Tax Credit Buyer Webinar: What Buyers and Sellers Are Negotiating Now with DLA Piper and Marsh

On October 22, 2026, Reunion brought together three perspectives from across the market—a corporate tax credit buyer, counsel representing both buyers and sellers, and a tax insurance specialist—to discuss what’s changing in tax credit transfer agreements (TCTAs) and where deal terms are landing in the latter half of 2026. Our discussion included:

• Raul Farias, Partner, DLA Piper
• Lindsay Raulli, Tax Advisory, Marsh
• Mark McTigue, Transactional Risk Practice, Marsh Risk
• Moderated by Alessio De Falcis, Commercial Strategy, Reunio

Key takeaways

Lowering ETR is a key benefit for publicly traded companies

The cash tax benefit from a transferable credit purchase is the difference between the face value of the credit and the purchase price. Publicly traded companies are also motivated to purchase credits due to the impact on the buyer’s effective tax rate (ETR). Lowering the ETR, in certain cases by up to several percentage points, can have a meaningful impact in public markets..

Assessing developer basis step-ups and seller financial strength are fundamental pillars of credit support due diligence 

• Basis step-ups: The majority of credit insurance claims have been related to IRS scrutiny of less conservative basis step-ups. Diligence of the underlying analyses that inform basis step-ups, such as eligible project costs and appraisals, are crucial to determine tax credit insurability. 

• Indemnitor financial strength: buyers should review financial statements of the indemnitor (most commonly the developer) to gauge whether the indemnitor has the financial strength to fulfill indemnity obligations. It is important to consider both point-in-time measures of financial strength (e.g., via balance sheets) and future projections (e.g., via cashflow models).  

Insurers are focused on basis step-ups of 20% or less, through higher step-ups continue to be insured under certain circumstances

Insurers regularly underwrite basis step-ups of 20% or less. Step-ups of 20-25% are insurable depending on the facts of the cost segregation study and appraisal, while step-ups of 25-30% are now starting to require a retention or lower limit of liability. Step-ups above 30% have become difficult to insure. 

Where insurance does not cover a portion of the step-up, buyers may mitigate risk basis risk by reducing the volume of purchased credits to the level covered by insurance.

Insurance policies may cover less than 100% of the face value of the credits 

Some buyers of energy tax credits may be comfortable with insurance policies covering less than 100% of the volume of credits to improve deal economics, especially in cases where a loss event is unlikely to affect the entire credit volume. This is observed most frequently in transactions that involve credits from multiple projects, such as those sold out of distributed residential rooftop solar portfolios. In these cases, buyers may get comfortable with insurance coverage as low as 40% of credit face value. 

Excluding fraud, gross negligence, and willful misconduct, sellers are typically negotiating indemnities with a capped limit of liability of 125% to 130% of the face value of the credits

Seller-provided indemnities typically backstop credit transactions after tax credit insurance. Indemnity caps varied widely in 2024 but stabilized in 2025, with ITC indemnity caps generally matching insurance coverage at 125% of the face value of the credits. PTC indemnity caps range from 125% to 150% of the face value of the credits, with a median of approximately 130%. 

The market for FEOC-subject credits is illiquid and awaiting treasury guidance

Until Treasury issues further Foreign Entity of Concern (“FEOC”) guidance, tax insurance is generally not available to cover FEOC-related risks, except for select, narrow policies that cover material assistance provisions. In lieu of insurance, transactions of FEOC-subject credit types typically require conditions to protect the buyer including termination rights, deferred payments, or price adjustment triggers in the event of adverse guidance. 

Ahead of treasury guidance, expected by early 2027, buyers are prioritizing “legacy” §48 ITCs and §45 PTCs, which are exempt from FEOC rules, as well as credits with more limited FEOC exposure, including §45Z, §45U, and §45Q.

For credits subject to full FEOC exposure, auditors may ask buyers to support their conclusion under ASC 740 before booking the tax benefit. Buyers often do this with an opinion from outside counsel or a non-audit accounting firm, typically at the more-likely-than-not or “should” level.

Forward commitments are increasingly common and require additional diligence

Forward commitments, under which a buyer agrees to purchase credits from future tax years, are most suitable for large buyers with predictable tax appetite. Additional buyer diligence and transaction terms for forward commitments include: 

• Ongoing monitoring of expected placed-in-service (PIS) date to ensure projects generate credits in the intended tax year for projects generating ITCs
• Liquidated damages to be paid in the event of credit nondelivery or underdelivery for projects generating either PTCs or ITCs
• Multi-year tax forecasting, to mitigate the risk of credit overpurchase and plan for top-up purchases as needed for projects generating either PTCs or ITCs

As Raul Farias from DLA Piper points out, tax credit buyers fall into three categories: whales, sharks, and dolphins

• Whales: Large corporate taxpayers with significant income tax liability. These companies value multi-year visibility into their ETR and prioritize payment deferral, which lets them arbitrage their cost of capital against the purchase price. Whales often contract forward with investment-grade sellers on a large volume basis.
• Sharks: Taxpayers that look for a combination of low price, large deferral, and a good opportunity. These buyers accept more credit risk, buy forward at low prices, and can offload part of a commitment to other buyers through reassignment.
• Dolphins: Taxpayers that diversify counterparty risk and purchase strategically on an annual basis. These buyers avoid forward commitments and select credits year to year.

A seller bankruptcy doesn't automatically trigger recapture

Under §50, recapture can be triggered by either a change in a project's ownership or the project ceasing to be a qualified investment property during the five-year recapture period. Many assume that a seller's bankruptcy would necessarily trigger recapture due to change in ownership. However, projects are often placed in bankruptcy-remote special purpose vehicles with securitization-style protections insulated from change-in-ownership risk. 

In recent residential solar bankruptcies, including Sunnova and PosiGen, projects that were held by cash and tax equity partnerships avoided recapture because the partnership itself typically doesn’t have creditors, and the investment partner would need to consent to a change in ownership. For a case where a bankruptcy did trigger recapture, see A Real-World Case of Investment Tax Credit Recapture.

Conversation topics

• [0:00] Welcome, introductions, and agenda
• [4:07] Financial statement benefit and payment timing
• [11:56] Indemnity caps and insurance coverage levels
• [23:45] Residual indemnity risk and basis step-ups
• [28:20] FEOC and change-in-law risk
• [35.37] Forward ITC commitments and PTC strips
• [46:53] Reassignment rights
• [51:31] Audience Q&A: basis claims, insurance pricing, CAP surcharges, and bankruptcy risk