How the individual AMT, passive activity rules, and the Corporate Alternative Minimum Tax (CAMT) affect buyers of transferred clean energy tax credits — and what it means for deal structuring.
Deal Star Research Brief — April 2026
Section 6418 of the Internal Revenue Code, enacted under the Inflation Reduction Act of 2022 (IRA), allows eligible taxpayers to elect to transfer all or a portion of eligible credits to unrelated taxpayers, with the transfer paid in cash and not included in the eligible taxpayer's gross income nor deductible by the transferee.
While this mechanism creates a robust market for clean energy tax credit monetization, transferee buyers face several Alternative Minimum Tax (AMT) limitations that can materially constrain their ability to fully utilize purchased credits.
The individual AMT is a parallel tax system that imposes a floor on federal tax liability. Some tax credits that reduce regular tax liability do not reduce AMT tax liability. For individual and non-corporate purchasers of 6418 credits, this creates a direct limitation: if the tentative minimum tax exceeds the regular tax, the AMT effectively erodes the value of purchased credits dollar-for-dollar.
Noncorporate taxpayers, personal service corporations, and closely-held corporations that receive a transferred IRA 2022 credit under Section 6418 must apply the rules under Sections 38 and 469, and are required to file Form 8582-CR or Form 8810 to calculate their total general business credit allowed from passive activities for the current year.
This is a significant practical constraint — purchased credits flow through the general business credit (GBC) framework and are therefore subject to the tentative minimum tax (TMT) limitation in Form 3800, Part I.
Among the most significant limitations for non-corporate buyers is the passive activity rule under IRC Section 469. Consistent with the proposed regulations, eligible credits purchased by a transferee are treated as related to a trade or business and thus subject to the passive activity limitation of IRC Section 469 in relevant situations.
Furthermore, the final regulations provide that a transferee cannot be considered an owner of the trade or business of the transferor so as to potentially qualify the purchased credits as non-passive by applying the "grouping" rules under Treasury Regulation Section 1.469-4(c), except in the limited situation where the transferee also owns an interest in that trade or business.
Practical Impact
Generally, this means transferees can only use purchased credits to offset passive income tax liability. Most taxpayers do not have passive income tax liability, as it generally does not include tax liability arising from most investment activities. This effectively limits the practical buyer universe for 6418 credits to large corporations with sufficient regular tax liability.
For corporate buyers, the more relevant AMT concern is the CAMT — a 15% minimum tax on Adjusted Financial Statement Income (AFSI) enacted under the IRA. Only "applicable corporations" are subject to the CAMT:
The good news for most corporate credit buyers is that the IRA specifically protected the value of transferred credits within the CAMT framework. In general, the proposed CAMT regulations work to ensure that the benefits afforded by the IRA with respect to energy credits are not undercut as a result of the application of the CAMT. Specifically:
Despite the protections above, CAMT liability can still limit credit utilization. General business credits — including transferable energy and manufacturing tax credits — can generally offset up to approximately 75% of a corporation's net income tax liability, inclusive of any CAMT liability.
In practice, this means that CAMT taxpayers have the opportunity to claim GBCs to reduce their liability, in essence converting GBCs into CAMT credits, which can be carried forward indefinitely but must be used after GBCs.
Deal Structuring Note
This "conversion" dynamic is critical: CAMT-subject buyers may find their ability to use purchased credits in the current year capped, with excess credits carried forward.
Clean energy and manufacturing tax credits — including when transferred — can be carried forward 22 years and carried back 3 years. This provides meaningful flexibility for buyers whose near-term regular tax liability is reduced by CAMT.
For buyers uncertain whether they qualify as "applicable corporations," the IRS has issued interim guidance. The interim simplified method (IRS Notice 2025-27) permits taxpayers to adjust AFSI to disregard certain financial statement amounts attributable to:
This is an important buyer diligence tool, as it may assist a corporation in confirming that 6418 credit purchases do not inadvertently push it over the CAMT threshold.
| Buyer Type | AMT Risk | Key Limitation |
|---|---|---|
| Individual / HNW | High | Passive activity rules; individual AMT; TMT in Form 3800 Part I |
| Closely-held C-Corp | Moderate–High | Passive activity rules apply; GBC offset cap |
| Large C-Corp (AFSI <$1B) | Low | No CAMT; standard GBC rules apply |
| Applicable Corporation (AFSI >$1B) | Moderate | CAMT at 15%; GBC limited to ~75% of net tax; excess converted to CAMT credits |
| S-Corp, REIT, RIC | N/A | Excluded from CAMT; passive activity rules still apply |
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