REITs, MLPs and YieldCos
Recorded on Thursday, October 3, 2013:
1:00 - 2:30 pm Eastern US Time
The United States renewable energy industry is abuzz with talk of REITs, MLPs and YieldCos. This panel will explain what these three vehicles are, how they can be deployed under current law and initiatives to expand their application.
The panel will explain the fundamental principle to understand about these vehicles: if an entity’s equity is publicly traded, the entity must in most instances be taxed as a corporation (i.e., a “c” corporation). Being taxed as a corporation means the imposition of two layers of tax: the entity pays tax and its shareholders pay tax on dividends and gains from the sale of the stock. This general rule applies even if the entity takes the state law form of a limited partnership, a limited liability company or a trust. The REIT and MLP rules are special exceptions to this principle.
REITs and MLPs are able to be publicly traded while avoiding the entity layer of tax. Thus, they are the holy grail of corporate finance: relatively low cost and highly liquid capital from retail investors with a single layer of tax. In contrast, a YieldCo is an entity that is publicly traded, taxed as a corporation but that plans to manage its tax position to limit the tax it and its shareholders incur.
The panel will explain how each of these three investment vehicles can be used for renewables under current law; however, REITs and MLPs are subject to difficult tax limitations which will be discussed. The panel will explain that YieldCo is a publicly traded corporation that intends to manage its tax profile and it is not seeking to satisfy any particular definition in the Internal Revenue Code. The panel will highlight investment banking rules of thumb for a YieldCo IPO.
David K. Burton, Partner, Akin Gump Strauss Hauer & Feld LLP
Amit Kalra, Partner, Troutman Sanders LLP
Eli M. Katz, Partner, Chadbourne & Parke LLP
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CANCELLATION, REFUNDS & CREDITS
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