Tribal tax credits for sale: what the IRS says is real

On September 18, 2026, the IRS issued news release IR-2026-112 warning taxpayers, tribal communities, businesses and tax professionals about promoters selling "Tribal Tax Credits." The agency's position is blunt: these credits "do not exist under federal law."

Per the release, the same product is also marketed as "Native American Tax Credits" or "Sovereign Tribal Tax Credits." Whatever the label, the offer is to buy tribal tax credits from an entity claiming a tribal connection, pay well under face value, and erase a federal tax bill or produce a refund.

That offer lands differently in Oklahoma. Our state is home to many tribal nations and tribally owned businesses that are part of ordinary commerce, so tribal branding on a tax product doesn't sound exotic here. It sounds plausible.

The release also names tribal communities among those it's warning, and its title describes the scams as targeting the tribal community. The promoters borrow tribal identity to sell the product; tribes and their members are the ones being targeted.

Below, we check the claims the release describes, plus one assumption buyers tend to make, against what federal law provides.

Claim: "Tribal tax credits are a federal program"

They aren't. A federal income tax credit exists only because a statute creates it and defines who earns it.

The IRS release rejects each authority promoters point to. One is a supposed agreement between federal agencies and certain tribal governments that converts tribal trust fund payments into federal tax credits; the IRS says no such agreement exists. Executive orders and Code provisions cited for the credit don't create one either, the release says.

A related claim is that a company owned by tribal members can receive tax credits because of its sovereign status. Tribal sovereignty is real, but the release is direct that no federal statute or agreement creates a credit on that basis.

What real tribal participation in federal credits looks like

There is a legitimate way tribal governments take part in federal energy credits, and it looks nothing like the pitch. IRS Publication 5817-F, revised in April 2024, describes elective pay, which lets an Indian tribal government that owes no federal income tax still benefit from certain clean energy credits. Under Section 6417 of the Code, the government elects to be treated as having made a tax payment equal to the credit.

That is a tribal government claiming a payment for its own qualifying property. Nobody else's tax bill is involved.

The two tracks don't blend, either. The transfer statute defines an eligible seller as a taxpayer that is not on the elective pay list, and that list names Indian tribal governments. How a particular tribally owned company fits is a fact question we won't generalize about.

Claim: "Credits are transferable now, so this is just another sale"

This one works because the premise is half true. For tax years beginning after 2022, Section 6418 of the Code lets an "eligible taxpayer" elect to transfer all or part of an "eligible credit" to an unrelated taxpayer for cash.

The list is closed

The statute lists eligible credits by Code section. As the section reads on Cornell's Legal Information Institute, the list covers credits under Sections 30C (alternative fuel vehicle refueling property), 45 and 45Y (electricity production), 45Q (carbon oxide sequestration), 45U (nuclear power production), 45V (clean hydrogen), 45X (advanced manufacturing production), 45Z (clean fuel production), 48 and 48E (energy and clean electricity investment), and 48C (advanced energy projects).

Public Law 119-21 added a twelfth item in 2025: the small agri-biodiesel producer portion of the Section 40A biodiesel credit, for fuel sold or used after June 30, 2025.

One reading note: the copy of the Treasury regulation we opened still lists eleven credits, so on the twelfth we're relying on the statute as amended. Either way, nothing on the list is a tribal credit.

A real transfer leaves a paper trail

Start with the seller. Only the taxpayer that generated the credit can sell it, and the regulations require a separate election for each "eligible credit property," meaning the specific unit of property behind the credit.

Before any transfer, and as a condition of it under the regulations, that seller has to complete pre-filing registration through the IRS's online tool and obtain a registration number for each property. The IRS recommends registering at least 120 days ahead of filing, and Publication 5884 says a number is valid only for the year it was issued for.

The number then has to appear on both sides: on the seller's return and on the Form 3800 filed with the buyer's return. Under the regulations, the IRS treats the election as ineffective if the seller leaves the number off, and the credit is disallowed to a buyer that leaves it off.

