Six Tax Credit Takeaways from Analyzing 6,000 Public Company Filings

In the realm of energy tax credits, special rules apply to U.S. companies that are subject to the corporate minimum tax known as BEAT, or the Base Erosion and Anti-Abuse Tax.

Certain credits, namely "legacy" §45(a) production tax credits and §48 investment tax credits, are treated favorably under BEAT, whereby 80% of the credit value can be “added back” when calculating BEAT. Other energy credit types, including §45Y, §48E, §45Q and §45Z credits, are not treated favorably when calculating BEAT. 

There is some debate as to whether other credit types were intentionally excluded from favorable treatment. However, the current statute indicates that only §45 and §48 credits are treated favorably for BEAT taxpayers.

What is BEAT? Who is subject to it?

The Base Erosion and Anti-Abuse Tax (BEAT) was enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA) to prevent large multinational corporations from eroding their U.S. tax base by shifting profits to foreign affiliates.

BEAT applies to any corporation that meets two criteria:

1. Revenue threshold: Average annual gross receipts of at least $500 million over the preceding three years (measured at the consolidated global level, including foreign affiliates).
2. Base erosion percentage: At least 3% of total deductions come from payments to related foreign parties — such as royalties, interest, services fees, or depreciation on transferred assets. The threshold is 2% for banks and registered securities dealers.

Companies that meet both thresholds must calculate their BEAT liability every year. BEAT functions as a minimum tax: if a company's regular tax liability falls below the calculated BEAT level, then the company must pay the difference as a top-up.

The IRS’ most recent available data about BEAT is for the 2022 tax year. That year, there were 324 companies that owed BEAT – and had to “top-up” their regular tax liability. 

Explaining the BEAT Calculation through Key Terms

The following key terms help explain how BEAT is calculated:

• Base Erosion Payments: Tax-deductible payments made by a U.S. corporation to a related foreign affiliate. These payments are often used by multinational companies to shift profits out of the U.S., lowering their tax bill
• Regular Taxable Income: A company’s income, minus all eligible deductions (includes deductible Base Erosion Payments).
• Regular Tax Liability: A company’s Regular Taxable Income times the statutory 21% corporate tax rate.
• Regular Tax Liability After Credits: A company’s Regular Tax Liability  minus the full value of credits.
• Modified Taxable Income: MTI is the sum of Regular Taxable Income and an add-back of deductions associated with Base Erosion Payments to foreign-related parties.
• Preliminary BEAT: Modified Taxable Income x BEAT Tax Rate (10.5% in 2026 and subsequent years).
• Adjusted Tax Liability: Used for BEAT calculation purposes, an adjustment that takes “Regular Tax Liability After Credits,” then adds back 80% of the value of eligible credits.
• BEAT Payment Due: If the company’s preliminary BEAT is larger than its Adjusted Tax Liability, then the difference is the BEAT Payment Due. If the Adjusted Tax Liability is equal to or greater than the preliminary BEAT, then the company’s BEAT Payment Due is zero.

Now, let’s explore which specific tax credits still qualify for the add-back in 2026 and beyond.

How the OBBBA Protected Credits for Taxpayers Subject to BEAT

The One Big Beautiful Budget Act (OBBBA) introduced two adjustments that were advantageous in the context of BEAT and tax credits:

• Set the permanent BEAT rate at 10.5%: Prior to the OBBBA, the BEAT rate was projected to increase to 12.5%, which would have increased the number of companies impacted by BEAT.
• Made the tax credit add-back permanent: Since 2017, companies have been able to add back 80% of the value of certain tax credits to their Regular Tax Liability, to arrive at their Adjusted Tax Liability. The OBBBA made the add-back permanent, preserving the value of credits for BEAT taxpayers. 

BEAT-Friendly vs. BEAT-Unfriendly Credits

The OBBBA's add-back provision is narrowly defined. Under the amended §59A, "Applicable Section 38 Credits" eligible for the 80% add-back are limited to:

• The renewable electricity production credit determined under section 45(a)
• The investment credit determined under section 46, but only to the extent properly allocable to the energy credit determined under section 48

The low-income housing credit determined under section 42(a), which is not a transferable tax credit, is also eligible for the 80% add-back. 

However, the list does not include other credit types, such as the technology-neutral §45Y and §48E credits. The table below summarizes the BEAT treatment of the most commonly traded transferable credits.

Three Numerical Examples of BEAT

The following examples help illustrate how credit selection changes the outcome when BEAT is in play.

Let’s assume that the company has the following characteristics:

• $600M in Taxable Income
• $20M in deductions not attributable to Base Erosion Payments
• $80M in Base Erosion Payments to foreign affiliates
• Regular Taxable Income of $500M ($600M - $20M - $80M)
• Regular Tax Liability Before Credits, of $105M (21% x $500M)
• MTI of $580M ($500M + $80M)
• Preliminary BEAT of $60.9M (10.5% x $580M)

Example 1: No tax credit purchases

Based on the assumptions above, the Regular Tax Liability Before Credits is $105M, and the Preliminary BEAT calculation is $60.9M. Because $60.9M is less than $105M, there is no requirement to pay BEAT top-up tax.

Example 2: Purchase $75M in §45(a) PTCs — BEAT-Friendly

This time, the company purchases $75M in §45(a) legacy PTCs. Since this is a BEAT-friendly credit, the company can retain 80% of the credit in their calculation of Adjusted Tax Liability. 

Regular Tax Liability Before Credits is $105M.

Regular Tax Liability after Credits is $30M.

Adjusted Tax Liability is $90M, which is calculated by adding back 80% of the credit’s value ($60M, which is 80% of $75M) to Regular Tax Liability after Credits ($30M).

Adjusted Tax Liability ($90M) exceeds the Preliminary BEAT floor ($60.9M). Therefore, the company avoids BEAT and realizes the full $75M value of the tax credit. Their final tax liability is the Regular Tax Liability after Credits, or $30M.

Example 3: Purchase $75M in §45Z PTCs — BEAT-Unfriendly

This time, the company purchases $75M in §45Z in Clean Fuel Credits. Unfortunately, since this is not a BEAT-friendly credit, the company cannot add back any of the credit in their calculation of Adjusted Tax Liability. 

