in an amount
that was less than the dividend and div-
idend equivalent amount received, the
QDD would be liable for tax under section
871(a) or section 881 for the difference.
The 2015 final regulations provided that
a withholding agent who made a payment
of a dividend to a qualified intermediary
acting as a QDD was not required to with-
hold on that payment if the withholding
agent reliably associated the payment with
a valid qualified intermediary withholding
form containing a certification described
in §1.1441-1(e)(3)(ii)(E). See §1.1441-
1(b)(4)(xxii) of the 2015 final regulations.

June 17, 2024 1740 Bulletin No. 2024–25
Comments requested that the Treasury
Department and the IRS adopt a different
method of determining a QDD’s tax liabil-
ity. Those comments generally requested
that this method be based on the QDD’s
net delta exposure for each underlying
security. The Treasury Department and
the IRS agreed that the net delta exposure
method was an administrable and accurate
method for a QDD to determine its resid-
ual exposure to underlying securities, and
the 2017 final regulations adopted the net
delta exposure method.
In adopting the net delta exposure
method, the Treasury Department and the
IRS were concerned that the exemption
from withholding on dividends paid to a
QDD, when combined with the net delta
exposure method, could result in U.S.
source dividends escaping U.S. tax com-
pletely in certain circumstances. There-
fore, the 2017 final regulations revised
§§1.871-15(q)(1) and 1.1441-1(b)(4)
(xxii) to provide that a QDD remains liable
for tax under section 881(a)(1) and subject
to withholding under chapters 3 and 4 on
dividends. However, to allow taxpayers
time to implement the net delta exposure
method, the 2017 QI Agreement and the
2017 final regulations provided that div-
idends and dividend equivalents received
by a QDD in its equity derivatives dealer
capacity in 2017 would not be subject to
tax under section 881(a)(1) or subject to
withholding under chapters 3 and 4.
The Prior Notices announced that the
Treasury Department and the IRS intend
to amend §§1.871-15(q)(1) and (r)(3), and
1.1441-1(b)(4)(xxii)(C) to provide that a
QDD will not be subject to tax on divi-
dends and dividend equivalents received
in 2017 through 2024 in its equity deriv-
atives dealer capacity or withholding on
those dividends (including deemed div-
idends). This Notice announces that the
Treasury Department and the IRS intend
to amend those provisions to provide that
a QDD will not be subject to tax on div-
idends and dividend equivalents received
in 2025 and 2026 in its equity derivatives
dealer capacity or withholding on those
dividends (including deemed dividends)
as well.
Section 4.01(1) of Rev. Proc. 2017-15
provided that a QDD would be required
to compute its section 871(m) amount
using the net delta exposure method
beginning in 2018. The Prior Notices pro-
vided that a QDD would be required to
compute its section 871(m) amount using
the net delta exposure method beginning
in 2025. The 2023 QI Agreement retains
this rule in section 3.09(A). This Notice
provides that a QDD will be required to
compute its section 871(m) amount using
the net delta exposure method beginning
in 2027.
A QDD will remain liable for tax under
section 881(a)(1) on dividends and divi-
dend equivalents that it receives in any
capacity other than as an equity deriva-
tives dealer, and on any other U.S. source
FDAP payments that it receives (whether
or not in its equity derivatives dealer
capacity). In addition, a QDD is respon-
sible for withholding on dividend equiva-
lents it pays to a foreign person on a sec-
tion 871(m) transaction, whether acting in
its capacity as an equity derivatives dealer
or otherwise.
Finally, section 10.01(C) of the 2017
QI Agreement provided that: “For calen-
dar year 2017, a QDD is not required to
perform a periodic review with respect to
its QDD activities (as otherwise required
by section 10.04 of this Agreement) or
provide the factual information specified
in Appendix I.” The Prior Notices pro-
vided that a QDD is not required to per-
form a periodic review with respect to its
QDD activities for 2017 through 2024.
Section 10.01(C) of the 2023 QI Agree-
ment provides that: “For calendar years
2023 and 2024, a QDD is not required to
perform a periodic review with respect to
its QDD activities (as otherwise required
by section 10.04 of this Agreement) or
provide factual information in Appen-
dix I with respect to its QDD activities.”
This Notice provides that a QDD is not
required to perform a periodic review or
provide factual information in Appendix
I with respect to its QDD activities for
2025 or 2026. The Treasury Department
and the IRS will consider incorporating
into the 2023 QI Agreement the waiver
of a QDD’s periodic review and the other
transitional provisions for QDDs for 2025
and 2026.
VI. EXTENSION OF TRANSITION
RULES FROM NOTICE 2010-46
Notice 2018-5, Notice 2018-72, Notice
2020-2, and Notice 2022-37 provided
that notwithstanding the preamble to the
2017 regulations, withholding agents may
apply the QSL transition rules described
in Notice 2010-46, Part III, for payments
made in 2018 through 2024. This Notice
provides that withholding agents may also
apply the QSL transition rules described
in Notice 2010-46, Part III, for payments
made in 2025 and 2026.
