ITC Transferability Explained: Why Tax Liability is No Longer a Barrier to Solar ROI

The objection: "We don't have enough tax liability to use the 30% Investment Tax Credit."

The reality: You don't need it anymore.

Since the Inflation Reduction Act introduced tax credit transferability in 2022, manufacturers can convert federal solar tax credits directly to cash — regardless of tax position.

The numbers speak for themselves: The transferability market reached $60 billion in 2025, with solar and storage projects dominating transactions. Corporate buyers are actively purchasing credits, creating a liquid market where tax liability is no longer a constraint.

How It Works: The ITC Basics

Tax credit transferability is simpler than it sounds.

You install solar. You generate federal tax credits. You sell those credits for cash.

Here's a typical transaction:

• Your facility: $1M solar system installed

• Federal ITC generated: $300,000 (30% base credit)

• You sell credits to unrelated corporation

• You receive: $240,000-$255,000 cash (80-85% of face value)

• Buyer applies full $300,000 against their federal taxes

• Transaction complete

No joint ventures. No partnership K-1s. No ongoing investor involvement in your operations. This is fundamentally different from traditional tax equity structures that required complex legal agreements and permanent investor relationships.

Why This Matters for Your Facility

Most manufacturing facilities don't have the tax appetite to absorb large solar credits in one year. Capital-intensive operations, accelerated depreciation, R&D credits, and competitive margins create a tax profile where a $2M solar installation generating $600,000 in credits exceeds annual federal liability by multiples.

Before transferability, you had three bad options:

1. Wait years to use credits as they carryforward

2. Tax equity partnerships — complex, expensive, investor-controlled

3. Skip solar entirely — can't justify ROI without monetizing incentives

Now, there's a fourth option: Convert credits to cash within 120 days.

A manufacturer with $75,000 in annual tax liability can pursue a $2M solar project and monetize $600,000 in credits immediately — without waiting seven years to use them internally.

What You'll Actually Receive: Pricing and Timeline

• Market rate: 80-85% of credit face value:

A $300,000 ITC converts to approximately $240,000-$255,000 cash.

• Payment timing: 90-120 days after your system is energized and placed in service.

This timeline covers IRS registration, buyer due diligence, and transfer documentation. Payment arrives as a single cash transaction — no installments, no contingencies tied to system performance.

What Determines Your Price?

Several factors influence where you land in the 80-85% range:

• Company creditworthiness — Credit rating and financial stability

• Operating history — Years in business and track record

• Transaction size — Larger credit volumes often command better pricing

• Project quality — Equipment specs, warranties, installer reputation

• Documentation — Clean verification of bonus credits and compliance

• Market conditions — Current buyer demand and competition

Companies with strong balance sheets and well-documented projects typically receive pricing at the higher end of this range. Your energy advisor can assess how these factors apply to your specific situation.

*Transaction costs (insurance, legal, brokerage) are typically embedded in the 80-85% pricing and covered by the seller up to negotiated caps.

Real Numbers: A Manufacturing Example

The facility: Midwest metal fabricator

Annual federal tax liability: $75,000

Solar system size: 500 kW rooftop array

Total project cost: $1.25M

Federal credits generated:

• Base ITC (30%): $375,000

• Energy Community Bonus (10%): $125,000

• Total credits: $500,000

Without transferability: This company needs 6-7 years to absorb these credits against tax liability. Project ROI becomes marginal.

With transferability (82% rate):

• Cash received: $410,000 (within 90-120 days)

• Plus: MACRS depreciation benefits (retained by company)

• Net project cost after incentives: Significantly reduced

• Payback period: 4-5 years despite limited tax appetite

The difference? A viable project that pencils with confidence vs. a marginal investment that gets tabled.