Regular Tax Liability before Credits is $105M.

Regular Tax Liability after Credits is $30M. 

Adjusted Tax Liability is also $30M, since credits cannot be added back.

Adjusted Tax Liability falls below the Preliminary BEAT of $60.9M, so BEAT is triggered and a top-up payment is required of $30.9M (calculated by “topping up” the $30M Adjusted Tax Liability to reach the $60.9M Preliminary BEAT level). 

Assume that the company paid $69M for the $75M transferable tax credit (a price of $0.92 per tax credit). The company only realized $44.1M ($75M - $30.9M) in tax savings for the current year, despite paying $69M.

Key Takeaways

BEAT-subject buyers should prioritize legacy §45(a) and §48 energy credits, which are treated favorably when calculating BEAT. The OBBBA preserved an 80% add-back for §45(a) and §48 credits only. Newer credits — §45Y, §48E, §45Z, §45Q, and others — do not benefit from this treatment.

Know your exposure before you transact. While only a few hundred companies may be subject to BEAT each year, many more approach thresholds that put them at risk. Companies with meaningful foreign affiliate payments should confirm their BEAT status before purchasing credits.

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This article — authored by Andy Moon and Denis Cook — was originally published in the May 4, 2026, issue of Tax Notes Federal.

A recent regulatory filing reveals one of the first publicly documented cases of the IRS recapturing transferable clean energy tax credits. More than $24 million in solar investment tax credits originally purchased by Missouri-based Enterprise Financial Services Corp. (EFSC) were recaptured because of a change in project ownership resulting from the seller’s bankruptcy. The case illustrates how transferable tax credits can encounter financial distress, and how comprehensive due diligence and risk management can ensure that buyers are made whole.

The Background

The Inflation Reduction Act created transferability, which has allowed banks and other corporations to access the economic benefits of energy tax credits without navigating the complexities of traditional tax equity. But transferability did not alter recapture rules. Certain transferable tax credits, namely section 48 and section 48E ITCs, remain subject to recapture under section 50(a) if the underlying clean energy project changes ownership or ceases to be investment credit property within five years of being placed in service.

While tax credit sellers typically agree to indemnify tax credit purchasers for any loss event including recapture, the liability ultimately rests with the purchaser. Purchasers of ITCs must carefully screen for and protect against recapture risk. With that said, IRS recapture of transferable credits is very rare. Given the high economic stakes, market participants take special care to avoid situations that could lead to a recapture event.

What Triggered Recapture for EFSC

In September 2024 EFSC executed a tax credit purchase agreement with Sunnova Energy, a residential solar developer. The tax credit purchase agreement covered about $6 million of ITCs from 2023 and $26.4 million of ITCs from 2024.

Less than 10 months later, in June 2025, Sunnova filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. The resulting liquidation of the underlying project assets triggered IRS recapture rules — not because the solar assets were physically impaired, but because the ownership change itself constituted a recapture event.

Importantly, the 2023 and 2024 ITCs that EFSC purchased were likely from projects wholly and directly owned by Sunnova. When Sunnova entered bankruptcy, creditors were able to force a change in asset ownership, thereby triggering recapture.

In contrast, buyers of Sunnova tax credits held in tax equity partnerships may not have been subject to recapture. Treasury regulations stipulate that changes of control that create recapture are borne at the partner level and allocated to the partner, as opposed to being borne by the partnership (shielding the impact to the tax credit purchaser). It is also possible that the tax equity partnerships had forbearance agreements in place to mitigate the risk of recapture.

EFSC was required to relinquish most of the previously claimed credits — a recapture of $24.1 million. The recapture was only partial because under section 50(a), the clawback percentage starts at 100 percent in year 1 and declines by 20 percentage points annually, reaching 20 percent in year 5. Because the underlying solar projects had been placed in service in 2023 and 2024 — EFSC and Sunnova are both calendar-year filers — the recapture percentage appropriately appears to have been between 60 percent and 80 percent.

In its financial records for the third quarter of 2025, EFSC recorded the $24.1 million recapture as a portion of its income tax expense for the quarter. This expense is captured in the entries in Figure 1, seen in the company’s consolidated financial summary from January.

The Mitigation

The tax credit purchases EFSC closed in 2024 included tax credit insurance, which covered recapture risk — a decision that worked out well for the corporation. Following the recapture, the company recognized approximately $32.1 million in anticipated insurance proceeds. These proceeds, highlighted in Figure 1, encompassed the $24.1 million value of the forfeited tax credit, as well as an additional $8 million to cover other costs. EFSC recorded the full $32.1 million insurance proceeds as non-interest income for the third quarter of 2025.

This amount was taxable, and the company characterized an $8 million portion as a tax expense related to the proceeds. The $24.1 million recapture event was therefore largely neutralized by the anticipated insurance payout and the taxes owed on it, as shown in the sequenced bars in Figure 2. In the company’s full-year 2025 results, EFSC management characterized the recapture event as nonrecurring and indicated that the insurance was expected to fully offset the economic impact.

Key Takeaways for Managing Recapture Risk

EFSC’s recapture event raises a practical question for tax credit buyers: How can recapture risk be managed in practice? Here are some practical takeaways from the EFSC case:

• Understand the sellerʹs financial situation and whether contractual terms mitigate recapture risk in the event of bankruptcy or foreclosure. As the ESFC case shows, recapture can be triggered by a direct change of control of the underlying project assets. Buyers should assess the bankruptcy or foreclosure risk of the seller entity, and whether partnership structures or forbearance agreements are in place to mitigate risk of change in ownership in the event of a liquidation.

• Tax credit insurance can protect against downside risk when uncertainty exists around a seller’s ability to pay indemnity claims. EFSC made a prudent decision to secure an insurance policy with sufficient coverage to zero out the economic effects of the recapture, even after accounting for taxes that needed to be paid on the insurance proceeds. We have observed a wide range in limits of liability — from 30 to 130 percent of the tax credit amount. In this case, a low limit of liability would have led to a substantial financial loss for EFSC.

