Market update: What happened in the 2Q2026 tax credit market?

After a volatile 2025 marked by policy uncertainty and lower market activity in the second half of the year compared to the first half, Crux anticipated that tax credit market deals would accelerate into 2026. 

To understand if that's actually the case, we spoke to Josh Price, Director of Intelligence & Research, about the 2Q2026 tax credit market.

Key takeaways:

• Prohibited foreign entity (PFE) compliance risk is a primary driver of pricing in the transferable tax credit market: legacy §45/§48 credits with no PFE exposure price highest, while current-vintage §§ 45Y, 48E, and 45X credits (which require compliance with material assistance and effective control rules) price lower.
• Transferable tax credit prices fell in 2Q2026 because deal volume surged quarter over quarter as buyers gained confidence in PFE compliance and their tax liabilities. More, and smaller and/or lower-quality, deals pulled the average price down.
• The historical buyer preference for investment tax credits (ITCs) reversed in the second quarter. While demand for production tax credits (PTCs) broke down in Q2 2026 as legacy §45 and §45Y deal flow dropped sharply, §45Z clean fuel PTCs and §45X advanced manufacturing PTC deals filled the gap.
• Access to bridge loan financing varies sharply by technology: utility-scale solar and battery storage have the deepest lender pools, while fewer than 24% of surveyed lenders would provide bridge financing to a §45X deal, for example. That gap is expected to narrow as these credits mature.

Tax credit market dynamics

What factors drove tax credit pricing in Q2?

Josh Price: I would probably point to three things: the first is exposure to prohibited foreign entity, or PFE, risk. Number two, seller quality — whether the seller of the credits is investment grade and has a strong balance sheet. Three, I would say market volume and liquidity. 

Prohibited foreign entity risk

From a PFE standpoint, you can really see a pricing dispersion. For example, legacy §45 production tax credits (PTCs) and legacy §48 investment tax credits (ITCs) are pricing on the higher end of the spectrum because they don't have any PFE risk. Going down the risk spectrum, you get to the §45U nuclear tax credit and the §45Z fuel production credit. The PFE provisions  haven't phased in yet for them, so they’re pricing at a premium. 

Moving down, you get older-vintage §45Y/§48E tech-neutral tax credits that entered service in 2025, before the 2026 implementation date for material assistance. And then continuing down, you have the current-vintage §§ 45Y, 48E, and 45X tax credits for advanced manufacturing that must comply with material assistance, ownership, and effective control rules and are pricing lower. 

There are some puts and takes — if it's an investment-grade (IG) seller selling one of these credits, it could price higher. But at a high level, you can really track pricing to PFE risk and exposure. 

Seller quality

Second, seller quality. We still see a premium for investment-grade sellers relative to non-IG, particularly for those tech-neutral tax credits that carry increased PFE risk. If you can have an IG-backed indemnity — because insurance won't cover it — you can get a premium. So as always, seller quality matters a ton when it comes to pricing. That said, IG pricing power has come down broadly since 2025, although the delta between IG and non-IG credits has widened.

Market volume and liquidity

Last, on liquidity. If you look at the total amount of deals in the first quarter, particularly for 2026 credits, they were extremely limited. Buyers were still trying to figure out their 2025 tax liability in the first quarter, and so, coupled with the new PFE risk that came on in 2026, we saw really limited deal flow overall in Q1. Looking at residential solar 2026 credits or advanced manufacturing 2026, for example, there was a super thin market. We saw some high prices by IG sellers that could command high values and have an outsized impact on average prices. 

But then as we moved into the second quarter, we saw a lot of more deal flow, particularly for 2026 credits, which brought overall pricing down. I want to emphasize that looking at the pricing data only tells part of the picture. From tax credit prices, you could infer that the second quarter was worse than the first quarter. It was actually meaningfully more active in terms of deal flow as market participants got more comfortable with PFE and buyers grew confident in their tax liability through the rest of the year. That liquidity is the reason that pricing is down quarter over quarter — there were more transactions, with lower-quality sellers and smaller deals that impacted the overall mix.

"It was actually meaningfully more active in terms of deal flow as market participants got more comfortable with PFE and buyers grew confident in their tax liability through the rest of the year."

‍What kind of tax credits are buyers focused on? 

Josh Price: Q2 is really where we saw the pivot from buyer interest in previous-year tax credits to current-year tax credits. Historically, you'll know your tax liability for the year as you start the year, and you'll start picking at your current-year vintage credits. That really didn't happen until the second quarter. Going into 2026 with the post-One Big Beautiful Bill (OBBB) changes to tax liability, to R&E expenses, all these other impacts on buyers, it took a while for corporations to figure out what their 2025 tax liability would be. Once you figure out what your 2025 tax liability is, that's probably a decent way to model your 2026 liability. Consequently, we saw an uptick both in 2025 purchases and 2026 purchases in Q2. 

What surprised you most about how the market moved in the second quarter? 

Josh Price: The limited amount of PTCs that transacted is pretty interesting. Historically, ITCs have dominated the market, but the proportion has been around 55%/45%. The number of legacy §§ 45 and 45Y tax credits in the market has just kind of fallen off a cliff, possibly related to wind permitting. We've seen other PTCs, like §45Z and §45X, fill that gap, but it was interesting to see the limited amount of deal flow related to legacy §45 and §45Y. 

