Recent U.S. Treasury Department and Internal Revenue Service (IRS) final regulations (T.D. 9993) outline the requirements for a buyer of certain clean energy credits. The statute allows eligible taxpayers, in a tax-free transfer, to exchange certain clean energy credits to a third party for cash so that businesses can take advantage of the incentives if they lack sufficient tax liability to fully utilize the credits themselves.Notably, the finalregulations treat the credits transferred to a buyer as passive activity credits. This restriction effectively precludes individuals and other non-corporate taxpayers from being able to utilize the credits, except to the extent that they have passive income.As a result, the buy-side market for these credits may be limited to C corporations that are not subject to the passive activity rules or other taxpayers with passive income.

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