• Understand contract terms in the event of financial stress. Diligence should look at terms that govern downside scenarios. For example, buyers should assess what happens to underlying assets if the sponsor goes bankrupt. If project-level debt is present, buyers should understand if there is a forbearance agreement in place during the recapture period, to avoid a recapture triggered by a debt foreclosure.

• Not all credits are subject to recapture. While ITCs typically provide superior pricing, they come with the risk of section 50 recapture. Recapture incidents are rare, but the case of EFSC shows that it can happen. Corporate buyers that want to avoid recapture rules entirely should consider production tax credits, which generally trade at a premium to ITCs but are not subject to section 50 recapture.

Looking Ahead

Although the transferable tax credit market nearly doubled from 2024 to 2025, acquisition and due diligence practices are still being shaped by early cases like this one. EFSC’s experience is a useful data point: The statutory risk of recapture is real, the tools to mitigate it work, and properly structuring a transaction makes the difference between an accounting event and an economic loss.

In Q1 2026, Reunion facilitated a $30 million §45Z tax credit transfer among a major Midwest ethanol producer and two publicly traded banks.

Reunion structured the transaction as a “club” deal, with the two buyers — while additional participants could have been included — aligning on negotiations, timing, due diligence, legal processes, and tax credit insurance requirements.

The deal offers insights not only into the mechanics and due diligence requirements of §45Z, but also how the club model can enable scale and efficiency.

‍The Credit

The §45Z PTC has become one of the most widely adopted credits to emerge from the Inflation Reduction Act. Available for transportation fuel produced domestically and sold between January 1, 2025 and December 31, 2029, the credit covers a range of low-carbon fuels such as ethanol, renewable natural gas, renewable diesel, and sustainable aviation fuel. 

§45Z, like many production credits, is not subject to §50 recapture. This structural feature distinguishes it from §48 and §48E investment tax credits, which often trade at a deeper discount due to the need to diligence and protect against the risk of recapture.

The §45Z PTC has garnered broad adoption, in large part, because it offers a sliding scale of credit value based on the emissions factor of the fuel. The base credit tops out at $1.75 for sustainable aviation fuel and $1.00 per gallon for other clean fuels. These credit amounts are adjusted annually for inflation. The following example shows a credit computation for ethanol fuel with a baseline credit value of $1.00 per gallon. 

The Seller

The seller, who had successfully executed several 2025 §45Z transfers, was a Midwestern-based ethanol producer with over 50 years of operating history. 

For this transaction, the seller elected to transfer credits from two facilities, each with a slightly different carbon intensity. The seller carved out $30 million from a broader credit portfolio exceeding $100 million, based on an expected per-gallon credit value of $0.10 to $0.20.

The Buyers

Two publicly traded community banks — a “lead” bank and a “follow-on” bank – partnered on the buy side of the deal:

Despite five successful deals between them, neither buyer had transactional experience with §45Z PTCs, which require a specialized set of third-party deliverables to properly diligence. To close this knowledge gap, the buyers elected to work with an accounting firm for additional due diligence support. 

The “Club” Structure

Running two independent, even if parallel, transactions would have translated into an overarching process that added undue complexity and cost for everyone. 

Reunion worked with the parties to devise a more efficient approach – a “club” deal. At its core, the structure brought both buyers to the table with the same legal counsel and accounting firm for diligence. 

One Negotiation 

With Reunion’s guidance, the lead bank set the key commercial terms for the transaction, including payment terms. Rather than a lump-sum payment, Reunion structured the deal as quarterly fundings across 2026 and into 2027. 

The seller is scheduled to receive cash as production occurs and qualifying credits are generated. The buyers, likewise, will realize the credit value on a rolling basis.

One Timeline

The deal closed in Q1 2026 — a timeline that mattered. Both banks were motivated to close before quarter-end to recognize the credit benefit in their Q1 financials. 

One Due Diligence Package

As the transaction facilitator, Reunion collaborated closely with all parties – including outside legal and diligence partners – to produce a diligence package that gave the buyers the confidence to move forward. The seller, for their part, was delighted to face a single set of questions and documentation requests. 

One Tax Credit Insurance Policy 

The buyers and seller agreed to a tax credit insurance policy with a limit of liability of at least 125% of the transaction volume. Unlike recapture insurance on ITC deals, tax credit insurance on a §45Z transfer is designed to protect against IRS disallowance of the credit itself – e.g., a determination that the credits were not validly generated. 

Two Purchase Agreements

Reunion drafted individualized purchase agreements for each buyer, although the contents and scope were effectively the same. 

The Diligence

As noted above, §45Z PTCs require a few specialized third-party deliverables that “typical” §45 wind or solar PTCs do not. That specialization is by design: because the §45Z credit amount is tied to a facility-specific emissions calculation, every element of that calculation must be verified, documented, and defensible.

• Emissions Rate: The producer's emissions rate consultant ran facility-level production data through the Department of Energy’s 45ZCF-GREET model, producing verified emissions rates for each production facility. The model rigorously incorporates elements like feedstock origin, transport logistics, and energy inputs. 
• Qualifying Sales: Credits are only generated on sales to unrelated third parties for use as transportation fuel. The seller’s 2026 qualifying sales are expected to go to a range of major fuel distributors and petroleum companies. Each contract will require a review to confirm buyer identity, qualifying use, and volume traceability. Under prevailing guidance, there was an open question about whether sales to resellers and intermediaries qualified — a question the February 2026 proposed regulations resolved in the taxpayers' favor. 
• Feedstock: All feedstock was confirmed as 100% domestically sourced corn — millions of bushels throughout the tax year  — with agricultural purchase contracts reviewed as part of the diligence package. The proposed regulations confirmed that, for fuel produced after December 31, 2025, feedstock must be exclusively from the U.S., Mexico, or Canada.
• PWA: Because both facilities were placed in service before January 2025, Prevailing Wage and Apprenticeship (PWA) requirements applied only to ongoing alterations and maintenance — not original construction. The producer's compliance reviews and certified payroll reporting were reviewed and confirmed by the buyers' diligence partner.
• FEOC: With respect to Foreign Entity of Concern (FEOC) rules, the seller’s tax consultant confirmed the seller was not a Specified Foreign Entity (SFE). 

