Frequently Asked Questions

In general, the only US federal income taxpayer types that can use clean energy tax credits to offset taxes from active income are:

(1) C-corporations with more than five shareholders; or 

(2) C-corporations with five or fewer shareholders who own at least 50% of the equity and materially participate in the business.

Other taxpayer types (including individuals) are limited to using the tax credits to offset taxes from passive, non-portfolio income. Portfolio income typically includes income from dividends, interest, capital gains, and royalties. 

Given that most taxpayers' income tends to be active, corporations are typically best positioned among taxpayers to purchase and use clean energy tax credits.

I recommend working with an advisor who has deep, professional experience with clean energy tax credit investments. Since the market for transferable tax credits opened in 2023, a host of intermediaries have entered the space - many without the legal, financial, and tax experience needed to navigate the risks that these transactions involve. The right advisor will make sure your interest is protected, not just close a deal. 

A buyer can prepare for its first deal by taking the steps below.

1) Determine A Target Deal Size: Since a United States taxpayer is generally allowed to reduce its federal income tax liability in a year by no more than 75% by using tax credits, buyers should forecast their federal tax liability in the coming years to determine a range of tax credit values that the buyer would be comfortable purchasing. Unused tax credits can be carried forward for 22 years.

2) Evaluate Preferences: Buyers should begin to determine if they have a preference regarding tax credit type (e.g. PTC or ITC) and project technology type (e.g. wind, solar, or battery).

On April 25, 2024 the IRS released final regulations which can be found here.

By conducting confirmatory due diligence before purchasing the tax credits, a buyer decreases the likelihood that it will need to file an indemnity claim against the seller after the sale if the IRS disallows the tax credits or reduces their value following an audit. The indemnity claim process can result in disputes between buyers and sellers that requires significant time, energy, and costs from both parties before a resolution is reached. It's best to make sure that a tax credit opportunity's qualification fact pattern is strong before investing.

A lifelong tennis enthusiast, I named the company after a situation that arises in the sport. In tennis, a "break point" is a receiving player's chance to outplay the server and win the game. Break Point Energy is a celebration of the clean energy that will be generated in the coming years to reduce the momentum of climate change and enable the United States to meet its goal of 100% carbon free power generation by 2035.