Tax Credit Insurance for Energy Projects: PFE Exclusions, Recapture, Diligence, and Claims

This CLE webinar will discuss using tax credit insurance in transferable energy credit transactions. The panel will examine policy coverage and exclusions, recapture and prohibited foreign entity (PFE) risks, underwriting and diligence, basis exposure, and managing claims.

Tax credit insurance has become an important tool for transactions with transferable clean energy tax credits. These policies can protect against risks arising from issues in credit qualification, basis, structure, or recapture. The scope of insurance coverage may vary widely. Policy exclusions, periods, limits, and claim provisions may leave the buyer or sponsor with significant exposure.

Recent changes to the clean energy credit framework add further complexity. Section 50(a)(4) creates a new 10-year recapture rule for certain payments involving specified foreign entities. Because the Section 6418 regulations governing transferred credits were adopted before this new rule, they do not clearly address how the new recapture provision applies when a credit has been transferred. Notice 2026-15 provides some interim guidance on PFE restrictions and material assistance but does not resolve that uncertainty.

Further, an insurer will not simply cover a tax credit because the parties believe it qualifies. The insurer wants documentation supporting the credit's validity and calculation. PFE compliance, supplier certifications, eligible basis, developer fees and profit, and other qualification issues may impact credit availability and insurability. The 2026 Alta Wind decision provides an object lesson in substantiating eligible basis and the documentation and valuation support insurers may expect when underwriting basis risk.

Listen as our panel explores tax credit insurance coverage and exclusions, ways to allocate uninsured risk between parties, how to conduct and document due diligence, and more.