Enabling a Seamless $500M+ §45X AMPC Transfer From Diligence to Close
Overview
A comprehensive overview of how Reunion facilitated a $500+ million transfer of §45X Advanced Manufacturing Production Credits between a top 25 US taxpayer and a publicly traded multinational manufacturing company.
$500M+
Credit Size
2024
Credit Year
§45X
Credit type
Blue Chip Deal Participants
Connecting a buyer seeking significant tax credits with a seller looking to monetize a large volume of §45X credits efficiently.
Buyer Profile
Publicly Traded
Fortune 500
Top 25 US taxpayer
Looking to close 2-3 tax credit transfers annually to offset significant portion of federal taxes
Preference to align timing with estimated tax payment dates
Seller Profile
Publicly Traded
Publicly traded multinational manufacturing company
Looking for a single buyer or small group of buyers to streamline time and expense of transaction
Willing to consider cost/benefit of payment timing vs credit price
Successful Transaction Outcomes
Negotiating a deal structure that allowed both parties to achieve outcomes aligned with their motivations.
Buyer: Economics & Risk
Publicly Traded
Fortune 500
Compelling Economics
Delayed payment terms for increased cash availability to offset tax payments prior to cash outlay
Large transaction size for considerable tax savings and increase in net income, which has compelling financial impact for the publicly traded buyer
Manageable Risk
Strong seller profile, with a long history of manufacturing and operational excellence.
Seller-provided indemnity from an investment grade entity to support the transaction.
Reunion’s robust due diligence process, helping the buyer gain comfort on qualification of eligible components for §45X credits and calculation of the credit amount
(Note: AMPCs carry no risk of Section 50 recapture)
Seller: Time Value of Money
Publicly Traded
Time Value of Money
Choosing credit transfer over direct pay due to improved certainty and timing of cash benefits
Higher net present value: faster payments under transferability would deliver a higher expected value after taking credit pricing and cost of capital into account
Competitive bid process resulting in one large and credit-worthy buyer leading to compelling price, streamlined negotiation and diligence process, and a fast and efficient transaction
Overall, predictable cash inflows and superior economics from transfer compared to direct pay
End-To-End Facilitation
Reunion supported the buyer from initial market intel to negotiation and due diligence, helping closing the $500M+ purchase
Market Intel & Commercial Negotiation
Technical Due Diligence
Commercial Due Diligence
Summary Memorandum
Market Intel & Commercial Negotiation
Aggregated market intel and pricing from similar transactions to support buyer in putting together a competitive bid package that was ultimately selected. Reunion's team then assisted buyer in negotiation of key commercial terms, including scope and sizing of indemnity.
Technical Due Diligence
Organized a site visit with a reputable independent engineer to validate that eligible components met technical specifications to qualify for §45X credits.
Commercial Due Diligence
Led due diligence of transactions that gave rise to AMPCs, with sampling to confirm support for:
• Production of eligible components after December 31, 2022, and
• Sale of eligible components during the applicable tax year in which the credit is reported as generated for sale.
Summary Memorandum
Prepared detailed summary memorandum to gain approval from buyer's executive team to purchase credits.
Spotlight: Due Diligence
Due to the complexity and level of required expertise, the buyer heavily relied on Reunion's diligence activities and summary memorandum to gain comfort and internal support for the deal.
Performed general corporate diligence, such as:
Confirmation of seller's state of domicile / good standing, federal tax treatment and filing deadlines, and relationship to its parent (guarantor)
Review of guarantor financials and credit ratings, and legal review of enforceability of the resulting guaranty
Confirmed qualification & structure for AMPCs, including:
Production activities in the U.S. by seller via review of satellite imagery of the facility's location, related lease agreements, and other publicly available documentation
All other qualification requirements under §45X including validation of technical specifications by an independent engineer
Resulting production and sales reports supportable by underlying sales/supply agreements
Sampling of applicable transactions supportable by documentary evidence such as purchase orders, invoices, and payment receipts
No sales to related parties, contract manufacturing agreements, or §48C credits through diligence inquiries and review of publicly available information
Amount of AMPCs verified:
Recalculated the resulting tax credits based on sales of eligible components during the applicable period with the appropriate tax credit rate to confirm clerical accuracy
§45X Due Diligence Guide
Navigating the complexities of §45X Advanced Manufacturing Production Credits requires specialized knowledge and a structured approach.
Our comprehensive due diligence guide covers:
- Major deal participants
- Seller/sponsor diligence
- Tax credit rates
- Qualification
- Structure
- Tax credit insurance
- Eligible components and critical minerals
Whether you're a buyer looking to purchase credits or a seller seeking to monetize your §45X credits, this guide will help you navigate the process with confidence.
Key Takeaways
Transfer payment terms can be mutually advantageous
Buyers can gain increased cash availability over tax payments while sellers can benefit from superior net present value compared to direct pay.
The right transaction parties make a difference
A large, credit-worthy buyer and a strong seller with history and access to investment grade indemnification made for a successful deal.
Robust due diligence is critical for both parties
Thorough verification of eligibility, production, and sales documentation provides confidence and reduces risk for all parties.
Additional Resources
Get your deal done with the industry-leading team that has facilitated $4.5B in tax credits transfers
.webp)