§48E Due Diligence Checklist and Recapture Rules for Credit Buyers

A buyer who purchases a §48E credit claims it on their own return, so the buyer carries the risk if the IRS disallows it or recaptures part of it. This checklist covers what to collect before you sign, and how the five-year recapture rule works. It is educational and is not legal or tax advice.

How recapture works

• Five-year window. Investment credit property that is disposed of, or stops being used as qualifying property, within five years of being placed in service triggers recapture under §50(a). The share clawed back falls 20 points a year: 100% in year one, 80%, 60%, 40%, then 20% (Crux; §50).
• Who bears it. The taxpayer that claimed the credit, which for a transferred credit is the buyer, unless the contract shifts the cost to the seller (Crux; Treas. Reg. §1.6418-5).
• Triggers. Sale or transfer of the project, ceasing to operate as energy property, or destruction without timely replacement. For §48E specifically, a determination that a facility's greenhouse gas emissions rate exceeds 10 grams CO2e per kWh also ends investment credit property status (§48E(g)).
• Bonus recapture. The prevailing wage multiplier can be recaptured if wage rules are not met during the five years, with a cure period (Crux; §48E(d)).
• New foreign-entity recapture. For §48E credits claimed in tax years beginning after July 4, 2027, Crux reports the IRS may claw back 100% of the credit if the project makes effective-control payments to a prohibited foreign entity within 10 years. Guidance is still expected, so ask your counsel how a contract should handle it.
• Frequency. Crux says recapture events have been rare since transfers began in 2023, and that all the few in its data were triggered by an ownership change or project transfer.

The checklist

Area	What to obtain	Why it matters
Registration	IRS transfer registration number for the facility; the seller's election statement	Required for the transfer election; check it matches the project (§6418; agreement checklist)
Placed in service	Date and proof (commissioning, interconnection approval), and the tax year of the credit	The credit belongs to the year placed in service; new wind and solar must also meet the deadlines
Wind and solar start/finish	Beginning-of-construction evidence: which test, physical-work or five percent, and continuity	Deadline rules; the IRS test for large solar and wind was vacated by a court in June 2026 and may change again
Qualified basis	Cost support, appraisal if basis is stepped up, and a list of ineligible property	The credit is a percentage of qualified investment; overstated basis is the common cause of excess credit
Credit rate	Prevailing wage and apprenticeship records, or proof the project is under 1 MW AC or began construction before the cutoff	The difference between a 6% and 30% credit
Bonuses	Energy community determination; domestic content certifications and tables	Each adds credit, but needs its own proof (bonus guide)
Foreign-entity	Supplier certifications and the material assistance cost ratio calculation for construction beginning after 2025; seller and owner status	Credit is lost if the thresholds are missed (Notice 2026-15; FEOC guide)
Project and lenders	Debt, forbearance agreements, liens, offtake, property and casualty insurance	A foreclosure or sale is the usual recapture trigger
Seller	Financial strength, tax-credit experience, any guaranty; related-party check	An indemnity is only as good as the seller
Contract and insurance	No-fault indemnity, anti-transfer covenants, reporting covenants, tax credit insurance policy review	See key transfer agreement terms
Your capacity	§38(c) room or passive-activity room, estimated tax plan, ASC 740 view	A credit you cannot use is not a saving

Red flags

• No registration number, or a seller that cannot say which beginning-of-construction test it used.
• A price well above the published ranges with no explanation of the risk allocation.
• No indemnity, no guaranty and no insurance on a large credit.
• A single-purpose seller with no operating history and a lender that has not agreed to forbear.
• Resistance to sharing payroll, supplier or basis documentation.

What the market usually requires

Crux's deal-terms data reports that every ITC deal includes some recapture-prevention covenant, 89% include a no-fault indemnity, and 93% require the seller to notify the buyer of a potential recapture event. The share of deals using external credit support (insurance, a guaranty or both) was cited as roughly 82% in one place and about 72% in another, so treat it as "most deals". Our CPA guide shows how to build this into a client file.

Educational information only, not tax, legal or investment advice, and no outcome is promised. Rules and figures were checked against the cited sources on October 29, 2026; they change, so confirm with your CPA and counsel before acting. Market figures are third-party data and are not Veritas quotes. See our disclaimer.