VII. TAXPAYER RELIANCE
Before the promulgation of the amend-
ments to the section 871(m) regulations or
the issuance of other guidance, taxpayers
and withholding agents (including QIs
for purposes of the 2023 QI Agreement)
may rely on the provisions of this Notice
regarding the proposed amendments
described in sections III and V. Withhold-
ing agents may rely on the simplified stan-
dard for determining whether transactions
are combined transactions as described in
section IV and may apply the QSL transi-
tion rules described in section VI.
VIII. DRAFTING INFORMATION
The principal authors of this Notice
are Karen Walny and Peter Merkel of the
Office of Associate Chief Counsel (Inter-
national). For further information regard-
ing this Notice, contact Karen Walny or
Peter Merkel at (202) 317-6938 (not a
toll-free number).

Bulletin No. 2024–25 1741 June 17, 2024
Part IV
Low-Income Communities
Bonus Credit Program
Unallocated Environmental
Justice Solar and Wind
Capacity Limitation
Carryover from the 2023
Program Year to the 2024
Program Year
Announcement 2024-25
This announcement provides the total
amount of unallocated environmental
justice solar and wind capacity limitation
(Capacity Limitation) for the Low-Income
Communities Bonus Credit Program (Pro-
gram) under § 48(e) of the Internal Reve-
nue Code and § 1.48(e)-1 of the Income
Tax Regulations that has been carried
over from the 2023 Program year to the
2024 Program year. Additionally, this
announcement sets forth the distribution
of the carried over Capacity Limitation
among the facility categories, category 1
sub-reservations, and application options
for the 2024 Program year.
Because the annual Capacity Limita-
tion for the 2023 Program year exceeds
the amount of Capacity Limitation allo-
cated in that Program year, the excess is
carried over to the 2024 Program year
and increases the Capacity Limitation
available for allocation in the 2024 Pro-
gram year under § 48(e)(4)(D). The total
amount of unallocated Capacity Lim-
itation from the 2023 Program year is
324.785 megawatts (MW). This amount
is distributed as follows for the 2024 Pro-
gram year:
Category, Category 1 sub-reservation, or application option Carried over Capacity Limitation amount
Category 1: Located in a Low-Income Community, Eligible Resi-
dential Behind-the-Meter (BTM)
1
Sub-Reservation, Non-Additional
Selection Criteria Application Option
50 MW
Category 1: Located in a Low-Income Community, Eligible Residen-
tial Behind-the-Meter
2
Sub-Reservation, Additional Selection Criteria
Application Option
50 MW
Category 1: Located in a Low-Income Community, Other Facilities
3

Sub-Reservation, Additional Selection Criteria Application Option
100 MW
Category 3: Qualified Low-Income Residential Building Project, Addi-
tional Selection Criteria Application Option
24.785 MW
Category 4: Low-Income Economic Benefit Project, Additional Selec-
tion Criteria Application Option
100 MW
TOTAL324.785 MW
The above table reflects only the dis-
tribution of the carried over unallocated
Capacity Limitation for the 2023 Program
year among the facility categories, cate-
gory 1 sub-reservations, and application
options to which unallocated 2023 Pro-
gram year Capacity Limitation has been
assigned in the 2024 Program year. Rev.
Proc. 2024-19, 2024-16 I.R.B. 899, pro-
vided the distribution for the 2024 Pro-
gram year of the 1.8 gigawatts of annual
Capacity Limitation.
DRAFTING INFORMATION
The principal author of this announce-
ment is the Office of Associate Chief
Counsel (Passthroughs & Special Indus-
tries). However, other personnel from
the Treasury Department and the IRS par-
ticipated in its development. For further
information regarding this announcement,
call the energy security guidance contact
number at (202) 317-5254 (not a toll-free
number).
1
Eligible residential BTM facilities are described in § 1.48(e)-1(i)(2)(ii).
2
Eligible residential BTM facilities are described in § 1.48(e)-1(i)(2)(ii).
3
Other facilities are front of the meter facilities described in § 1.48(e)-1(i)(2)(iii) as well as non-residential BTM facilities that meet the requirements of § 1.48(e)-1(i)(2)(i).

June 17, 2024 1742 Bulletin No. 2024–25
Notice of Proposed
Rulemaking
Interest Capitalization
Requirements for
Improvements to
Designated Property
REG-133850-13
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains
proposed regulations that would remove
the associated property rule and similar
rules from the existing regulations on the
interest capitalization requirements for
improvements to designated property.
In addition, this document contains pro-
posed regulations that would modify the
definition of “improvement” for purposes
of applying those existing regulations.
Lastly, this document contains proposed
regulations that would modify other rules
in those existing regulations in light of the
proposed removal of the associated prop-
erty rule. The proposed regulations would
affect taxpayers making improvements
to real or tangible personal property that
constitute the production of designated
property.
