Final Transfer Regulations Issued by Treasury and IRS Regarding Transfer Election for Tax Credits under Section 6418 of the Internal Revenue Code

The Department of the Treasury and the Internal Revenue Service have issued final regulations regarding the transfer election for certain tax credits by eligible taxpayers under the Internal Revenue Code. The Final Transfer Regulations, released on April 25, 2024, largely mirror the temporary and proposed regulations from June 2023, with few changes made in response to taxpayer concerns and requests for clarifications.

Some key points from the Final Transfer Regulations include the allowance for corrections to numerical errors on tax returns, restrictions on cash payments and advance payments, and clarification on the timing of transfers. The regulations also address recapture liability, the application of Code section 469 limitations, and the distinction between vertical and horizontal slices of eligible credits.

Despite requests for more detailed guidance on documentation requirements and estimated tax payments, the preamble to the Final Transfer Regulations emphasized a facts and circumstances determination and due diligence responsibility on the part of transferee taxpayers. The regulations are set to take effect 60 days after publication in the Federal Register, expected on April 30, 2024.

Overall, the Final Transfer Regulations provide important guidance for eligible taxpayers looking to transfer tax credits and engage in transactions with unrelated taxpayers. Stay tuned for further analysis on the impact of these regulations, particularly on real estate investment trusts.