May 17, 2024
12 min read

The Process for Buying Transferable Clean Energy Tax Credits

Tax and treasury teams can purchase clean energy tax credits with confidence by working with Reunion on project selection, due diligence, and risk mitigation.

The market for clean energy tax credit transfers has accelerated rapidly in 2024, as corporate tax and treasury leaders see a significant new opportunity to reduce tax liabilities and increase corporate cash availability.

A complete transferable clean energy tax credit transaction, from identifying the opportunity to closing the deal, can be summarized in seven key steps.

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Step 1: Build your company's internal business case

Duration

Varies by company.

Goals and activities
Goals Key activities
Develop key tax credit purchase criteria and success measures Confirm your company's interest in a tax credit transfer that meets specific criteria – for instance, credit pricing, type (48 ITC, 45 PTC, 45X APMC), technology (solar, wind, battery storage, critical minerals), payment terms, indemnification and insurance
Align internal stakeholders Get an understanding of the needs of your tax, treasury, accounting, legal, and ESG teams. At the same time, understand who is ultimately resposible for the investment decision

How Reunion helps

Through an introductory call, Reunion's transactions team can equip your company with insights on eligibility, appropriateness, market dynamics, and risk. We can also help your team prepare a business case/investment committee memo and provide supporting materials. For larger organizations, Reunion has organized tax credit "workshops," which we have found are particularly effective for aligning multiple functional teams.

Key resources

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Step 2: Identify and formally express interest in projects

Duration

One to three weeks.

Goals and activities
Goals Key activities
Identify project(s) Sign NDA to gain more information about tax credit opportunities available on the Reunion platform
Negotiate and sign term sheet(s) Formally express interest in a project through issuance and negotiation of term sheet, which defines key transaction terms and kicks off an exclusivity period

How Reunion helps

Reunion takes a "push" and "pull" approach when helping companies find projects that most align with their needs. On the "push" front, we curate a list of tax credit opportunities based on the criteria we identified in step one and share it with your team. For many companies, we do this on a rolling basis as new projects join our platform. On the "pull" front, we provide your team with access to our managed tax credit marketplace, where we have over $7B (and growing) in near-term tax credits available.

Once your team has the right project(s) in mind, Reunion will populate our form term sheet on your company's behalf. We'll levarage our market intelligence to ensure your proposal is competitive and assist you in negotiating key terms, like timing of payment, indemnification, and tax credit insurance.

Key resources

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Step 3: Conduct Reunion-led preliminary due diligence

Duration

One to two weeks.

Goals and activities
Goals Key activities
Identify potential issues, if any, upfront before spending significant time and expense Review Reunion’s preliminary due diligence note to better understand potential risks and risk mitigation
Make a decision to proceed with the transaction Assess the risk / reward profile of the transaction

How Reunion helps

Reunion conducts a preliminary screen to identify any major issues up front ("fatal flaw" due diligence analysis). From that point, we consult with your team to assess risks and recommend appropriate mitigation strategies. Importanty, this step ensures alignment of incentives: we do not want to move a transaction forward unless there is a high probability of success.

We also provide validated market intelligence to compare your proposed transaction to the risk/reward profile of similar tax credit opportunities in the market.

Key resources

Green H4 Element

Step 4: Conduct comprehensive due diligence

Duration

Two to six weeks. The precise duration depends largely on the number and relatively complexity of projects in the transaction.

Goals and activities
Goals Key activities
Conduct comprehensive financial, legal and technical due diligence to gain comfort in moving forward with the transaction Ensure that proper due diligence has been performed on the project, covering the following topics: qualification, structure, recapture, prevailing wage and apprenticeship compliance, bonus credit adder qualification, and risk mitigants (indemnification and tax credit insurance)

How Reunion helps

Reunion spearheads the due diligence process by:

  • Reviewing documents provided by the Seller, and requesting any missing or incomplete information
  • Creating and organizing a data room, ensuring that due diligence documentation meets Reunion's checklist of required documentation
  • Reunion will produce a summary due diligence memorandum summarizing our findings and highlighting any areas of concern
  • If you are working with additional diligence advisors, Reunion will work closely with advisors to organize and accelerate their review process, reducing costs
Key resources
  • Due diligence checklist (by request)

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Step 5: Procure tax credit insurance (if needed)

Duration

This step is optional and runs in parallel to step 4.

Goals and activities
Goals Key activities
Procure tax credit insurance to mitigate risk of tax credit disallowance or recapture Work with Reunion to ensure that tax credit insurance adequately covers desired risks. Ensure that insurance coverage levels are adequate in scope and amount

How Reunion helps

Reunion can help companies decide if insurance is an appropriate risk mitigation tool for their transaction. If we collectively determine that tax credit insurance makes sense, we can advise on insurance offerings, including the scope of coverage – e.g., structure, qualification, recapture, PWA, bonus credit adders – and where gaps might exist.

We can also help you validate that the insurance policy is appropriately sized and includes penalties and tax gross-up and contest costs.

Key resources

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Step 6: Sign tax credit transfer agreement

Duration

This step runs in parallel to step 4.

Goals and activities
Goals Key activities
Negotiate and sign a tax credit transfer agreement Review the legal contract to ensure that Buyer and Buyer counsel are satisfied with the terms

How Reunion helps

Reunion streamlines the negotiation process for buyers and sellers by providing a template legal document and helping parties focus on the most pertinent deal topics.

Key resources

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Step 7: Post-transaction support

Duration

Ongoing duration depending on credit type.

Goals and activities
Goals Key activities
Navigate various IRS filing deadlines in the months following the transaction File IRS paperwork and stay compliant with the follow up requirements. Stay up to date on the latest market trends

How Reunion helps

Our transactions team will issue both parties reminders about filing requirements and deadlines, including tax forms and compliance. In subsequent tax years/quarters, Reunion will provide early acccess to new deals.

Key resources

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Get started

Reunion’s team of clean energy and tax credit experts are here to support you through the entire process of buying and conducting due diligence on  IRA tax credits. We draw on our deep expertise to help you navigate tax credit transactions, and our marketplace features the widest pool of tax credit opportunities available in the industry.

Our key differentiators include:

  • Widest pool of high quality tax credits: We curate opportunities from our $7B marketplace, featuring 6+ supported technologies and projects ranging from under $3M to $300m+
  • Extensive educational materials: We offer an extensive resource library featuring  content on financial, legal, and market-related topics pertaining to IRA tax credits
  • Hands-on due diligence: We support buyers throughout the transaction process, ensuring that the due diligence is performed at high quality and that risks are minimized upfront, saving you time and expense
  • Industry-leading transaction team: Our transaction team consists of industry veterans, with experience raising $5+ billion in clean energy project financing `with partners such as US Bank, JP Morgan, Wells Fargo, Bank of America, Key Bank, PNC, Nord/LB, D.E. Shaw, First Reserve, and over a dozen Fortune 500 companies
  • Market intelligence tools: Available upon request, we offer proprietary insights on tax credit pricing and data on key trends

Reunion accelerates investment into clean energy

Our platform facilitates the purchase and sale of transferable tax credits to support solar, wind, battery, biogas and other clean energy projects.
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