TIL that tax credits can be sold/transferred, (once I think). I had a knee jerk reaction to this, and I’m struggling to understand how that benefits anyone.
Is there any risk associated with buying a credit? It honestly just seems like a scam, but I’ll admit that I’m not very educated when it comes to these things. I tried to research it a bit, and it seems like the main risk would be a recapture.
In: Economics
I used to work in architecture and real estate development, and one of the things I did a fair bit of was historic renovations, which the government incentivized via tax credits.
It was great for us because we could basically pre-sell the tax credits to a big bank, and then use that money to help fund the project. On a bigger project, that could be a few million dollars, and since it wasn’t a regular loan, we didn’t have to pay interest on it or anything like that.
Of course the risk there would be if for some reason when you completed the renovation work if the final result didn’t qualify for those tax credits, but as long as you worked decently well with the authorities in charge of that stuff it was pretty low risk. Definitely heard of a few other companies that screwed that up though and ended up in a big legal mess.
It can be useful if for example you have tax credits for stock losses but don’t have offsetting gains. If the credits were allowed to be sold you could sell them to someone with stock gains to reduce the amount of your stock loss.
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