The Future of Tax Credit Transferability

Transferability at Risk

Republicans are currently working on a tax reconciliation bill that would set most of the clean energy tax credits from the Inflation Reduction Act for early sunset. While some GOP Senators have expressed public support for these credits, the new legislation would accelerate the phaseouts and add new restrictions for investment tax credits (ITCs) and production tax credits for clean energy projects. 

The version of the bill that passed the House on May 22 repeals taxpayers’ ability to transfer four of the credits under Section 6418. Fortunately, the Senate version of the bill released on June 16 retains the transferability provisions, evidence of their popularity in the business community. 

The existence of significant tax incentives for renewable energy projects, and the general inability of project developers to utilize them directly, necessitated the emergence of a tax equity ecosystem, with banks, insurance companies, pension funds, and other financial institutions participating as investors. The introduction of transferability brought a wide swath of corporate taxpayers from all industries into the tax credit market as new participants eager to take advantage of the strategic opportunity afforded by Section 6418. 

Now, as Congress targets longstanding investment and production tax credits for complete phaseout, a question arises; could other types of credits become transferable? Transferability is vulnerable, but what if it applied to strategic initiatives? Transferable tax credits have long been used by states to incentivize certain industries. Now that the IRS has a process in place to administer transferable credits, we could see the federal government apply transferability provisions elsewhere. There are several proposed bills that would look to fill Section 48F (the next code section in line after the energy investment tax credits that are found in Sections 48A–48E of the Code). While most ITCs are not energy-focused, the framework that has driven industry-specific growth over the last several decades could be applied to other sectors of the economy, with several proposed credits on deck to support domestic production, infrastructure, and the reshoring of critical supply chains. 

Driving Innovation in Agriculture

H.R. 1705 - Supporting Innovation in Agriculture Act of 2025, was introduced earlier this year by House Ways and Means Committee member Mark Kelly, R-PA. With a proposed 30% transferable ITC for investments in innovative agricultural technology, the bill casts a wide net with the definition of qualified property that would be eligible for the credit. “Qualified property” in this bill is defined as tangible personal property that is depreciable under the tax code, as well as software and computer systems. Any property for which an ITC is claimed would need to be part of an innovative agricultural technology project, which per the bill’s language could include:

• Controlled Environment Agriculture (CEA): This refers to closed, indoor agricultural systems where environmental factors and inputs are precisely controlled throughout the crop lifecycle. Examples of CEA include vertical farming, hydroponics, and aquaponics.
• Precision Agriculture Technologies: Use of sensors, drones, GPS, robotics, and data analytics to optimize planting, irrigation, fertilization, and harvesting.
  
  

The bill leaves a broad opening for “any other technology … that leads to a reduction in, or improves efficiency of, inputs used in crop production and harvesting.” In addition to providing a transferable credit, the proposed bill would also allow for direct pay under Section 6417. If an agriculture-focused ITC were enacted, it is not difficult to imagine that tax equity investors could become interested in financing large agriculture projects, especially with the bill’s revival of 100% bonus depreciation through 2029.

Enhancing Electric Grid Reliability

With the U. S.’s electrical grid in need of significant modernization to support projected load growth in the coming years (and with grid resilience considered critical to national security), several representatives have sensibly proposed ITCs for projects that improve grid resiliency and transmission capability. The Grid Resiliency Tax Credit Act (H.R. 5803), introduced by Representative Steven Horsford, D-N.V., aims to strengthen the U.S. energy supply chain by providing a 30% transferable ITC for investments in large-scale transmission infrastructure. The credit would be available for new transmission property, modifications to existing transmission property meeting certain requirements, or for transmission-adjacent property such as generator tie lines and network upgrades. 

Another transmission infrastructure-focused bill, the Clean Electricity and Transmission Acceleration Act (H.R. 6747), is a more comprehensive bill aimed at siting and permitting reform that would both expedite approvals for high-priority transmission projects and provide a 6% base ITC for qualifying transmission projects (with a bonus multiplier to 30% if prevailing wage and apprenticeship requirements are met). These grid-focused bills have the same overarching goal, and would align nicely with the GOP’s recent emphasis on American energy independence.

Shoring Up Supply Chains

Ever since the COVID pandemic laid bare the shortcomings of the domestic manufacturing capabilities and supply chain in 2020, there has been talk of government stepping in with support for reshoring manufacturing and supply chains for essential products. In February 2025, House Ways and Means Committee member Nicole Malliotakis, R-N.Y., introduced H.R. 8504, the Supply Chain Security and Growth Act. This bill would fill section 48F with a 40% transferable ITC for reshoring critical supply chain facilities for biotechnology, pharmaceuticals, semiconductors, and aerospace equipment, among others. Qualifying facilities would have to have manufacturing as their primary purpose to qualify. Oddly, the credit would apply only to critical supply chain facilities reshored to Puerto Rico and a handful of other U.S. possessions, but not to the states. More broadly, a reshoring incentive of some sort certainly seems like a possibility given the Trump administration’s focus on trade policy. 

Opportunities for the Future

Besides the proposed bills discussed here, there are numerous other proposals for new transferable investment tax credits. With significant uncertainty surrounding the future of existing clean energy credits, corporate taxpayers with significant tax liabilities could look to new transferable credits for planning opportunities in the coming years. As Congress negotiates 2025 tax legislation, significant changes in the amount and duration of the credits that are currently eligible for transfer are expected. However, the appeal of transferability in the larger business community means that we could continue to see a range of proposals for new transferable credits in the coming years.