DATES: Written or electronic comments
and requests for a public hearing must be
received by July 15, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at https://www.regulations.gov
(indicate IRS and REG-133850-13) by
following the online instructions for sub-
mitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submit-
ted to the Federal eRulemaking Portal,
comments cannot be edited or withdrawn.
The Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments submit-
ted to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG-
133850-13), room 5203, Internal Revenue
Service, P.O. Box 7604, Ben Franklin Sta-
tion, Washington, D.C. 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Livia Piccolo of the Office of
Associate Chief Counsel (Income Tax and
Accounting), at (202) 317-7007; concern-
ing submissions of comments or a public
hearing, Vivian Hayes, (202) 317-6901
(not toll-free numbers) or by email at pub-
lichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This document proposes amendments
to § 1.263A-11(e)(1)(ii) and (iii) of the
Income Tax Regulations (26 CFR part
1) to remove the “associated property
rule” and similar rules from the interest
capitalization requirements for improve-
ments that constitute the production of
property under section 263A(f) of the
Internal Revenue Code (Code). In addi-
tion, this document proposes amend-
ments to § 1.263A-11(f) to clarify that
§ 1.263A-11(f) applies only to property
purchased and further produced before it
is placed in service. Finally, this docu-
ment proposes to amend § 1.263A-8(d)(3)
to update the definition of “improvement”
so that it is consistent with the definition
of “improvement”, including the excep-
tions, safe harbors, and elections provided
under § 1.263(a)-3.
Sections 263A(a) and (b) of the Code
generally require the capitalization of
direct and indirect costs of real or tangi-
ble personal property produced by the
taxpayer. Under section 263A(g)(1) and
§ 1.263A-8(d)(3), the term “produce”
includes “improve.”
Section 263A(f) contains rules for
capitalizing interest with respect to cer-
tain property produced by the taxpayer
and for determining the amount of inter-
est required to be capitalized. In general,
section 263A(f)(1) limits capitalization
to interest that is paid or incurred during
the production period and that is allocable
to real property or certain tangible per-
sonal property produced by the taxpayer,
referred to as “designated property” in the
section 263A regulations. See § 1.263A-
8(b)(1). Under section 263A(f)(2)(A),
in determining the amount of interest
required to be capitalized to any property,
(i) interest on any indebtedness directly
attributable to production expenditures
with respect to the property is assigned to
the property, and (ii) interest on any other
indebtedness is assigned to the property to
the extent that the taxpayer’s interest cost
could have been reduced if production
expenditures not attributable to indebted-
ness described in clause (i) had not been
incurred (avoided cost method).
Section 1.263A-8(a) provides that tax-
payers must use the avoided cost method
described in § 1.263A-9 in determining
the amount of interest required to be cap-
italized with respect to the production of
designated property. Section 1.263A-9(a)
(1) explains that, under the avoided cost
method, any interest that the taxpayer the-
oretically would have avoided if accumu-
lated production expenditures (as defined
in § 1.263A-11) (APEs) had been used
to repay or reduce the taxpayer’s out-
standing debt must be capitalized. Under
§ 1.263A-11(a), APEs generally mean the
cumulative amount of direct and indirect
costs described in section 263A(a) that are
required to be capitalized with respect to a
unit of property.
Section 1.263A-9(c) provides that,
to the extent a taxpayer’s APEs exceed
traced debt (that is, debt that is allocated to
APEs with respect to the unit of property),
the general formula for determining the
amount of interest that must be capitalized
is the average excess expenditures multi-
plied by the weighted average interest rate
on the debt during the time the production
occurs. A larger base of production expen-
ditures leads to more interest capitalized.
Section 1.263A-11(e)(1)(i) provides
that, if an improvement constitutes the
production of designated property under
§ 1.263A-8(d)(3), APEs with respect to the
improvement consist of all direct and indi-
rect costs required to be capitalized with
respect to the improvement. In the case
of an improvement to a unit of real prop-
erty qualifying as the production of des-
ignated property under § 1.263A-8(d)(3),
§ 1.263A-11(e)(1)(ii) provides that APEs
include an allocable portion of the cost of

Bulletin No. 2024–25 1743 June 17, 2024
land, and for any measurement period, the
adjusted basis of any existing structure,
common feature, or other property that
is not placed in service, or must be tem-
porarily withdrawn from service to com-
plete the improvement (associated prop-
erty) during any part of the measurement
period if the associated property directly
benefits the property being improved, the
associated property directly benefits from
the improvement, or the improvement
was incurred by reason of the associated
property (associated property rule). In the
case of an improvement to a unit of tan-
gible personal property qualifying as the
production of designated property under
§ 1.263A-8(d)(3), § 1.263A-11(e)(1)(iii)
provides that APEs include the adjusted
basis of the asset being improved if that
asset either is not placed in service or must
be temporarily withdrawn from service to
complete the improvement.