Think of the registration number the way you'd think of a vehicle identification number. It tells you which vehicle is being sold; it doesn't tell you the seller holds good title or that the engine runs. The regulations say as much: receiving a number does not, by itself, mean the seller is eligible to transfer anything.

Payment is the next tell. The statute requires the buyer to pay in cash, which the regulations define to include checks, wires, ACH transfers and similar bank transfers of immediately available funds. The payment isn't included in the seller's gross income and isn't deductible by the buyer.

There's also no resale. A credit can be transferred once, and a buyer can't elect to transfer it again, so anyone offering credits acquired from a third party is describing a deal the statute doesn't allow.

Finally, the parties complete a transfer election statement. It's a written document identifying both taxpayers, the credit, the amount transferred, the cash paid and the registration number, and each side attaches it to its return. The election has to be made by the return's due date, including extensions; it can't be made for the first time on an amended return, and once made it's irrevocable.

The limit that surprises individual buyers

According to the IRS's transferability FAQs, individuals, estates, trusts, closely held C corporations and personal service corporations can buy credits but are subject to the passive activity rules of Section 469. Generally, the FAQs explain, that means purchased credits can offset only tax on passive income, which they note most taxpayers don't have. Even a genuine, registered credit may do little against tax on wages.

Claim: "It's backed by Section 45D and the New Markets Tax Credit"

The New Markets Tax Credit is real. It just isn't something you buy off a shelf.

Under Section 45D, the credit goes to a taxpayer who holds a "qualified equity investment" in a qualified community development entity. That's a domestic corporation or partnership, certified by the Treasury, whose primary mission is serving or providing investment capital for low-income communities. The investment has to be acquired at original issue for cash.

The credit is then claimed across seven credit allowance dates: the day the investment is made and its next six anniversaries. An investor earns it by putting capital into a certified entity and leaving it there.

Section 45D doesn't appear on the Section 6418 transfer list, and the IRS release says the program has no relationship to the credits being promoted.

Claim: "The IRS accepted last year's return, so it works"

The release addresses this directly: acceptance of a return doesn't mean the IRS has approved a credit claimed on it.

Here is the order things usually happen in. A return is processed, and a refund may go out, well before anyone at the IRS looks at the substance of a particular line. Examination, if it comes, comes later and on the IRS's schedule, which we describe in our piece on how the IRS decides who gets audited.

In schemes of this type, the first year's uneventful processing typically becomes the sales pitch for the second year. By the time a notice arrives, the taxpayer may have several returns at issue instead of one.

Assumption: "You paid a discount, so the risk stays with the seller"

Even in a legitimate transfer, the opposite is closer to true. Section 6418 treats the buyer, and not the seller, as the taxpayer with respect to the transferred credit.

If the buyer claims more than the credit that was otherwise allowable, the statute calls the difference an excessive credit transfer. The buyer's tax goes up by that excess plus 20 percent of it. Reasonable cause removes only the 20 percent addition; the excess itself is still owed.

The regulations name the kinds of facts that can show it: review of the seller's records, reasonable reliance on outside specialists' reports, reasonable reliance on the seller's representations, and review of audited financial statements filed with the SEC. Reasonable cause, in other words, is built from diligence the buyer did before the purchase.

That allocation is why legitimate buyers do their checking before they wire money. The regulations require the seller to hand over minimum documentation that validates the property exists and substantiates the qualifying costs or production behind the credit.

Indemnities come from the contract, not from the statute. Nothing in the regulations we read makes the seller reimburse the buyer.

Now apply all of this to a credit that doesn't exist. There is no eligible credit and no valid election, and the regulations say an ineffective election means no transfer occurred under Section 6418 at all. The buyer is simply a taxpayer who claimed a credit the law doesn't provide.