The Takeaways

All Transacting Parties Experienced Efficiency Gains

Although the “club” formed on the buy side of the deal, all transacting parties experienced efficiency gains. The seller, as we mentioned, faced a single set of due diligence questions and requirements, while the buyers worked with the same legal and diligence partners. 

Club Deals are Applicable to Other Credit and Counterparty Types

Although Reunion’s inaugural club deal involved §45Z PTCs, the key unifying features — negotiations, timing, due diligence, legal, form(s) of credit support — can be readily aligned across other credits and counterparties. Reunion is currently structuring club deals for §48 ITCs, §45U PTCs, and §45X PTCs. 

“Lead” Buyers Welcome “Follow-On” Buyers and Vice Versa

When we initially proposed a club deal, we were pleasantly surprised by how receptive the prospective lead bank was to bringing a second bank into the transaction. In hindsight, it was a non-issue.

We attribute that openness to an under-appreciated feature of the tax credit market: tax, treasury, and finance leaders tend to be highly collaborative and inclined to share their expertise. As we see almost daily, it’s a relatively small community — one that consistently shows a willingness to support peers in meaningful ways.

The Inflation Reduction Act introduced a five-times multiplier on some renewable energy tax credits that is contingent on full compliance with Prevailing Wage and Apprenticeship (PWA) requirements. As projects have become eligible for this multiplier over the past few years, the industry has developed practical applications to meet the complex requirements and has encountered real-world examples of how risks can arise.

We brought together a panel of seasoned practitioners from Orrick and DLA Piper to discuss what they're actually seeing firsthand: the recurring pitfalls, costly surprises, and practical strategies that separate compliant projects from ones that end up in remediation. This post gives a quick refresh of PWA requirements, then provides key commentary from our April 7th webinar. 

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The Basics

We’ll start with a recap of PWA requirements.

Prevailing Wage Requirements: All laborers and mechanics performing construction, alteration, or repair work on a qualifying project must be paid at least the county-specific minimum wage rate, encompassing both base pay and fringe benefits, for their classification where work is performed. These rates are published and publicly available on SAM.gov and locked in when the work is contracted (assuming an EPC contract with a definitive end date).

Apprenticeship Requirements: There are three requirements related to apprenticeship that taxpayers must follow: 

1. The labor hours requirement states that at least 15% of total construction labor hours for the project must be performed by registered apprentices for projects beginning construction in 2024 or later (earlier projects are allowed to be compliant at lower percentages).
2. The ratio requirement states that projects must also maintain the daily apprentice-to-journeyworker ratio established by the relevant registered apprenticeship program throughout the construction period. 
3. The participation requirement states that each contractor and subcontractor that employs four or more workers must either hire an apprentice at some point during the project or meet the good-faith effort exception requirements. 

Where Projects Most Commonly Fall Short

1. Apprenticeship Requirements Shortfalls

The apprenticeship requirements are complex and cause the most issues in tax credit transactions. Contractors often struggle to source enough qualified apprentices to meet the labor hours and participation requirements. Then they still need to ensure the right ratios are maintained daily and document it all rigorously.

"At first glance, some of these non-compliance issues are not as cut and dry as they might look. If you have a required ratio of one apprentice to two journey workers and on a given day you only achieved one to one — it's not as simple as everything being non-compliant. If that apprentice was paid above journey worker wages, we can classify them as a journey worker instead and exclude their labor hours from the apprentice portion of the apprentice labor hours calculation." — Alex Melehy, Head of Product and Engineering, Reunion

Penalty payments exist as a remediation path for each of the apprenticeship requirements, but they can stack up. For example, if enough contractors on a project do not hire apprentices, then they may trigger penalties for the participation requirement and labor hours requirement. Additionally, if the ratio requirement is not met on a given day, then the labor hours of the apprentice who was under-supervised will not be included in the labor hours requirement calculation, which could lead to issues with the labor hours requirement if enough violations occur. It is recommended that the apprentice-to-journeyworker ratio be tracked in an automated platform so that daily violations are caught quickly and flagged to contractors before the violations lead to large penalties. 

 2. Worker Misclassification

Worker misclassification also ranks among the most frequent compliance failures — especially once work has begun and the wrong classification has already been selected. It is important to review the Department of Labor wage determinations classifications before starting work and assess which are the most appropriate for the job at hand. Unfortunately, internal job titles like "installer" or "pile driver" may not map neatly onto Department of Labor wage determination classifications. When contractors make assumptions based on title rather than actual duties performed, they can end up underpaying workers for the entirety of a project.

"You have to look holistically at the role and what duties are being performed. Things like 'installer' will really have to be remapped to the Department of Labor's classifications — general labor, skilled labor, power equipment operator. It really matters what exactly they're doing." — Vani Parti, Attorney, DLA Piper

A few specific scenarios come up repeatedly:

Experience may not change the rate. A laborer with 20 years of experience and one with one year of experience may fall under the same wage determination. There is often no tiered structure within a classification, and companies that apply internal pay scales may inadvertently fall out of compliance.

Multi-classification workers require meticulous tracking. When a worker performs duties across more than one classification in a given period, employers must track hours by classification and pay the applicable rate for each. Estimates, averages, and reconstructed records are not acceptable.

Foremen are not automatically exempt. When a foreman performs labor on site, those hours may need to meet the prevailing wage requirements if the foreman spends 20% of the week doing the work of a laborer or mechanic.  

When misclassification is discovered late in construction, at the transaction stage, or beyond, the financial exposure compounds quickly as interest accrues and penalties stack. Remediation can require reviewing records from the very beginning of a project and involve contractors and subcontractors who have not been on-site for months.

3. The Payroll Data Gap

Compliance is only as strong as the data behind it. Getting complete, timely payroll data from every contractor and subcontractor on a project is a persistent operational challenge, especially if there are issues with the relationship between the contractors and the developer. 

