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Alert to Taxpayers: New Scam Targets Clean Energy Tax Credits

Ruth Singleton
Published Date:
Jul 8, 2024


The IRS is alerting taxpayers about a new scam involving buying clean energy tax credits.

This scam entails unscrupulous tax return preparers who misrepresent the rules for claiming clean energy credits under the Inflation Reduction Act .

Under the transferability provisions of the Inflation Reduction Act, taxpayers can buy eligible federal income tax credits from investments in clean energy to offset their tax liability. But these unscrupulous return preparers are claiming purchased clean energy credits that the taxpayer is ultimately unable to benefit from.

The victims of the scam are generally individuals who file Form 1040. The dishonest preparers file returns in which individuals improperly claim clean energy credits to offset income tax from sources such as wages, Social Security and retirement account withdrawals.

Individuals purchasing clean energy tax credits are subject to the passive activity rules for any purchased credits. They generally can only use purchased credits to offset income tax from a passive activity. Because most taxpayers do not have passive income and a passive income tax liability, most investment activities are not considered passive.

“This is another example where scammers are trying to use the complexity of the tax law to entice people into claiming credits they’re not entitled to,” said IRS Commissioner Danny Werfel. “Taxpayers should be wary of promoters pushing dubious credits like this and others. The IRS is watching out for this scam, and we urge people to use a reputable tax professional before claiming complex credits like clean energy.”

Individual taxpayers who fill victim to the scam and claim inappropriate credits risk future compliance action by the IRS. They are responsible for repaying the inflated credit, plus interest and possible penalties.

The IRS recommends that taxpayers considering buying clean energy credits consult a trusted tax professional for advice on whether they are eligible to buy the credits and claim the tax benefits. They should also understand how the limitations under the passive activity rules, and other portions of the tax code, may apply to their particular tax situation.

More information about clean energy can be found on the Inflation Reduction Act of 2022 page on


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