Solar and Energy Credit Promotions

The pitch

Buy into a solar project and offset your W-2 or S corp income with the energy credit. Or buy someone else's credit at a discount under the transfer rules and apply it to your own return.

The point to hold onto

Anyone marketing a residential Sec. 25D solar deal in 2026 is selling a credit that no longer exists.

The structural problem with real projects

The investment tax credit is a PASSIVE CREDIT for a non-materially-participating individual. Passive credits can only be taken to the extent of the tax attributable to passive investments. Unlike suspended losses, they are not freed up against active income and are not released on disposition in the same way. Material participation requires clearing Temp. Reg. 1.469-5T(a): Test 1 (over 500 hours) or Test 3 (over 100 hours and more than anyone else, UNAVAILABLE TO LIMITED PARTNERS). Investor-type hours such as reviewing financials do not count. Add Sec. 465 at-risk, Sec. 50(b) limitations, and Sec. 50(a) five-year recapture.

Fraud in transferable credits

authority

IRC Sec. 6418

status

Emerging. The IRS has warned of a scam targeting the clean energy credit, with promoters misrepresenting purchased or transferred credits to individuals who cannot use them under Sec. 469. Solar industry groups have formally raised fraudulent-credit-claim concerns to Treasury.

buyer diligence

• The seller must have a valid IRS pre-filing registration number
• The credit must be a real Sec. 6418 eligible credit
• The buyer bears recapture risk under Sec. 50(a)
• Excessive credit transfer penalties under Sec. 6418(g)(2) are 20 percent
• For an individual buyer, Sec. 469 passive limits still apply

What OBBBA terminated

• Sec. 25D residential clean energy: TERMINATED 12/31/2025
• Sec. 25C: TERMINATED 12/31/2025
• Sec. 30D, 25E, 45W (EVs): TERMINATED 9/30/2025
• Sec. 30C: property placed in service after 6/30/2026 does not qualify
• Sec. 45L: phases out for homes acquired after 6/30/2026
• Sec. 179D: phases out for construction beginning after 6/30/2026
• Sec. 45Y and 48E wind and solar: facilities beginning construction after July 4, 2026 must be placed in service by December 31, 2027
• New prohibited foreign entity restrictions on ownership, financing, and supply chain

Classification note

A for solar lens; B/C for real projects and credit transfers

What it costs you if it is wrong

Red flags specific to this structure

• The pitch is a residential Sec. 25D credit, which terminated after 2025
• You are a W-2 earner and nobody mentioned Sec. 469
• The credit seller has no IRS pre-filing registration number
• The equipment cannot be shown to exist or produce power
• Investors are recruited by other investors

Questions to ask the person selling this

Take these into the next meeting. Someone selling the legitimate version answers them without difficulty.

1. 1Which credit is this, and is it still available after the OBBBA termination dates?
2. 2I am a W-2 earner. How do I use a passive credit under Sec. 469?
3. 3If this is a transferred credit, what is the seller's IRS pre-filing registration number?
4. 4Can I see the equipment, and is it producing power?
5. 5Who bears recapture risk under Sec. 50(a), and is there an indemnity?

Which of the Seven Markers this trips

• A promised deduction or savings multiple

• The economics do not work without the tax benefit

Score your own situation against all seven

The legitimate version

A commercial taxpayer places real energy property in service, meets prevailing wage and apprenticeship and domestic content rules, files Form 3468, and either uses the credit against its own active business tax or purchases a registered Sec. 6418 credit with full indemnity and diligence.

What distinguishes it

• The equipment physically exists and produces power
• The seller is registered
• The buyer has passive income or is a C corporation

What the courts have done

How this has actually gone for the people who bought one.