What a real deal file holds, and what a scheme hands you

When a business owner brings a CPA a legitimate credit purchase, the file usually answers the basic questions before anyone asks them:

• A named seller that generated the credit, and a specific project that can be identified and visited.
• A credit that appears on the Section 6418 list.
• An IRS registration number for that property and that tax year.
• A draft transfer election statement and the documentation behind the credit amount.
• A cash price payable to the seller, with contract terms on who bears a disallowance.

The scheme file looks different, and the warning signs in the IRS release match it. The price is far below the credit's supposed value, and supply is said to be limited, so the decision has to be made now. Legal support is an agreement that isn't publicly available or an opinion that can't be verified with the attorney named on it, and basic information waits on a signed nondisclosure agreement.

We'd add the statutory tells. No registration number and no identifiable facility. A seller that isn't the taxpayer that earned the credit, or a payment arrangement other than cash to that seller.

Credit-purchase pitches of any kind tend to arrive through an intermediary, late in the year or during extension season, when a large balance due is already in view. That's why the checking matters most before money moves.

If a return already claims one

The release describes the consequences of participating in an abusive scheme in plain terms. The correct tax is assessed with penalties and interest, and fines or imprisonment are possible.

More than one civil penalty can attach to a disallowed credit, and which applies depends on the facts. The accuracy-related penalty in Section 6662 is 20 percent of the portion of an underpayment attributable to, among other things, negligence or a substantial understatement of income tax. Section 6676 separately imposes a 20 percent penalty on the excessive amount of a claim for refund or credit, unless the claim is due to reasonable cause.

Promoters and preparers have their own exposure. Section 6700 reaches a person who organizes or sells a plan and makes a statement about a credit's allowability that the person knows or has reason to know is false; the penalty is 50 percent of the gross income derived from the activity. Section 6694 penalizes a return preparer for an understatement due to an unreasonable position, at the greater of $1,000 or 50 percent of the income derived from the return, absent reasonable cause and good faith.

Why timing changes the posture

Under the Treasury regulations on accuracy-related penalties, additional tax reported on a "qualified amended return" is generally treated as if it had been shown on the original return, which shrinks the underpayment the penalty is measured against. The treatment doesn't extend to a fraudulent position on the original return.

The wrinkle is how the window closes. An amended return stops qualifying once the IRS first contacts the taxpayer about an examination of that return. It also stops qualifying once the IRS first contacts any person about a promoter-penalty examination for the activity that produced the claimed benefit, and a taxpayer may not know that second event has happened. The regulation lists other cut-off events as well.

So correcting a return before the IRS raises the issue is, as a general matter, a different position from waiting. That isn't a promise about any outcome; whether and how to correct a return is a judgment for the taxpayer's own advisers on the actual facts.

The release also notes that promoters may urge people who already claimed the credit to challenge the IRS during an audit. That advice comes from someone whose exposure isn't the same as the taxpayer's, which is one reason the roles described in working with your CPA and your attorney matter here.

Two fair points, one from each side

On the government's side, the concern is legitimate. A fake credit costs the Treasury money, and it does damage closer to home as well: it casts suspicion on real tribal enterprises and on businesses selling real credits under the statute.

Taxpayers deserve equal candor. Often, the person with one of these credits on a return didn't go looking for a scheme. They relied on a preparer who presented it as routine, and they may be out the purchase price on top of the tax.

Reliance and reasonable cause arguments exist for those taxpayers, and they are fact-dependent. What the taxpayer was told, by whom, what that person stood to gain, and what the taxpayer did to check all tend to matter. We walk through the general framework in our piece on IRS penalty relief and reasonable cause.

Anyone pitched one of these products can also report it; the release points to Form 14242, Report Suspected Abusive Tax Promotions or Preparers.

If you or your CPA have been offered a credit purchase that doesn't match the statute, or a filed return already carries one of these credits, that's a good moment to talk it through. You can reach us through the contact page or at our Oklahoma City office. A conversation at the front end usually costs far less than untangling the problem afterward.

This article is general information about Oklahoma, Texas, and federal law, not legal advice, and it does not create an attorney-client relationship. Facts matter; talk to a lawyer about yours.