
One of the most celebrated features of the Inflation Reduction Act (“IRA”) is the ability to sell tax credits, including the Production Tax Credit (“PTC”) under Internal Revenue Code (“IRC”) § 45 and the Investment Tax Credit (“ITC”) under IRC § 48. Under federal statute and IRS regulations issued last year, the sale of these tax credits does not result in taxable income to the seller and a buyer does not have to recognize gain on the difference between the value of the tax credit and the buyer’s purchase price. But the answer isn’t so simple under state law, which does not always track the federal rule; in some cases, whether the sale proceeds are taxable is unclear, and buyers and sellers of tax credits need to ensure that they are accurately assessing risk and expense.