Section 1.263A-12(a) explains that
under § 1.263A-9, a taxpayer must capi-
talize interest for computation periods that
include the production period of a unit of
designated property. In the case of prop-
erty produced for self-use, § 1.263A-12(d)
(1) generally provides that the produc-
tion period for a unit of property ends on
the date that the unit is placed in service
and all production activities reasonably
expected to be undertaken are completed.
In Dominion Resources, Inc. v. United
States, 681 F.3d 1313 (Fed. Cir. 2012),
the Federal Circuit invalidated the asso-
ciated property rule of § 1.263A-11(e)
(1)(ii)(B) for property temporarily with-
drawn from service. The court concluded
that the regulation was not a reasonable
interpretation of the avoided cost rule in
section 263A(f)(2)(A)(ii) and that it vio-
lated the State Farm requirement that the
Treasury Department and the IRS provide
a reasoned explanation for adopting a reg-
ulation. See Motor Vehicles Mfrs. Ass’n of
the United States, Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983).
The taxpayer in Dominion Resources
was a public utility that replaced coal
burners in two of its electric generating
plants. This action required the taxpayer
to temporarily withdraw the two electric
generating plants from service. During
that time, Dominion incurred interest
on debt unrelated to the improvements.
Dominion deducted some of that interest,
and the IRS disagreed with the taxpay-
er’s computations. The IRS argued that
pursuant to § 1.263A-11(e)(1)(ii)(B), the
taxpayer’s APEs should include the cost
of the improvements (that is, the amount
spent to replace the coal burners), as well
as the adjusted basis of the property tem-
porarily withdrawn from service to com-
plete the improvement (that is, the electric
generating plants).
The taxpayer and the IRS ultimately
reached a settlement agreement, pursuant
to which Dominion deducted 50 percent
and capitalized 50 percent of the disputed
amount. The taxpayer subsequently filed
a claim for refund, asserting that the entire
amount was deductible. The taxpayer
challenged the validity of § 1.263A-11(e)
(1)(ii)(B) as applied to its improvements.
In Dominion Resources, Inc. v. United
States, 97 Fed. Cl. 239 (Fed. Cl. 2011),
the United States Court of Federal Claims
upheld the validity of the associated prop-
erty rule and denied the taxpayer’s claim
for refund.
On appeal, the United States Court of
Appeals for the Federal Circuit (Federal
Circuit) reversed the lower court decision
and invalidated the associated property
rule of § 1.263A-11(e)(1)(ii)(B) for prop-
erty temporarily withdrawn from service.
The Federal Circuit explained that the
regulation “unreasonably links” the inter-
est capitalized when a taxpayer makes
an improvement to the adjusted basis of
the property temporarily withdrawn from
service to complete the improvement.
The court reasoned that to implement
the avoided cost principle, the interest to
be capitalized is the amount that could
have been avoided if funds had not been
expended for the improvement. How-
ever, the adjusted basis of the temporar-
ily withdrawn property does not represent
an “avoided” amount. The court found
that “[a] property owner does not expend
funds in an amount equal to the adjusted
basis [of the temporarily withdrawn prop-
erty] when making the improvement.
Instead, she expends funds in an amount
equal to the cost of the improvement
itself.” Dominion Resources, 681 F.3d
at 1318; see also S. Rep. No. 99-313, at
144 (1986) (interest to be capitalized is
the amount “that could have been avoided
if funds had not been expended for con-
struction.”); H.R. Rep. No. 99-426, at 628
(1985) (same). Thus, the court concluded
that the regulation contradicts the avoided
cost rule.
Section 1.263A-8(d)(3) provides that
any improvement to property described
in §1.263(a)-1(b) constitutes the produc-
tion of property. Final regulations under
sections 162 and 263(a) of the Code (TD
9636) were published in the Federal Reg-
ister (78 FR 57686) on September 19,
2013. The final regulations clarified the
definition of “improvement” and moved
the definition to § 1.263(a)-3. Section
1.263(a)-3 did not change the meaning of
the term “improvement” but synthesized
applicable case law and prior adminis-
trative rules into a framework to ease
determinations of whether a cost must
be capitalized as an improvement cost
or deducted as a repair and maintenance
expense. These final regulations also clar-
ified that a cost capitalized as an improve-
ment cost can include only the cost of
activities performed after the property is
placed in service. See § 1.263(a)-3(d).