"We had a subcontractor get into a dispute with the developer. The subcontractor then refused to provide some of the data needed to pay the workers. The developer was still obligated to demonstrate PWA compliance for every hour those workers were on site. They had to pull certified payroll reports, reconstruct any misclassifications discovered at that point, work with the general contractor to validate the data, and then somehow find a way to pay these workers...  it was a big undertaking."— Vani Parti, Attorney, DLA Piper

The path forward in situations like this requires pulling certified payroll reports, working with the general contractor to validate data, and, in some cases, invoking state "unclaimed property" laws to make correction payments to workers who could not be located. The best way to prepare for this scenario is to appropriately structure the risks and responsibilities in the contracts between the taxpayer and the contractors. EPC agreements, O&M agreements, and supply agreements should all include provisions that enforce cooperation for PWA.

"It's very important to make sure there's timely sharing of information because it can get very difficult. You have to have provisions in there — not only that the contractor is going to comply with prevailing wage and apprenticeship requirements, but provisions on maintaining records, sharing records, and making sure those records can be shared in a format that the PWA advisor can use in their system." — Mark Christy, Partner, Orrick

Additionally, contracts generally include indemnity provisions that are structured to allow parties to act on a PWA advisor's reasonable findings in real time — rather than waiting for a final IRS determination, at which point a transaction is often already under strain.

4. The Good Faith Effort Exception: A Safety Net With Fine Print

When apprentices are genuinely unavailable, the final Treasury regulations provide a good-faith effort exception. A taxpayer or contractor who has made a documented request to a registered apprenticeship program is exempt from compliance requirements for a given work period if one of the following conditions is true: they received either no response from the apprenticeship program within five business days, or the program confirmed that the program cannot fulfill the request, or fewer apprentices were provided than requested.

In practice, the exception is frequently mishandled.

"The biggest thing I would tell folks is follow exactly what the IRS says needs to be in those requests."— Alex Melehy, Head of Product and Engineering, Reunion

A compliant request must include, among other items, the number of apprentices being requested, the number of labor hours, the relevant trade, and the start and end dates of the work period. There is also a requirement to state that the request is made with an intent to employ apprentices in the occupation in which they are trained, in accordance with the requirements of the registered apprentice program, and consistent with the hours and dates included in the request.  Requests that omit any of these elements do not qualify. 

Timing is equally critical. Requests must be submitted no later than 45 days before apprentices are needed, and the exception itself expires after 365 days. For example, a good-faith effort exception covering a 16-month project period only protects the first 12 months — a new request must be submitted in order to include the requested labor hours of the last four months in the labor hours requirement calculation.

Additional pitfalls include directing requests to programs outside the geographic area of the project, declining a partial fulfillment and attempting to claim the full exception, and failing to confirm that a non-response is genuinely a non-response.

"We've had taxpayers who submitted by email, and the [apprentice] program responded — but it went to their spam folder. They took a good faith effort exception where one wasn't available."— Vani Parti, Attorney, DLA Piper

The operational standard here is straightforward: use a reliable template, track every request and response, set renewal reminders, and maintain all correspondence in a centralized location.

5. Navigating Transactions With an Imperfect PWA Report

On larger projects, a fully clean PWA report is the exception rather than the rule. A clear-eyed remediation plan, established early, is what allows transactions to move forward.

"Usually, I do see PWA reports that are often not clean. The parties are going to have to figure out what to do, and it's good to be able to quantify what the issue is and have a plan."— Mark Christy, Partner, Orrick

For prevailing wage shortfalls, correction payments flow to affected workers, plus interest at the federal short-term rate plus six percentage points. Penalty payments for both prevailing wage and apprenticeship requirement failures should be filed with the taxpayer's tax return. The IRS this year released Form 7220, which requires taxpayers claiming increased credit amounts to calculate and report PWA penalties at the facility level, with a tax return preparer signing off on the filing.

Under the statute, taxpayers have 180 days following a final IRS determination to make correction and penalty payments. This window exists as a post-audit remedy, but should not be relied on as a mechanism for managing known compliance gaps during a transaction. Tax credit buyers and tax equity investors will require documented evidence that all correction and penalty payments have been made before a transaction can proceed.

Looking Ahead

The regulatory landscape for PWA continues to evolve. The final Treasury regulations (published in mid-2024) are comprehensive, but gray areas remain, particularly around newer credit structures like Section 48E and 45Y, where PWA compliance is tracked by inverter block per the definition of a qualified facility for those tax credits.

The practitioners on this webinar consistently reiterated the value of getting ahead of these common pitfalls by focusing on PWA from day one. Managing risk, both for contractors, sub-contractors, and taxpayers, requires visibility into the data and early feedback if mistakes occurred and need to be corrected. Setting up this infrastructure will lead to smoother transactions and better relationships. 

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For more information about PWA and compliance, contact us here.

Section 6418 of the Internal Revenue Code — effective for tax years beginning after December 31, 2022 — created something that did not previously exist in the U.S. tax code: a market for companies to purchase clean energy tax credits.

While the market has grown quickly, it has historically been difficult to get a clear picture of what companies are making tax credit purchases. This is now changing with the introduction of ASU 2023-09, a new accounting standard which requires more granular tax disclosures, making credit purchases easier to detect. ASU 2023-09 took effect for fiscal years beginning after December 15, 2024 (for public companies), which will drive greater visibility into market trends.

To date, Reunion has analyzed over 6,000 public filings submitted since January 2025, including 10-Ks and 10-Qs, across 1,400 of the largest companies listed in the US. Our AI-assisted process examines filings for tax credit purchase disclosures; all identified purchasing activity is then human-verified. 

This analysis should be viewed as an early snapshot rather than a final dataset. Public companies are filing new 10-K and 10-Q reports virtually every day, and additional tax credit disclosures continue to emerge as reporting cycles progress. Our current methodology allows us to systematically scan filings, identify purchase disclosures, and incorporate them into a growing dataset that will continue to expand as more filings are released.

Below are six key takeaways from our filings analysis through March 2, 2026. The Wall Street Journal featured our research in a recent article.

Insight 1: Buyer Participation Has Nearly Doubled — With Smaller Companies Accounting for 62% of Growth

Across the nearly 1,000 public companies in our dataset that filed annual disclosures in both 2024 and 2025, we found that the share of firms disclosing tax credit purchases rose from 4.9% in 2024 to 8.5% in 2025.

