26 U.S.C. § 6418 — Transfer of certain credits

(a) General rule. An eligible taxpayer^* may elect to transfer all or a specified part of an eligible credit for a taxable year^* to an unrelated taxpayer, called the “transferee taxpayer.” The transferee, not the eligible taxpayer, is treated as the taxpayer for this title with respect to the transferred credit.
(b) Payment for transfer. The transferee’s consideration must be paid in cash. It is not gross income to the eligible taxpayer and is not deductible by the transferee under this title.
(c) Partnerships and S corporations. (1) If a partnership^* or S corporation^* directly holds the facility or property, and makes the election, consideration received is tax-exempt income under sections 705 and 1366, and each partner’s share is based on that partner’s share of the otherwise eligible credit for the year. (2) A partner^* or shareholder^* may not make the election for credit from property held directly by the partnership or S corporation^*.
(d) Year taken into account. The transferee takes the credit into account in its first taxable year ending with or after the eligible taxpayer’s taxable year for which the credit was determined.
(e) Election limits. (1) The election is due by the return due date, including extensions, but not before 180 days after enactment of this section, and is irrevocable. (2) A transferee may not transfer again a credit portion previously transferred to it under this section.
(f) Definitions. (1) “Eligible credit” means the section 30C credit portion treated as a section 38(b) credit; sections 45(a), 45Q(a), 45U(a), 45V(a), 45X(a), 45Y(a), 45Z(a), 48, 48C, and 48E credits; the small agri-biodiesel producer part of the section 40A credit; and no section 39 business-credit carryforward or carryback. For the section 45, 45Q, 45V, and 45Y credits, the election is separate for each facility and each year in the ten-year period beginning when the facility was first placed in service, or, for section 45Q, each year in the twelve-year period beginning when the equipment was first placed in service. (2) “Eligible taxpayer” means a taxpayer not described in section 6417(d)(1)(A); this section does not define that term.
(g) Special rules. (1) Before a transfer, the Secretary^* may require information, information returns, or registration needed to prevent duplication, fraud, improper payments, or excessive payments. (2) If a transferred credit is excessive, the transferee’s chapter 1 tax for the year of the decision increases by the excess plus 20 percent of it, even if it otherwise would not owe that tax. The 20 percent does not apply if reasonable cause is shown. The excess is the credit claimed minus the credit otherwise allowable without this section. (3) For transferred section 48, 48C, or 48E credits, section 50(c) applies to the investment property as if the credit were allowed to the eligible taxpayer. If the property is disposed of or stops being investment-credit property before the recapture period ends, the eligible taxpayer must notify the transferee, and the transferee must notify the eligible taxpayer of any recapture amount. (4) This section does not apply to amounts allowed under rules similar to former section 46(c)(4) and (d) for progress expenditures. (5) A credit under section 45Q, 45U, 45X, 45Y, 45Z, or 48E may not be transferred to a specified foreign entity, as defined in section 7701(a)(51)(B).
(h) Regulations. The Secretary must issue regulations or other guidance needed to carry out this section, including rules for partners’ shares^* of the tax-exempt income.