Explanation of Provisions
The Treasury Department and the
IRS have considered the Federal Cir-
cuit’s opinion in Dominion Resources
and agree with its rationale. Under this
rationale, treating the adjusted basis of
any associated property that is temporar-
ily withdrawn from service to complete
the improvement as a component of APEs
contradicts the avoided cost rule because
the adjusted basis of the temporarily with-
drawn property does not represent an
“avoided” amount. Accordingly, these
proposed regulations would remove the
associated property rule at §1.263A-11(e)
(1)(ii)(B) (for improvements to real
property) and § 1.263A-11(e)(1)(iii) (for
improvements to tangible personal prop-
erty) for property temporarily withdrawn
from service. For similar reasons, these
proposed regulations would remove the
rule at § 1.263A-11(e)(1)(ii)(A) (APEs
with respect to an improvement to real
property includes an allocable portion of
the cost of land).
In Dominion Resources, the chal-
lenge to § 1.263A-11(e)(1)(ii)(B) applied
only to improvements to property “tem-
porarily withdrawn from service” and
not to improvements to property that is

June 17, 2024 1744 Bulletin No. 2024–25
“not placed in service.” However, the
Treasury Department and the IRS have
determined that the associated prop-
erty rule at §§ 1.263A-11(e)(1)(ii)(B)
and 1.263A-11(e)(1)(iii) for improve-
ments to property “not placed in service”
also should be removed because under
§ 1.263(a)-3(d), the definition of “improve-
ment” is limited to amounts paid for
activities performed after the property is
placed in service. Amounts paid for activ-
ities performed prior to the date that prop-
erty is placed in service are characterized
as acquisition or production costs (rather
than improvement costs) and are generally
capitalized under § 1.263(a)-2 and section
263A. See §§ 1.263(a)-2(d) and (c)(1). In
addition, the APE rules in § 1.263A-11(f)
already address a situation in which a tax-
payer incurs production costs with respect
to property that has not been placed in ser-
vice. Accordingly, these proposed regula-
tions would remove the associated prop-
erty rule at §§ 1.263A-11(e)(1)(ii)(B) and
1.263A-11(e)(1)(iii) for improvements to
property not placed in service.
Because these proposed regulations
would remove the associated property rule
at § 1.263A-11(e)(1)(ii)(B), the de mini-
mis rule of § 1.263A-11(e)(2) would be
irrelevant. Accordingly, these proposed
regulations also would remove this de
minimis rule.
As a result of the proposed amend-
ments to § 1.263A-11(e) to remove from
APEs the adjusted basis of associated real
property, the adjusted basis of associated
tangible personal property, and an alloca-
ble portion of the cost of the land when
the taxpayer makes an improvement, a
taxpayer would be required to include in
APEs only the direct and indirect costs of
the improvement itself.
The proposed regulations would not
change the substance of the rules in
§ 1.263A-11(f) concerning interest capi-
talized with respect to property purchased
and further produced before it is placed in
service. Section 1.263A-11(f) provides
that if a taxpayer purchases a unit of prop-
erty for further production, the taxpayer’s
APEs include the full purchase price of
the property plus additional direct and
indirect costs incurred by the taxpayer.
The Treasury Department and the
IRS considered whether the rules in
§ 1.263A-11(f) should be modified to
exclude the purchase price of such prop-
erty from the taxpayer’s APEs in light
of the holding in Dominion Resources.
That is, the Treasury Department and
the IRS considered whether the rationale
of Dominion Resources should apply to
situations in which a taxpayer purchases
property for further production prior to
placing the property in service. As noted
previously in the Background and this
Explanation of Provisions, the holding
in Dominion Resources was limited to
improvements to property “temporar-
ily withdrawn from service” and did not
address situations in which a taxpayer
purchases property for further production
prior to placing the property in service.
Further, unlike the cost of property that is
temporarily withdrawn from service to be
improved, the cost of property purchased
for further production prior to being
placed in service represents an “avoided”
amount under avoided cost principles
because the cost of such property is a
component cost of the original production
activity. In contrast, the cost of property
that is temporarily withdrawn from ser-
vice to be improved is not a component
cost of the subsequent production activ-
ity. Accordingly, these proposed regula-
tions would retain the substantive rules in
§ 1.263A-11(f). However, these proposed
regulations would modify § 1.263A-11(f)
to clarify that § 1.263A-11(f) applies only
to situations in which property is pur-
chased and further produced before the
property is placed in service.
The Treasury Department and the IRS
recognize that the proposed amendments
to remove from APEs the adjusted basis
of associated real property, the adjusted
basis of associated tangible personal prop-
erty, and an allocable portion of the cost
of the land when the taxpayer makes an
improvement may increase the potential
for abuse. For example, a taxpayer may
attempt to treat property produced for self-
use as having been placed in service (even
though the placed-in-service requirements
have not yet been met) and then attempt to
characterize subsequent production activ-
ities as an improvement, thereby improp-
erly excluding relevant costs from APEs.
Section 1.263A-12(d)(1) provides that in
the case of property produced for self-use,
the production period for a unit of prop-
erty does not end until the taxpayer places
the property in service and all produc-
tion activities reasonably expected to be
undertaken are completed. The proposed
regulations contain a cross-reference to
§ 1.263A-12(d)(1) to emphasize that tax-
payers must comply with the rules of that
section when determining whether the
production period has ended and therefore
whether the taxpayer’s production activi-
ties constitute an improvement.
