Transferable Federal Tax Credits Under IRC §6418
A federal tax credit transfer mechanism Congress created in 2022 — explained for the advisors who have to get it right.
6418 Partners works with CPAs, RIAs, corporate tax departments, family offices, and CFOs evaluating Section 45Q carbon oxide sequestration credits available for transfer under Internal Revenue Code Section 6418. We are not a law firm, accounting firm, or registered investment adviser. We connect qualified advisors and corporate buyers with credit holders and the documentation their tax professionals need to evaluate a transaction independently.
Request Information →Why This Exists
The Inflation Reduction Act of 2022 added Section 6418 to the Internal Revenue Code, creating something that did not previously exist in U.S. tax law: a statutory mechanism for an eligible taxpayer to sell certain federal tax credits — including Section 45Q carbon sequestration credits — directly to an unrelated buyer for cash.
Before 2022, a taxpayer who generated a tax credit but couldn't fully use it had limited options. Section 6418 changed that. A buyer — whether an individual, a corporation, or a pass-through entity — with federal income tax liability can now acquire credits from a generator at a negotiated discount to face value, and apply them dollar-for-dollar against that liability — without acquiring equity, without a Schedule K-1, and without any ownership stake in the underlying project.
That's the mechanism. What matters to your client is whether a specific credit, from a specific seller, actually qualifies — and that depends on facts your CPA needs to verify, not on anything we say here.
What Section 45Q Credits Are
Section 45Q is the part of the Internal Revenue Code that provides a federal tax credit for each metric ton of qualified carbon oxide that is captured and either permanently stored or used in a qualifying manner. It predates the Inflation Reduction Act — the IRA expanded the credit amounts and, separately, created the §6418 transfer mechanism that lets these credits change hands.
Credits can be generated by a range of project types, including industrial point-source capture and agricultural or biological sequestration methods such as biochar production and soil-based carbon storage. The method matters: the statute distinguishes between different forms of storage and utilization, and the strength of a credit's qualification depends on how closely the underlying project's documentation matches what §45Q(f) actually requires. This is a question for your client's tax counsel to evaluate on the underlying documentation — not a judgment we make for them.
For a detailed walkthrough of how transfers actually work under §6418, see our How It Works page.
The Basic Economics
The structure is straightforward to describe, even though the underlying tax analysis is not:
| What | Detail |
|---|---|
| What the buyer pays | A negotiated price per dollar of credit face value (commonly discussed in the market in the 70–85 cent range, though pricing varies by transaction, credit vintage, and seller) |
| What the buyer receives | Federal tax credits applied dollar-for-dollar against income tax liability |
| What the buyer does not receive | Equity, a Schedule K-1, or any ownership interest in the underlying project |
| Where the credit is reported | Generally Form 3800 (General Business Credit), subject to your client's CPA confirming the correct treatment |
If a credit is purchased at a discount to face value and is fully usable against the buyer's tax liability, the buyer's all-in cost is lower than the tax otherwise owed — that's the basic appeal. Whether that holds in any specific case depends on the buyer's tax position, the credit's classification, and limitations that may apply under Sections 38 and 469. We cover those open questions directly on our How It Works and FAQ pages rather than skip past them, because any advisor who doesn't ask them is not doing their job.
Who This Is For
- C-corporations and corporate tax departments managing federal income tax liability as part of annual tax planning
- CPAs and tax partners evaluating a transferable credit opportunity on behalf of a client with significant federal income tax liability
- RIAs and CFPs who've been asked about carbon credit tax strategies by high-net-worth clients
- Family offices and CFOs managing concentrated tax liability across one or more tax years
- Taxpayers — individual or corporate — with $1M+ in federal income tax liability for the relevant tax year, who have independent tax representation
This is not a retail product, and we don't present it as one. Learn more about who this is for →
What We Are — and Are Not
6418 Partners identifies and presents transferable credit opportunities to qualified advisors. We do not provide legal, tax, or investment advice. We are not a broker-dealer. We do not prepare tax returns or issue tax opinions. Every transaction we present should be independently reviewed by the buyer's own CPA and legal counsel before any funds move. We say this plainly because the credibility of this entire category depends on advisors doing exactly that — and any program that discourages independent verification is not one we'd want to be associated with either.