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Lane
Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3119
Experience:  Providing Financial & Tax advice since 1986
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Hi, I have question regarding tax credit. Im building the

Resolved Question:

Hi,
I have question regarding tax credit. I'm building the Solar power plant and i should be getting 30% Investment Tax Credit. Which will be over my tax liability in US.

Is it legal to sell or transfer the tax credit to someone with TAX liability ?
Submitted: 6 months ago.
Category: Tax
Expert:  Lane replied 6 months ago.

Lane :

Hi,

Customer:

hi

Lane :

There IS currently a marketplace fr STATE tax credits, but I have nothing for federal

Lane :

Do realize, however, that you can carry forward your unused tax credit to future years

Lane :

See this from IRS:

Lane :

While Code §39 generally provides for a 1 year carryback and 20 year carryforward for current year business credits that exceed the limitation of Code §38(c), no portion of the unused business credit can be carried back to a tax year before the first year for which that credit is allowed. §§39(a) & (d)


 

Customer:

my question is if it is legal to sell Federal ITC

Lane :

If you'll let me move us to the Q&A mode, I'll do the research .... I have access to the full tax code (Title 26 of U.S. code, all federal cases all state cases and US Supreme and Tax cour decisions holding and analysis) ...More than likely this will be handled in what's caked a treasury regulation... I know that the code itself only estatblishes the cod

Lane :

ore than likely there is non statute (law created by contres that disallows it or makes it a criminal or civil wronf

Customer:

what is it Q&A mode ?

Lane :

NO Statue (law)

Lane :

Rather than talking in real-time chat as here ... we continue our dialogue through an exchange where we cominually respons do eah other

Lane :

You've asked an intriguing question, One of the first things I'll do is consult with my tax law professor form Lawschool She is VERY up[ on the most recent issues

Lane :

BUT, what you WILL eventualy need is the actual citation to code, case law or both

Customer:

well we can discuss details of how or who latter ... i just wanted simple answer is it legal ?Y/N:)

Lane :

That will give me th tme to answer your questions thoroughly and accurately

Lane :

There is no law that I can find that makes it a crime

Lane :

And so I'm looking here I find nothing that makes it a CIVIL Penalty either

Lane :

Give me a minute here

Customer:

ok

Lane :

Yes, you can sell your credits

Lane :

Government (under the current tax code) allows green energy firms to sell these credits and depreciation.

Lane :

Here's how it works:

Lane :



From a company that SELLS (and buys) these credit … this is from the perspective of the buyer


What are the steps in buying energy tax credits?


This flow chart simplifies the order in which the events take place. This example assumes you have already paid the IRS your taxes that were due.

1. We find out how much taxes were paid to the IRS in the last year by you.

2. The solar company issues a K-1 for that amount.

3. K-1 is given to your CPA (certified public accountant) to be turned in to the IRS.

4. In 2 to 3 months, the IRS will issue a refund to you.

5. Once you receive the IRS refund, you issue a check to the solar company for 90% of the amount you received.

6. You keep the 10% savings.

7. Repeat the steps for future tax returns


Lane :

I have found one case, called the Historic boardwalk case , that disallowed credits ... hang on a sec

Customer:

So basicaly the % are set by law ? or can be negotiable by sale agreement ?

Lane :

Negotiable, and needs to be done by someone that has explored the possible dissalowance... some have been see this:

Lane :
Substance–over–form doctrine” is applicable to instances where the substance of a particular transaction produces tax results inconsistent with the form embodied in the underlying documentation, permitting a court to recharacterize the transaction in accordance with its substance


Historic Boardwalk Hall, LLC v. C.I.R., 694 F.3d 425 (3d Cir. 2012) cert. denied,XXXXX 2734 (U.S. 2013)

Lane :

Thirm I linked to you had this to say about that:

Lane :

In the historic boardwalk case, there was 23 points that the government had a problem with in regards XXXXX XXXXX the project was structured. The way that we have structured our tax credits is completely different and we don't violate any of the 23 points that the government had an issue with. If you would like your CPA to speak with one of our support staff on this case, we would be happy to do so with you and/or your tax professional.

Lane :

Don

Lane :

t try to do this without eother using a company such as this or using a good CPA/tax atty with experience in the area

Lane :

Here's was another issue re: Boardwalk:

Lane :
Even if a transaction has economic substance, the tax treatment of those engaged in the transaction is still subject to a substance–over–form inquiry to determine whether a party was a bona fide partner in the business engaged in the transaction.


Historic Boardwalk Hall, LLC v. C.I.R., 694 F.3d 425 (3d Cir. 2012) cert. denied,XXXXX 2734 (U.S. 2013)

Lane :

Given the atypical (not commonly done) nature of this IRS probably WILL look at it

Lane :

You noticed that the firm talked about issuing K-1 .. what you're really doing here is setting up a partnership (joint venture) ... and IORS will look at whether that arrangement was done according to statute law

Lane :

Internal Revenue

[IMAGE][SRC][/SRC][ALT][/ALT][WIDTH]100[/WIDTH][HEIGHT]100[/HEIGHT][STYLE][/STYLE][/IMAGE]


Who Are Partners or Venturers



Purported partner's vigorous negotiation and due diligence investigation did not support finding that purported partner was bona fide partner in limited liability company (LLC) for purposes of determining tax treatment of claimed rehabilitation tax credits (HRTCs); purported partner's actions were not intended to form business relationship, but rather to protect it from any real risk of not receiving sought–after HRTCs or their cash equivalent






Historic Boardwalk Hall, LLC v. C.I.R., 694 F.3d 425 (3d Cir. 2012) cert. denied,XXXXX 2734 (U.S. 2013)

Lane :

Here's another firm with experience on BOTH sides of the transaction, it appears: http://fallbrookcredits.com/?gclid=CPi90N-s5LkCFSdk7AodnxMAfg

Customer:

Thank you very much

Lane :

SO, full circle ... YES it IS legal, but must be done VERY carefully ... and I wouldn't be doing my job if I didn't point out that Carrying forward the credit and using it yourself, to wipe out tax bill until it's used up (going forward) comes with more certainty

Lane :

BUT it IS doable

Lane :

You're welcome

Customer:

you have been very helpfull

Lane :

f this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer:

thank you

Lane :

You're very welcome (positive feedback appreciate... It's the only way I get paid)

Lane :

BUT if have another question on THIS come back here ... Also the links provided above will stay active for future reference

Customer:

Thank you Lane im putting in the highest rating for you ofc :)

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3119
Experience: Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 6 months ago.


Thanks Peter,


If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.

Thanks again,
Lane

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