The final regulations under sections
162 and 263(a), published in 2013, clar-
ify the definition of “improvement” and
change the specific citations for the defini-
tion. Specifically, § 1.263(a)-3 now gov-
erns the definition of “improvement” for
purposes of section 263(a). In addition,
§ 1.263(a)-3 includes certain exceptions,
safe harbors, and elections that may be
applied in determining whether certain
amounts must be treated as improve-
ment costs. The treatment afforded by
the application of § 1.263(a)-3, including
these exceptions, safe harbors, and elec-
tions, should also apply in determining
whether costs must be treated as improve-
ments for the computation of APEs for
section 263A interest capitalization pur-
poses. Accordingly, these proposed reg-
ulations would amend § 1.263A-8(d)(3)
to update the definition of “improvement”
so that it is consistent with the definition
of “improvement”, including the excep-
tions, safe harbors, and elections provided
under § 1.263(a)-3. Note, however, the
de minimis safe harbor election, as pro-
vided by § 1.263(a)-1(f), is not an election
under § 1.263(a)-3 and generally does
not apply to amounts paid for tangible
property subject to section 263A if these
amounts comprise the direct or allocable
indirect costs of other property produced
by the taxpayer. See § 1.263(a)-1(f)(3)(v).
Accordingly, the de minimis safe harbor
election under § 1.263(a)-1(f) generally
would not apply in determining whether
amounts should be included in the compu-
tation of APEs for interest capitalization
under section 263A.
Proposed Applicability Dates
These regulations are proposed to
apply to taxable years beginning after the
date that final regulations are published in
the Federal Register. However, taxpay-
ers may choose to apply these proposed

Bulletin No. 2024–25 1745 June 17, 2024
regulations for taxable years beginning
after May 15, 2024, and on or before the
date that final regulations are published in
the Federal Register.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
1. Collections of Information
These proposed regulations do not
impose additional recordkeeping or
reporting burden related to section 263A
for taxpayers. A change in a taxpay-
er’s treatment of interest to a method
consistent with §§ 1.263A-8(d)(3) and
1.263A-11(e) and (f), as applicable, is a
change in method of accounting to which
sections 446 and 481 apply. Taxpayers
change methods of accounting by filing
Form 3115 (OMB 1545-2070). For pur-
poses of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3507(d)) (PRA), the
reporting burden associated with Form
3115 will be reflected in the PRA submis-
sion for OMB 1545-2070, so no estimate
is provided here.
2. Burden Estimates
These regulations impose 0 hours and
$0 of additional recordkeeping or report-
ing burden related to section 263A for
taxpayers. Taxpayers who change their
accounting method based on the revised
requirements do so by filing Form 3115
(OMB 1545-2070). For purposes of the
PRA, the reporting burden associated with
Form 3115 will be reflected in the PRA
submission for OMB 1545-2070, so no
estimate is provided here.
Because businesses with gross receipts
of up to $25 million (as adjusted for infla-
tion pursuant to sections 263A(i) and
446(c)) are exempted from the require-
ment to capitalize costs, including inter-
est, under section 263A, businesses with
gross receipts in excess of $25 million
(as adjusted for inflation) are impacted
by these proposed regulations. Approx-
imately 30,000 taxpayers with gross
receipts in excess of $25 million (as
adjusted for inflation) reported that they
were subject to section 263A during the
past five years. This number is based upon
the number of taxpayers who reported
that they were subject to section 263A on
Forms 1120, 1125-A, and 4562.
It is estimated that no more than 1
percent of these businesses will make
improvements to real or tangible personal
property that constitute the production of
designated property for which a change
in accounting method will be made in
any one year. Therefore, it is estimated
that approximately 300 taxpayers may
be impacted by the changes in these pro-
posed regulations.
III. Regulatory Flexibility Act
Small business taxpayers, those with
gross receipts of up to $ 25 million (as
adjusted for inflation), are exempted
from the requirement to capitalize costs,
including interest, under section 263A.
Therefore, very few, if any, small busi-
ness taxpayers will be affected by these
proposed regulations. It is hereby certi-
fied that these proposed regulations will
not have a significant economic impact
on a substantial number of small entities
within the meaning of section 601(6) of
the Regulatory Flexibility Act (5 U.S.C.
chapter 6). The Treasury Department and
the IRS invite comments about the poten-
tial impacts of this proposed rule on small
entities.
Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
of the Office of Advocacy of the Small
Business Administration for comment on
its impact on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggre-
gate, or by the private sector, of $100
million (updated annually for inflation).
This proposed rule does not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector in excess of
that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Execu-
tive order. This proposed rule does not
have federalism implications and does
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS, as prescribed
in this preamble under the ADDRESSES
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed regulations. Any com-
ments will be made available at https://
www.regulations.gov or upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal Register.