The growth is even more pronounced among smaller taxpayers. Companies with under $200M in annual tax expense doubled their purchase rate year-over-year, from 21 buyers to 42 buyers in the matched sample. Purchasing among larger taxpayers also grew, albeit at a 50% rate – from 26 to 39 buyers.

Participation is broadening thanks to more standardized deal structures, increases  in credit supply, and clarified IRS guidance. What began as a large-cap strategy is increasingly common among more modest taxpayers. We expect further convergence of tax credit purchase rates among company size cohorts as the market matures.

Insight 2: Tax credit purchase rates are highest for corporate taxpayers with ETRs in the 15% to 30% range

Our analysis of filings for the 2025 tax year suggests that over 10% of companies with ETRs in the 15% to 30% range purchased tax credits.

Purchase rates among companies with ETR’s of 20-25% are roughly 7 times higher than for companies with ETR’s below 10%. 

Insight 3: Reductions in Effective Tax Rate Have Clustered Between 0.4% and 2.0%

Many companies purchase transferable tax credits with the express goal of “managing” their effective tax rate (ETR). Others focus on cash tax savings, although this, too, has an impact on ETR.

The chart below shows that nearly 80% of companies that purchased transferable tax credits in 2025 lowered their ETR between 0.4 and 2.0 percentage points – for example, from 23.2% to 21.2% for a 2.0% reduction. 

Our analysis identified outliers at both ends of the distribution (see Methodology Note). Multiple companies reported effective tax rate reductions in excess of 5.0%. 

Insight 4: Tax Expense Is the Strongest Predictor of Purchasing

Our analysis shows that purchase rates increase steadily as annual tax liability rises — then drops at the very highest levels.

Why the drop above $1 billion in annual tax expense? Very large corporations often have more alternatives when it comes to tax reduction strategies, such as complex deductions and cross-border tax planning. Deployment of these alternate strategies may translate into a dampened interest in buying transferable credits.

At the same time, we also know from our work in the tax credit market that many extremely large buyers do not acquire tax credits at a level that crosses the reporting thresholds prescribed in ASU 2023-09. If we were to layer these companies into our analysis - perhaps in a future report – we would expect a less dramatic drop.

We tested other size proxies, including revenue, employee count, and market capitalization. All are positively correlated with purchasing, but are also highly correlated with each other. Among all such size proxies, tax expense shows the strongest relationship with purchase behavior.

Insight 5: Tax Credit Purchasing Has Gained Traction Nationwide — with a Notable Outlier

The market is attracting companies from all regions. More than 30 states are home to at least one public company that has disclosed transferable tax credit purchases.

It’s also worth noting that the actual number of states associated with corporate tax credit purchasing is greater than shown in the map above. For example, Reunion has worked with tax credit buyers in a number of the non-highlighted states including Idaho and Washington, but these buyers do not register in our analysis of federal filings because the buyers were either private companies or public companies that have yet to make tax credit disclosures in federal filings.

One state stood out in our geographic analysis – for its surprisingly weak buying activity.

California-headquartered companies purchase at less than half the national rate (3.4% vs. 8.5%). This gap persists across tax expense bands and across sectors.

A contributing factor may include that California’s technology companies already have robust tax reduction channels through their R&D spending and capital expenditures. One other observation is that prior to SB 302 (a California law effective January 2026), the state did not conform to IRC §6418 for tax purposes. Therefore, the discount on a purchased credit (e.g., buying a $100M credit for $90M) was potentially subject to state-level taxes for tax years before January 1, 2026. 

Insight 6: Retail and Construction Stand Out

Purchase rates show meaningful variation across industries, with construction and retail leading the charge.

Factors leading construction companies toward greater tax credit purchases include predictable federal tax liabilities, and limited availability of tax strategies such as R&D credits and international structuring opportunities. Retail faces similar structural characteristics — often more acutely. Retail R&D intensity is minimal relative to technology or pharma, and retailers face large and recurring domestic tax expenses. 

For many companies in these industries, transferable credits are the first meaningful new federal tax reduction tool in decades.

In Summary

Our analysis suggests that the transferable tax credit market continues to evolve in several important ways. Activity is increasing overall, participation is extending beyond the largest revenue companies, and geographic concentration is gradually dispersing. We are also observing particularly strong engagement in industries that historically have had limited access to tax credit opportunities.

Recent disclosure changes are making transaction activity more transparent, while market infrastructure continues to mature. As a result, buyer participation patterns are becoming easier to identify and evaluate.

This represents an early snapshot rather than a definitive assessment. As additional 2025 and 2026 filings become available, we will continue to monitor and analyze how the buyer market develops.

Exclusive access to underlying SEC data provided to existing buy-side and sell-side clients of Reunion. Reach out to your Reunion contact for access.

This research was featured in the Wall Street Journal. Read the article here.

Data Notes

Date of analysis: February - March 2026
Universe: ~1,400 of the largest public companies listed in the US
Filings reviewed: 10-K, 10-Q, 20-F, 40-F filed since January 1, 2025
Methodology Notes: 

1. Many filings reference “transferable tax credits” without specifying credit type. Since transferability is generally tied to Section 6418, we classify them as clean energy credits.
2. Of the ~1,400 companies analyzed, roughly 1,000 had filed both a 2024 and a 2025 report during the period we examined. The remainder fall into two categories: companies that have not yet filed their 2025 annual report, and fiscal-year filers whose 2024 filings were published before our data collection began in January 2025. As a result, the year-over-year comparisons are based on the subset of companies for which both filings are available, ensuring an apples-to-apples comparison.
3. In our assessment of effective tax rate reductions, we identified one outlier company that experienced an increase in its ETR as a result of the non-recurring accounting treatment associated with an investment tax credit (ITC) recapture event. We omitted this data point in our reported results, but intend to examine this recapture in greater detail in a forthcoming note.

Consumer cyclical companies – including construction companies and retailers – purchase transferable tax credits at the highest rate of any sector: 16 percent, or roughly five times the rate of technology companies.