Data centers are driving a lot of new electricity demand. How is that showing up in the deals and pricing that you're tracking? 

Josh Price: It's definitely part of the overall theme of market growth. I talked about a lot of deal flow in Q2, a lot of liquidity in the tax credit market. That's in part driven by load demand for these projects, which is primarily driven by data centers. 

It’s not having as much of a direct impact on transferable tax credit transactions because the portion of the market today that is selling tax credits specifically tied to data center development is not huge. We've seen a handful of battery storage deals associated with data centers that want to monetize tax credits, but for the most part, it's more standard utility-scale solar developers or even advanced manufacturing that's somewhat distant from the actual offtake. 

The clean energy finance landscape

The data shows that debt financing is easier to come by for some technology types than others. What is driving that gap, and what do you think will happen to it as we move forward? 

Josh Price: In the second quarter, we went out to about 50 different lenders, both private credit and banks across the lending spectrum, to figure out how they would price tax credit bridge loans based on specific customers. We got the pricing information for a utility-scale, 100-megawatt, committed bridge loan as a baseline, and then we toggled it based on technology type, whether it was uncommitted, and whether it was a tax equity bridge loan, a transfer bridge loan, or a pref equity bridge loan to try to figure out how these different variables can impact the overall price. 

We found that utility-scale solar and storage have the highest level of capital availability when it comes to tax credit bridge loans. Lenders are very comfortable with ITCs, very comfortable with those technologies. 

At the other end of the spectrum, you have clean fuels, where just under 15% of lenders said they would provide bridge financing for a §45Z credit. Twenty-four percent of lenders said they would provide bridge financing to §45X manufacturing tax credits. A lot of the lenders are more familiar and comfortable with solar and with ITC dynamics, whereas §45Z is a brand new credit that just came into effect in 2025 and is still being implemented. The regulatory uncertainty and newness of the credits have made it harder to finance any bridge lending. 

But we are seeing increased openness. We're into the second year of existence for the §45Z tax credit. There are still policies and regulations being implemented — the GREET model is getting updated, for instance. As those dominoes start to fall and developers demonstrate this is a trustworthy, mature technology — “I'm an ethanol plant. I've been operating since the 1980s” —  I think that lenders will grow more comfortable. 

State-level policies seem to be pulling in a lot of different directions depending on the state and the technology type. What can market participants take away from that state-level policy picture? 

Josh Price: It's extremely volatile, not just at the federal level, but at the state level, too. To name some examples, there's been a long-time push at the state level to create new clean fuel programs. California is the longest-standing and largest market that provides incentives for clean fuel producers to sell into California. Washington and Oregon also have programs. New Mexico recently launched one, Hawaii became the newest state, so now there are five programs. New York and New Jersey have considered these programs for years. But with the higher-than-average gasoline and diesel prices over this year, it's been a lot tougher for state policymakers to prioritize transportation decarbonization over affordability. That's been a big tension we've seen on the clean fuel side. 

That affordability issue has also been front and center on the power side and the electricity side. Different states are taking different approaches. We've seen Texas, for example, take a leading role in trying to integrate data centers into the grid while ensuring adequate cost protections and ensuring that they're not double-counting the data center customers in the load-growth forecast, and then creating new rules to integrate them quickly while supporting flexible operations so they're not adding to peak demand. PJM as a region is also following course; they've had some approvals from the Federal Energy Regulatory Commission (FERC). 

Looking forward to the 2H2026 market

What sectors do you feel optimistic about heading into the second half of the year? 

Josh Price: I think the §45U nuclear production tax credit. Nuclear generally is having a good time in terms of new investment and policy support, but specifically on §45U, we are expecting clarity from the US Department of the Treasury sometime this summer on the calculation of gross receipts. Basically, what's the value of that credit? How do you measure that? Right now most existing nuclear plant owners who are selling these credits are relying on spot prices, which seems to be the industry standard, but we don't have any exact direction from Treasury saying you can do that. Once we get those rules from Treasury, that should help buyers get more comfortable with that credit type. 

I'd also say §45Z. It's had a great year. We are expecting additional regulations clarifying some of the carbon intensity calculations for renewable natural gas and a rule finalizing the regulations implementing §45Z. I think that'll all be done by the end of the year. These credits are already performing well, but the upcoming catalysts are all positive. 

I would also be remiss not to note that we do expect PFE rules to come out either at the end of Q3 or in Q4, which should serve as an unlock for the whole market, particularly §48E and §45Y. 

Is it accurate to say that PFE guidance is the thing you’ll be watching most closely for the rest of 2026? 

Josh Price: That’s it. Any tea leaves on PFE notice or proposed rulemaking — when it's coming out, what the content could be — that's the main thing on everyone's mind. It's not so much what the rules are, but having rules that folks can underwrite to is critical. Right now it's a bit of a black box on the two critical pieces of how to define ownership when it comes to PFE rules and how to define effective control when it comes to various contracts. Clarity on those would be extremely meaningful for the market. 

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Further reading

Learn more about the popular §45Z tax credit with our guide to clean fuels tax credits. 

Understand the differences between legacy §45 and §48 tax credits and the tech-neutral §45Y and §48E tax credits. 

Coming soon: Check out our resource hub for the latest on prohibited foreign entity guidance.