Transfer Election Statement

A Transfer Election Statement is a formal written declaration that informs the IRS that a tax credit earned by one taxpayer is being transferred to another taxpayer who will claim it. Think of it like an official "permission slip" for the credit it shows that the original owner is legally allowing someone else to use it. This is especially useful when the original taxpayer cannot fully use the credit because their tax liability is low, ensuring the credit doesn’t go to waste.

TE Statements are commonly used for transferable tax credits under U.S. tax law, including clean energy, renewable energy, research and development credits, and other incentive-based credits. Instead of letting these credits go unused, eligible taxpayers can transfer them to someone else, often in exchange for cash or other consideration. The TE Statement ensures the IRS recognizes the transfer, confirms the right parties are involved, and that the credit is claimed correctly.

Beyond compliance, a TE Statement helps the IRS track the credit, prevent duplicate claims, and link the credit to the original project or activity. It clearly states who the transferor and transferee are, the type of credit, the amount, and details of the registration or project. By attaching the TE Statement to their tax returns, both parties can confidently claim the credit, knowing that the IRS has the proper documentation on file.

What is a Transfer Election Statement?

A Transfer Election Statement is the official document that confirms a taxpayer has elected to transfer a tax credit rather than claim it themselves. It serves as proof to the IRS that the credit has changed ownership and that the transferee is entitled to claim it on their tax return.

Why is a Transfer Election Statement used?

Not all taxpayers who earn tax credits can benefit from them directly. Instead of letting credits go unused, U.S. tax law allows certain credits to be transferred or sold.

The TE Statement exists to:

• Document the transfer clearly
• Prove IRS compliance
• Prevent misuse or duplicate claims

Without a TE Statement, the IRS may disallow the transferred credit.

Who uses a Transfer Election Statement?

A Transfer Election (TE) Statement always includes two parties, and each one must attach it to their tax filing.

1. Transferor (Eligible Taxpayer)

• Earned the original tax credit
• Elects to transfer all or part of the credit

2. Transferee (Credit Buyer)

• Receives or purchases the credit
• Claims the credit on their tax return

What credits commonly use a TE Statement?

Transfer Election Statements are typically used for transferable credits, including:

• Alternative Fuel Vehicle Refueling Property Credit (Section 30C)
• Renewable Electricity Production Credit (Section 45)
• Carbon Oxide Sequestration Credit (Section 45Q)
• Zero-Emission Nuclear Power Production Credit (Section 45U)
• Clean Hydrogen Production Credit (Section 45V)
• Advanced Manufacturing Production Credit (Section 45X)
• Energy Investment Credit (Section 48)
• Qualifying Advanced Energy Project Credit (Section 48C)
• Clean Electricity Production Credit (Section 45Y)
• Clean Fuel Production Credit (Section 45Z)
• Clean Electricity Investment Credit (Section 48E)
• Small Agri-Biodiesel Producer Credit (Section 40A)
• Clean & Renewable Energy Credits (IRA-expanded)
• Research & Development (R&D) Credits
• Clean Vehicle-Related Transferable Credits
• Other IRA-Eligible General Business Credits

Many of these credits were expanded or made transferable under the Inflation Reduction Act (IRA).

What information is included in a TE Statement?

A real Transfer Election Statement should clearly include:

• Names, addresses, and TINs for both sides
• The kind of tax credit being moved
• How much credit was moved
• The year of the tax credit
• If necessary, your IRS registration number
• When and how much to pay for the credit
• Required legal representations
• Both parties must sign under threat of perjury.

All required details must be complete and accurate for the statement to be accepted.

What forms are filed along with a TE Statement?

A Transfer Election Statement doesn’t get filed on its own. Think of it as a supporting document that travels with the tax return where the transferred credit is claimed.

It is usually attached to:

• Form 3800 - Credit for General Business
• Other business or exempt organization returns that apply

The transferor (the person who originally held the credit) and the transferee (the person who is claiming the credit)must both include it on their returns for the year that the credit is reported.

Why you should use a Transfer Election Statement

Taxpayers can do the following with a TE Statement:

• Make money off credits they can't use
• Make sure you follow the IRS rules
• Don't lose credits that are worth a lot.

It gives buyers a legal way to lower their taxes by using approved credits.

How the Transfer Election Process works (in steps)

1. A taxpayer gets a tax credit that they can use
2. The taxpayer chooses to move the credit
3. The credit goes to another taxpayer.
4. A Transfer Election Statement is made
5. The person who gets the credit fills out Form 3800.
6. Both sides send in their TE Statement with their returns.

IRS Format for TE Statement vs Custom Format

To help taxpayers, the IRS has recently released a standard format for Transfer Election Statements. You don't have to use this format, though. Taxpayers now have two good choices.

Option 1: IRS-Provided Format for a Transfer Election Statement

The IRS-recommended format (Schedule A of Form 3800)

• Fully follows IRS requirements
• Covers all required Transfer Election details
• Uses Schedule A (Form 3800) to report the credit transfer
• Makes the process easier for first-time filers

Option 2: Custom Format for Transfer Election Statement

Taxpayers can also use their own format as long as it:

• It is called "Transfer Election Statement."
• Has all the IRS information it needs
• Both parties have signed it.
• Is attached to the right tax returns

A lot of tax professionals and businesses use this choice.

What happens if you don't have a TE Statement?

If you don't attach a required TE Statement:

• You may not get the credit you transferred.
• The return might take longer or be looked over.
• You may need to send more paperwork to the IRS.