Reunion analyzed over 6,000 public filings across approximately 1,400 of the largest U.S. public companies to determine which industries are most actively purchasing transferable clean energy tax credits under IRC Section 6418. ASU 2023-09, a new accounting standard in effect for fiscal years beginning after December 15, 2024, requires more granular tax disclosures by public companies and makes credit purchases easier to verify.

How Do Tax Credit Purchase Rates Vary by Sector?

The following table shows the share of companies in each GICS sector that have been verified as purchasers of transferable tax credits, based on SEC filings since January 2025.

Source: Reunion analysis of SEC filings (10-K, 10-Q, 20-F, 40-F) filed since January 1, 2025. Sectors based on Yahoo Finance GICS classification.

Consumer Cyclical Leads at 16%

The Consumer Cyclical sector – which includes retail, construction, restaurants, and lodging -- has the highest purchase rate at 16%. Within this sector, residential construction companies purchase at 33%, specialty retailers at 24%, and restaurants at 18%.

Factors leading construction companies toward greater tax credit purchases include predictable federal tax liabilities, and limited availability of tax strategies such as R&D credits and international structuring opportunities. Retail faces similar structural characteristics – often more acutely. Retail R&D intensity is minimal relative to technology or pharma, and retailers face large and recurring domestic tax expenses. 

For many companies in these industries, transferable credits are the first meaningful new federal tax reduction tool in decades.

Financial Services Is the Second-Largest Buyer Sector

Financial services companies purchase at 12%, driven by banks, insurers, and asset managers. Many of these institutions have prior experience with tax-equity investing, making transferable credits a natural adjacent strategy. Regional banks are also active, purchasing at 13%.

Technology Purchases at Just 3%

Despite housing some of the largest taxpayers in the S&P Composite, the technology sector purchases at just 3% – roughly one-fifth the rate of Consumer Cyclical. Large technology companies typically already leverage substantial R&D credits, stock-based compensation deductions, and international tax planning structures that reduce their effective tax rates well below the statutory federal rate.

SIC Industry Classification Tells a Similar Story

Grouping by SIC division rather than GICS sector produces a similar picture:

Key Takeaway

The strongest predictor of tax credit purchasing is not company size or profitability – but rather the combination of a meaningful federal tax liability and limited access to alternative tax reduction strategies. Sectors where these two conditions converge (e.g. consumer cyclical, financial services, industrials) show purchase rates significantly higher than sectors where companies already have robust tax optimization tools.

For the first post in this series that explores the tax credit purchaser landscape by analyzing data from publicly available filings, click here.

Reunion maintains a database of public companies that have disclosed transferable tax credit purchases, available to entities buying or selling credits, and provides exclusive access to the underlying SEC data to existing buy-side and sell-side clients of Reunion. Reach out to your Reunion contact for access.

Data Notes

Analysis Period: February-March 2026

Universe: ~1,400 largest U.S. public companies

Filings Reviewed: 10-K, 10-Q, 20-F, 40-F filed since January 1, 2025

Sectors: Based on Yahoo Finance GICS classification

Methodology:

• Credit Classification: Many filings reference transferable credits without specifying type. These are classified as clean energy credits since transferability is generally tied to Section 6418.
• Sample Composition: Of approximately 1,400 companies, roughly 1,000 had filed both 2024 and 2025 reports during the analysis window. The remainder had not yet filed 2025 reports or had 2024 filings published before data collection began.
• Data Quality: An AI-assisted process was used to scan filings. All identified purchasing activity was then human-verified at the company level.

‍More than 30 states are home to at least one public company that has disclosed purchasing transferable tax credits under IRC Section 6418. But not all states are participating equally.

Reunion analyzed over 6,000 public filings across approximately 1,400 of the largest U.S. public companies to map where buyers are located. ASU 2023-09, a new accounting standard in effect for fiscal years beginning after December 15, 2024, requires more granular tax disclosures by public companies and makes credit purchases easier to verify.

The data shows broad geographic adoption – with one notable exception.

Which States Have Transferable Tax Credit Buyers?

Among the companies we analyzed, these five states housed the headquarters for the most number of companies that publicly disclosed tax credit purchases.

The following map shows which states have at least one verified public company purchaser.

It’s also worth noting that the actual number of states associated with corporate tax credit purchasing is greater than shown in the map above. Reunion has worked with tax credit buyers in a number of the non-highlighted states, such as Idaho and Washington, but these buyers do not register in our analysis of federal filings because the buyers were either private companies or public companies that have yet to make tax credit disclosures in federal filings.

Low Purchase Rate for California Companies

California is home to over 175 of the largest U.S. public companies – more than any other state. It is a leader in installed solar capacity and clean energy investment. Yet California-headquartered companies purchase transferable tax credits at less than half the national rate.

This gap persists across tax expense bands, sectors, and company sizes.

A contributing factor may include that California’s large technology companies already have robust tax reduction channels through their R&D spending and capital expenditures. One other observation is that prior to SB 302 (a California law effective January 2026), the state did not conform to IRC §6418 for tax purposes. Therefore, the discount on a purchased credit (e.g., buying a $100M credit for $90M) was potentially subject to state-level taxes for tax years before January 1, 2026. 

Key Takeaway

Tax credit purchasing has spread to more than 30 states, demonstrating that this is not a regional phenomenon. While California's low purchase rate could be a regulatory outlier, the Golden State may close the gap with SB 302 now in effect.

For the next post that explores tax credit purchase rates by company sector and industry, click here. For the full series, start here. 

Reunion maintains a database of public companies that have disclosed transferable tax credit purchases, available to entities buying or selling credits, and provides exclusive access to the underlying SEC data to existing buy-side and sell-side clients of Reunion. Reach out to your Reunion contact for access.

Data Notes

Analysis Period: February-March 2026

Universe: ~1,400 largest U.S. public companies

Filings Reviewed: 10-K, 10-Q, 20-F, 40-F filed since January 1, 2025

Methodology:

• Credit Classification: Many filings reference transferable credits without specifying type. These are classified as clean energy credits since transferability is generally tied to Section 6418.
• Sample Composition: Of approximately 1,400 companies, roughly 1,000 had filed both 2024 and 2025 reports during the analysis window. The remainder had not yet filed 2025 reports or had 2024 filings published before data collection began.
• Data Quality: An AI-assisted process was used to scan filings. All identified purchasing activity was then human-verified at the company level.