Drafting Information
The principal author of these regula-
tions is Livia Piccolo of the Office of the
Associate Chief Counsel (Income Tax and
Accounting). However, other personnel

June 17, 2024 1746 Bulletin No. 2024–25
from the Treasury Department and IRS
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read, in part, as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
§ 1.263A-0 [Amended]
Par. 2. Section 1.263A-0 is amended
by removing the entries for § 1.263A-11(e)
(1) and (2).
Par. 3. Section 1.263A-8 is amended
by revising paragraph (d)(3)(i) to read as
follows:
§ 1.263A-8 Requirement to capitalize
interest.
* * * * *
(d) * * *
(3) Improvements to existing prop-
erty--(i) In general. Any improvement
to property owned by the taxpayer that
is treated as an improvement under
§ 1.263(a)-3 constitutes the production
of property. Generally, any improvement
to designated property constitutes the
production of designated property. An
improvement is not treated as the pro-
duction of designated property, however,
if the de minimis exception described in
paragraph (b)(4) of this section applies to
the improvement. Paragraph (d)(3)(iii)
of this section provides an exception for
certain improvements to tangible personal
property. In addition, improvements to
designated property under this paragraph
(d)(3)(i) do not include repairs and main-
tenance described in § 1.162-4(a).
* * * * *
Par. 4. Section 1.263A-11 is amended
by revising paragraphs (e) and (f) to read
as follows:
§ 1.263A-11 Accumulated production
expenditures.
* * * * *
(e) Improvements. If an improvement
constitutes the production of designated prop-
erty under § 1.263A-8(d)(3), accumulated
production expenditures with respect to the
improvement consist of all direct and indirect
costs required to be capitalized with respect
to the improvement. See § 1.263A-12(d)(1)
to determine when the production period for
a unit of property has ended.
(f) Mid-production purchases. If a tax-
payer purchases a unit of property for fur-
ther production before the purchased unit
of property is placed in service, the tax-
payer’s accumulated production expen-
ditures include the full purchase price of
the purchased unit of property plus all the
additional direct and indirect production
costs incurred by the taxpayer that are
required to be capitalized with respect to
the purchased unit of property.
* * * * *
Par. 5. Section 1.263A-15 is amended
by adding paragraph (a)(6) to read as fol-
lows:
§ 1.263A-15 Effective dates,
transitional rules, and anti-abuse rule.
(a) * * *
(6) Sections 1.263A-8(d)(3) and
1.263A-11(e) and (f) apply to taxable
years beginning after [DATE OF PUBLI-
CATION OF FINAL RULE]. A change
in a taxpayer’s treatment of interest to a
method consistent with §§ 1.263A-8(d)(3)
and 1.263A-11(e) and (f), as applicable,
is a change in method of accounting to
which sections 446 and 481 apply.
* * * * *
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register May 14,
2024, 8:45 a.m., and published in the issue of the
Federal Register for May 15, 2024, 89 FR 42404)

Bulletin No. 2024–25 i June 17, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

June 17, 2024 ii Bulletin No. 2024–25
Numerical Finding List
1
Bulletin 2024–25
Announcements:
2024-1, 2024-02 I.R.B. 363
2024-3, 2024-02 I.R.B. 364
2024-5, 2024-05 I.R.B. 635
2024-6, 2024-05 I.R.B. 635
2024-4, 2024-06 I.R.B. 665
2024-7, 2024-07 I.R.B. 673
2024-8, 2024-07 I.R.B. 674
2024-9, 2024-07 I.R.B. 675
2024-12, 2024-08 I.R.B. 676
2024-11, 2024-08 I.R.B. 683
2024-13, 2024-10 I.R.B. 710
2024-10, 2024-11 I.R.B. 711