The Transfer Process (Step-by-Step)

The IRS transferability framework is straightforward:

1. Pre-Filing Registration: Register your solar facility with IRS Energy Credits Online portal → receive unique registration number

2. System Commissioning: Complete installation → achieve operational status (placed in service)

3. Buyer Identification: Connect with qualified buyers through marketplaces or advisor relationships

4. Due Diligence: Buyers verify project eligibility, bonus credits, compliance requirements (30-45 days)

5. Transaction Agreement: Execute transfer documentation covering price, timing, representations

6. Cash Payment: Receive payment (90-120 days post-energization)

7. Tax Filing: Both parties file transfer election statements with federal returns

Your energy advisor and tax counsel coordinate this process end-to-end. Most manufacturers don't need specialized expertise internally — advisors handle registration, buyer identification, and documentation.

Five Advantages for Manufacturing Finance Leaders

1. Immediate Liquidity: Convert tax credits to working capital in 90-120 days instead of waiting years to use them against liability.

2. Simplified Structure: No tax equity partnerships. No K-1 reporting. No investor oversight of operations. One-time transaction, clean exit.

3. Size Flexibility: Works for projects from $500K to $5M+. Small and mid-sized manufacturers now have the same access as large corporations.

4. You Keep Depreciation: Transfer the ITC but retain MACRS accelerated depreciation benefits for your own tax planning.

5. Stackable with Other Incentives: Combine transferred federal credits with state programs, USDA REAP grants, and utility rebates. Nothing is left on the table.

Time-Sensitive: 2025-2026 Window

Legislative changes create urgency for manufacturers evaluating solar :

2025 = Last easy year. Starting January 1, 2026, Foreign Entity of Concern (FEOC) restrictions take effect. Projects must source 40-60% of components from non-FEOC manufacturers (excluding China, Iran, Russia, North Korea) to qualify.

Key deadlines:

• Before January 1, 2026: Simplest qualification path without FEOC supply chain documentation

• Placed in service by December 31, 2028: Final deadline for full commercial credit eligibility

Manufacturers considering solar should engage advisors now to understand safe harbor provisions and lock in current incentive structures. For more on commercial solar tax credits, consult DOE resources.

Bottom Line for Finance Leaders

• Tax liability is no longer a constraint on solar ROI.

• The transferability market is liquid, pricing is predictable (80-85%), and payment is reliable (90-120 days post-energization).

What you should do:

→ Model projects assuming 80-85% credit monetization rather than zero value for unusable credits

→ Engage tax counsel early to coordinate timing and ensure clean documentation→ Explore bonus credits — Energy Communities and domestic content add 10-20 percentage points

→ Move with confidence knowing limited tax appetite no longer blocks viable projects

Four Questions CFOs Ask:

Q: Can we transfer only part of our credits?

Yes. Transfer any percentage vertically (must include proportional bonus credits). Many manufacturers use what they can internally and transfer the excess.

Q: What if we sell the facility within five years?

The ITC has a five-year recapture period. Early sale triggers partial recapture. When credits are transferred, buyers typically bear this risk (and price it into the transaction). Expect indemnification provisions.

Q: Do we lose our depreciation benefits?

No. You retain full MACRS accelerated depreciation even when transferring the ITC. This is a critical distinction — you keep one major tax benefit while monetizing the other.

Q: Do we need in-house tax expertise for this?

Recommended but not required. Most manufacturers work with energy advisors who coordinate the full process — IRS registration, buyer identification, documentation, and closing. Your tax counsel reviews but doesn't need to drive execution.

Next Step: Get Your Facility Assessment

Solar project economics are facility-specific. Incentive stacking, utility rates, and operational profiles all influence ROI. Envision Energy Solutions provides complimentary incentive assessments for manufacturers — modeling total economics with realistic transferability assumptions. No tax liability constraints. No complex partnerships. Just clear numbers.

Request your assessment at envisionenergy.solutions→

Contact our manufacturing energy team directly

*Envision Energy Solutions serves as a vendor-agnostic energy strategy partner for U.S. manufacturers, specializing in federal ITC optimization, Energy Community Bonus qualification, MACRS planning, state incentives, and USDA REAP grants. We deliver clarity, data, and execution support for manufacturing energy investments.