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SOLAR TAX CREDITS

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Owner syndicates. Owner maintains/repairs (and gets warranties) SOLAR COMPANY OWNS ... Solar company syndicates. Power purchase agt./possible buy-out ... – PowerPoint PPT presentation

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Title: SOLAR TAX CREDITS


1
SOLAR TAX CREDITS
  • Green Homes and Sustainable Communities
  • August 7 and 8, 2008
  • Jeffrey S. Lesk
  • Nixon Peabody LLP

2
Affordable Housing
New Markets
Tax Credits
Historic
Renewable Energy
3
Affordable Housing
New Markets
Tax Credits
Historic
Renewable Energy
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13
Why Solar?
  • Escalating energy costs
  • Uncontrollable costs
  • Unpredictable costs
  • Caps on rental income

14
Sizing and SelectingSolar Array
  • Consult with Engineer
  • Building Footprint/Configuration
  • Electrical Demand Load
  • Who pays utilities?
  • Cost (consider tax credits, rebates, net
    metering)
  • Amount of available LIHTCs

15
Designing for Sola r
  • Building Footprint/Configuration
  • Lot Size
  • Land Use Restrictions
  • Battery Back-up/Inversion Equipment (design and
    location)
  • Integrated Design
  • Only part of the energy reduction puzzle

16
How the Solar Credit Works
  • SOLAR ENERGY INVESTMENT TAX CREDITS (Section 48
    of IRC)
  • INVESTMENT 30 of cost of facility
  • All in year placed in service
  • Investment in qualifying equipment
  • TCs to owner of equipment

17
  • Recapture potential 5 years (20 vesting/year)
  • Reduced by grants, tax exempt bonds, subsidized
    energy financing
  • Reduces depreciable basis by 50 of the credit
    (depreciate 85 of equipment)
  • Depreciate over 5 years

18
  • Placed in service by 1/1/09
  • Cost Certification by third-party accountant
  • Submission to IRS on Forms 3468 and 3800 (General
    Business Credits)

19
Structures
  • SOLAR COMPANY OWNS
  • Owner purchases cheap energy hedge
  • Solar Company qualifies for tax credits
  • Solar company syndicates
  • Power purchase agt./possible buy-out
  • DEVELOPER/OWNER OWNS
  • Owner gets free energy
  • Owner qualifies for tax credits/depreciation
  • Owner syndicates
  • Owner maintains/repairs (and gets warranties)

20
COMBINING PTCs and LIHTCs - OWNERSHIP MODEL
21
Combination of Solar Credits LIHTC 9 Credits
22
Solar Added to a 4 LIHTC
23
Issues with Combining
  • Viewed as double dipping?
  • Per-unit cost and subsidy caps in QAPs
  • QAPs encourage --- but how much is too much?
  • Is it commercial property (excluded from basis)
    sale of energy, RECs?
  • Includable in development cost from which
    Development Fee is based?
  • Utility allowance issue
  • Coordination with other project documents
  • Is there a market for the credits?

24
Investor Reaction
  • First year boost
  • 5-year ACRS (not all value)
  • Utility savings
  • More predictable energy costs
  • Low recapture potential
  • Qualified selection, installation, maintenance
  • Adequate Insurance
  • Carriage turns back into a pumpkin 12/31/08
  • Green is good

25
Thank you!
  • Jeffrey S. Lesk
  • jlesk_at_nixonpeabody.com
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