Reunion's analysis of public company filings shows that nearly 80% of companies purchasing transferable tax credits in 2025 lowered their effective tax rate (ETR) by between 0.4 and 2.0 percentage points. 

We analyzed over 6,000 public filings across approximately 1,400 of the largest U.S. public companies to quantify the impact of tax credit purchases on effective tax rates. ASU 2023-09, a new accounting standard in effect for fiscal years beginning after December 15, 2024, requires more granular tax disclosures by public companies and makes credit purchases easier to verify.

The Typical Reduction: 0.4 to 2.0 Percentage Points

For a company paying a 23% effective rate, a typical credit purchase might bring that down to somewhere between 21% and 22.6%. In cash terms, a company with $1B in pre-tax income can save $10M in cash when reducing its ETR by 1 percentage point – which it can do by purchasing tax credits at a discount to face value.

This range reflects the economics of how most companies size their credit purchases: large enough to generate meaningful tax savings, but not so large as to create concentration risk with a single credit type or project.

What Is the Upper End of the ETR Reduction Range?

A smaller group of companies reported ETR reductions exceeding 5.0 percentage points – companies that made particularly large credit purchases relative to their overall tax liability. These are often mid-size companies where a single credit transaction represents a material share of total tax expense.

Key Takeaway

The 0.4–2.0 percentage point range provides a useful benchmark for companies evaluating their transferable tax credit purchase strategy. The clustering of reductions in this range suggests that the buyers have largely converged on sizing transactions to produce meaningful yet manageable impacts on their tax positions – neither making token purchases nor going all-in.

Transferable tax credit purchases are producing real, measurable reductions in effective tax rates for the companies that buy them. For companies with significant federal tax liabilities and effective rates near the statutory rate, this represents a new and accessible lever for tax optimization.

For the next post that explores the geographic incidence and spread of tax credit purchase rates, click here. For the full series, start here.

Reunion maintains a database of public companies that have disclosed transferable tax credit purchases, available to entities buying or selling credits, and provides exclusive access to the underlying SEC data to existing buy-side and sell-side clients of Reunion. Reach out to your Reunion contact for access.

Data Notes

Analysis Period: February-March 2026

Universe: ~1,400 largest U.S. public companies

Filings Reviewed: 10-K, 10-Q, 20-F, 40-F filed since January 1, 2025

Methodology:

• Credit Classification: Many filings reference transferable credits without specifying type. These are classified as clean energy credits since transferability is generally tied to Section 6418.
• Sample Composition: Of approximately 1,400 companies, roughly 1,000 had filed both 2024 and 2025 reports during the analysis window. The remainder had not yet filed 2025 reports or had 2024 filings published before data collection began.
• Data Quality: An AI-assisted process was used to scan filings. All identified purchasing activity was then human-verified at the company level.

A common question in the transferable tax credit market is whether it is dominated by the largest corporations, or whether mid-size companies are meaningfully participating. SEC filings give the answer: mid-sized public companies, in the $50M-$1B annual tax expense range, showed the highest purchase rates.

Reunion analyzed over 6,000 public filings across approximately 1,400 of the largest U.S. public companies to quantify buyer participation. ASU 2023-09, a new accounting standard in effect for fiscal years beginning after December 15, 2024, requires more granular tax disclosures by public companies and makes credit purchases easier to verify. 

Which Financial Metric Is the Best Proxy for Tax Credit Purchasing?

Among the size metrics we tested – revenue, market capitalization, employee count, and tax expense – annual tax expense showed the strongest correlation with purchasing behavior. This makes intuitive sense: tax expense directly measures the liability that transferable credits offset. 

Companies in the $50M-$1B annual tax expense range showed the highest purchase rates, while those with lower tax expenses participated less frequently. The decline above $1B likely reflects that very large corporations often have alternative tax reduction strategies, including complex deductions and cross-border planning. It may also reflect that purchases for some large buyers do not cross ASU 2023-09 reporting thresholds.

However, growth in purchasers is fastest among smaller companies. Companies with under $200M in annual tax expense doubled their purchase rate year-over-year (from 21 buyers to 42 buyers, in the ~1,000 for whom Reunion analyzed both 2024 and 2025 annual filings). Purchasing among larger taxpayers also grew, albeit at a 50% rate – from 26 to 39 buyers.

Do Companies with Higher Effective Tax Rates Buy More Credits?

When we examine purchasing by effective tax rate rather than absolute tax expense, a parallel pattern emerges:

The highest purchase rate (14%) occurs among companies whose effective tax rate (ETR) is in the 20-25% range. The purchase rate stays elevated on both sides of the range as well, with over 1 in 10 companies with ETR’s of 15%-30% purchasing tax credits. Companies already benefiting from low effective rates (under 10%) have weaker incentive to purchase credits.

Key Takeaway

The transferable tax credit market is not just a large-company phenomenon. It is showing broad adoption among companies with tax expenses above $50M annually, with the fastest growth in adoption happening among companies with <$200M in annual tax expenses. This profile describes hundreds of public companies, and many private ones as well.

For the next post that explores the impact of tax credit purchases on company effective tax rates, click here. For the full series, start here.

Reunion maintains a database of public companies that have disclosed transferable tax credit purchases, available to entities buying or selling credits, and provides exclusive access to the underlying SEC data to existing buy-side and sell-side clients of Reunion. Reach out to your Reunion contact for access.

Data Notes

Analysis Period: February-March 2026

Universe: ~1,400 largest U.S. public companies

Filings Reviewed: 10-K, 10-Q, 20-F, 40-F filed since January 1, 2025

Methodology:

• Credit Classification: Many filings reference transferable credits without specifying type. These are classified as clean energy credits since transferability is generally tied to Section 6418.
• Sample Composition: Of approximately 1,400 companies, roughly 1,000 had filed both 2024 and 2025 reports during the analysis window. The remainder had not yet filed 2025 reports or had 2024 filings published before data collection began.
• Data Quality: An AI-assisted process was used to scan filings. All identified purchasing activity was then human-verified at the company level.