2024-14, 2024-12 I.R.B. 719
2024-15, 2024-15 I.R.B. 876
2024-16, 2024-16 I.R.B. 909
2024-17, 2024-16 I.R.B. 932
2024-19, 2024-17 I.R.B. 950
2024-20, 2024-19 I.R.B. 1069
2024-18, 2024-21 I.R.B. 1234
2024-21, 2024-21 I.R.B. 1236
2024-22, 2024-24 I.R.B. 1673
2024-23, 2024-24 I.R.B. 1674
2024-24, 2024-24 I.R.B. 1675
2024-25, 2024-25 I.R.B. 1741
Notices:
2024-1, 2024-02 I.R.B. 314
2024-2, 2024-02 I.R.B. 316
2024-3, 2024-02 I.R.B. 338
2024-4, 2024-02 I.R.B. 343
2024-5, 2024-02 I.R.B. 347
2024-6, 2024-02 I.R.B. 348
2024-7, 2024-02 I.R.B. 355
2024-8, 2024-02 I.R.B. 356
2024-9, 2024-02 I.R.B. 358
2024-11, 2024-02 I.R.B. 360
2024-10, 2024-03 I.R.B. 406
2024-12, 2024-05 I.R.B. 616
2024-13, 2024-05 I.R.B. 618
2024-16, 2024-05 I.R.B. 622
2024-18, 2024-05 I.R.B. 625
2024-19, 2024-05 I.R.B. 627
2024-21, 2024-06 I.R.B. 659
2024-22, 2024-06 I.R.B. 662
2024-20, 2024-07 I.R.B. 668
2024-23, 2024-07 I.R.B. 672
2024-24, 2024-10 I.R.B. 707
2024-25, 2024-12 I.R.B. 712
2024-26, 2024-12 I.R.B. 713
2024-27, 2024-12 I.R.B. 715
2024-28, 2024-13 I.R.B. 720
2024-29, 2024-14 I.R.B. 751
Notices:—Continued
2024-31, 2024-15 I.R.B. 869
2024-30, 2024-16 I.R.B. 878
2024-32, 2024-16 I.R.B. 897
2024-33, 2024-18 I.R.B. 959
2024-34, 2024-18 I.R.B. 960
2024-35, 2024-19 I.R.B. 1051
2024-37, 2024-21 I.R.B. 1191
2024-38, 2024-21 I.R.B. 1211
2024-36, 2024-24 I.R.B. 1479
2024-39, 2024-24 I.R.B. 1611
2024-40, 2024-24 I.R.B. 1612
2024-41, 2024-24 I.R.B. 1615
2024-42, 2024-25 I.R.B. 1732
2024-43, 2024-25 I.R.B. 1737
2024-44, 2024-25 I.R.B. 1737
Proposed Regulations:
REG-118492-23, 2024-02 I.R.B. 366
REG-107423-23, 2024-03 I.R.B. 411
REG-121010-17, 2024-05 I.R.B. 636
REG-101552-24, 2024-13 I.R.B. 741
REG-117631-23, 2024-14 I.R.B. 754
REG-108761-22, 2024-16 I.R.B. 933
REG-117542-22, 2024-16 I.R.B. 942
REG-123379-22, 2024-16 I.R.B. 952
REG-115710-22, 2024-20 I.R.B. 1070
REG-118499-23, 2024-20 I.R.B. 1167
REG-117631-23, 2024-21 I.R.B. 1237
REG-124850-08, 2024-24 I.R.B. 1624
REG-133850-13, 2024-25 I.R.B. 1742
Revenue Procedures:
2024-1, 2024-01 I.R.B. 1
2024-2, 2024-01 I.R.B. 119
2024-3, 2024-01 I.R.B. 143
2024-4, 2024-01 I.R.B. 160
2024-5, 2024-01 I.R.B. 262
2024-7, 2024-01 I.R.B. 303
2024-8, 2024-04 I.R.B. 479
2024-9, 2024-05 I.R.B. 628
2024-12, 2024-09 I.R.B. 677
2024-13, 2024-09 I.R.B. 678
2024-14, 2024-09 I.R.B. 682
2024-15, 2024-12 I.R.B. 717
2024-11, 2024-13 I.R.B. 721
2024-17, 2024-15 I.R.B. 873
2024-18, 2024-15 I.R.B. 874
2024-19, 2024-16 I.R.B. 899
2024-20, 2024-19 I.R.B. 1053
2024-21, 2024-19 I.R.B. 1054
2024-24, 2024-21 I.R.B. 1214
2024-22, 2024-22 I.R.B. 1332
2024-25, 2024-22 I.R.B. 1333
2024-23, 2024-23 I.R.B. 1334
Revenue Rulings:
2024-1, 2024-02 I.R.B. 307
2024-2, 2024-02 I.R.B. 311
2024-3, 2024-06 I.R.B. 646
2024-5, 2024-07 I.R.B. 666
2024-4, 2024-10 I.R.B. 686
2024-6, 2024-10 I.R.B. 688
2024-7, 2024-14 I.R.B. 749
2024-8, 2024-16 I.R.B. 877
2024-9, 2024-19 I.R.B. 964
2024-10, 2024-22 I.R.B. 1240
2024-11, 2024-24 I.R.B. 1459
2024-12, 2024-25 I.R.B. 1677
Treasury Decisions:
9984, 2024-03 I.R.B. 386
9985, 2024-05 I.R.B. 573
9986, 2024-05 I.R.B. 610
9987, 2024-06 I.R.B. 648
9988, 2024-15 I.R.B. 794
9989, 2024-15 I.R.B. 850
9990, 2024-19 I.R.B. 966
9992, 2024-21 I.R.B. 1175
9995, 2024-22 I.R.B. 1241
9996, 2024-22 I.R.B. 1317
9993, 2024-25 I.R.B. 1679
9997, 2024-25 I.R.B. 1730
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 26, 2023.

Bulletin No. 2024–25 iii June 17, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–25
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 26, 2023.

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