Energy demand is surging and is expected to rise, driven by electrification, Al and a resurgence in domestic manufacturing. To ensure a reliable, affordable power supply, and meet the demands of a growing American economy, the United States must expand energy generation from all sources, build out energy infrastructure and reshore our energy supply chain, including critical minerals.
In this time of rapid growth, targeted federal tax policies are emerging as a critical tool to help our nation meet this moment of growth. Targeted tax credits are accelerating infrastructure deployment, power generation, domestic critical minerals and the expansion of U.S. manufacturing. Within these policies, a key tool for accelerating the deployment of new energy technologies are “transferability” provisions.
TRANSFERABILITY Accelerates CRITICAL INVESTMENTS
Tax credit transferability is a credit delivery provision within tax credits that allows companies to “transfer” tax credits. Transferability has spurred investment across diverse industries and regions, with 85% of new investments located in Republican-held Congressional districts. In practice, transferability reduces the cost of capital and allows developers and manufacturers to recycle their capital more quickly. By both accelerating access to capital and reducing the cost of capital, the pace of building infrastructure or expanding operations necessary to meet demand also accelerates.
Prior to transferability, tax credits were primarily monetized through complex financial transactions—known as a tax equity market—accessible only to large developers and companies. Over the years, Republicans in Congress have supported transferability because it can increase investment and accelerate deployment, maximizing results including economic growth, jobs and innovation.
How it works
For example, if a business owes $40,000 in taxes but is eligible for a credit worth $65,000, the tax credit reduces the business’s tax liability to $0, but the government does not send the business a check for the remaining $25,000. Under the credit transfer program, the hypothetical company described above could sell its credit for a price between $40,000 and $65,000, while the credit buyer could benefit by reducing its tax liabilities by $65,000 after having bought the credit for less than that amount. In practice, transferability helps companies stretch capital, accelerate their planned deployments and meet growing resource demands.
TRANSFERABILITY SUPPORTs ENERGY AND MANUFACTURING DOMINANCE
Unleashing All-of-the-Above Energy: Energy tax credits have expanded to new technology categories such as advanced manufacturing (45X), nuclear (45U), biofuels (45Z), hydrogen (45V), carbon capture and sequestration (45Q), standalone battery storage, hydropower, and geothermal (45Y, 48E). These tax credits made up more than 72% of the tax credit market in the second half of 2024, directly supporting the President’s goals of unleashing all forms of American energy, creating high-quality jobs, and building strong, secure and resilient domestic supply chains. In 2024, transferability helped drive more than $300 billion in private investment in US infrastructure.
Providing Affordable Electricity: As rising demand for electricity risks driving up electricity prices without new generating capacity coming online, transferability provides an additional source of revenue to projects and is already lowering electricity costs for consumers and businesses.
According to a report by the American Clean Power Association, transferable tax credits will catalyze $2.0 trillion in capital investments and $3.8 trillion in US economic activity over the next ten years, leveraging $4 of private capital for every dollar of tax credits.
Reinvigorating Domestic Nuclear: Today, there are two nuclear facilities that are in the process of being reopened. Transferable tax credits are a critical source of capital for nuclear projects, helping them secure lower-cost financing.
Catalyzing Domestic Manufacturing and Critical Minerals: Transferability is especially critical to building a secure, resilient and domestic energy supply chain. For example, the advanced manufacturing tax credit (45X) supports a greater stake in the critical minerals supply chains for American companies. These supply chains are currently dominated by China, who processes nearly 90% of all rare earth minerals. 45X made up more than 50% of the transferable tax credit market by the end of 2024.
Supporting Small Businesses: Transferability has also broadened capital access for mid-size developers, manufacturers and miners who lack access to tax equity investment. Historically, it has been very difficult for smaller projects to access tax equity. Transferability simplifies capital access for developers. It has led to new financing structures that widen the pool of capital for projects and lower financing costs.
Policy Recommendation: Protect Transferability
Congress must protect transferability to drive investment in new energy production and industrial projects across the U.S. Doing so will empower companies to unlock capital and scale new technologies. This tool strengthens domestic supply chains and ensures the U.S., not China, meets rising power demand and leads the next era of energy innovation.