Tax Implications and Planning for Renewable Energy Projects
Recorded on Tuesday, December 9, 2014:
To purchase a copy of the recording, please call 818.888.4444
1:00 - 2:15 pm Eastern US Time
Renewable energy developers are looking for ways to reduce the cost of capital for their projects. Five yield cos have been brought to market and others are in the works. The IRS ruled that an Arkansas telephone company could put its wires in a REIT and lease them back. At least 41 US corporations have reincorporated in lower tax countries as a way of reducing their US corporate tax bills.
As many as 14,000 megawatts of wind farms were under construction at the end of 2013 in time to qualify for tax credits, according to the American Wind Energy Association. The tax equity market has shied away from financing projects that relied on a small amount of physical work at the project site or a factory to start construction. The IRS issued additional guidance in an effort to break the logjam on August 8. Tax counsel and the tax equity community are evaluating what the IRS said. The next difficult issue will be in what circumstances projects that slip into 2016 or 2017 will be considered under construction in late 2013 since it is not enough merely to have started construction, but work on the project after 2013 also must be continuous.
Tax basis for calculating tax benefits remains an area of dispute between project developers and the government. There are 20 lawsuits pending against the US Treasury filed by developers who feel they received smaller section 1603 payments than they were entitled. The lawsuits raise four significant issues. Some of the cases could start to be decided later this year. Basis issues are also starting to come up in some IRS audits.
Congress is expected to extend some expiring or expired tax benefits in late November or December in a “lame-duck” session after the November elections. One of the issues in play is whether to allow renewable energy developers another two years through December 2015 to start construction of new wind, geothermal, biomass, landfill gas, incremental hydroelectric and ocean energy projects to qualify for tax credits. The wave of corporate inversions will put pressure on the next Congress that takes office in 2015 to address corporate tax reform. Any corporate tax reform is expected to lead to repeal of accelerated depreciation and a scaling back of some tax credits. The US Treasury is focused in the meantime on stopping corporate inversions. Some of the ideas in play could affect European, Chinese and other foreign companies invested in the US renewable energy sector.
This hour and 15 minute webinar will consist of an open forum: 15-20 minutes on the latest developments and the rest of the session will be an open floor to deal with any and all issues in deals.
Keith Martin, Partner, Chadbourne & Parke LLP
John J. Marciano III, Partner, Chadbourne & Parke LLP
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