Michael%20J.%20Goldman,%20Esq.

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• Michael J. Goldman, Esq.
• Donald Nimey, CFA, FRM
• Daniel J. Smith, CPA

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Energy Credit

• Section 48 of the Internal Revenue Code
• Energy property using solar energy to generate
  electricity, to heat or cool (or provide hot
  water for use in) a structure, or to provide
  solar process heat, but not to generate energy
  for the purposes of heating a swimming pool
• Must be new property

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Solar Energy Credit

• 30 of the facilitys basis, if placed in service
  prior to January 1, 2017
• 10 of the facilitys basis, if placed in service
  after December 31, 2016

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Solar Energy Credit

• Credit is claimed in the year the facility is
  placed in service
• (although it could be claimed based on progress
  expenditures over more than one year)
• Recapture possible for 5 years
• (credit vests 20 per year)

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Who Claims The Credit?

• The owner of the solar facility
• If there are multiple owners, it is shared in
  accordance with profits sharing
• The lessee

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What is the credit basis?

• Cost of the facility
• Not all items includible
• Cost Certification
• Fair market value of the facility
• Lease passthroughs
• Appraisal

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When are the tax benefits claimed?

• Placement in service
• Credits
• 50 bonus depreciation
• Depreciation

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Who participates, and who cannot participate?

• Corporate investors
• Individuals
• Issues with respect to at-risk and passive
  activity rules
• Tax-exempt entities
• Qualified allocations

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Exit strategies

• Flip
• Put/Call

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Special considerations

• Profit motive
• AMT
• Timing
• Rebates
• Utility subsidies
• Transfers of Interests

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Structures

• Self-owned
• Partnership
• Lease Passthrough / Inverted Lease
• Sale-Leaseback

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Sample ITC Single Tier Structure Flip
Tax Credit Investor, Corp.
Renewable Energy Project Developer
Investor contributes equity equal to 1.XX per
ITC at completion of project receives 99.99 of
Project Ownership, Depreciation, Residual Cash
Flow (after fees) and ITCs. A yield-based or
timing-triggered flip of partnership interests
typically precludes a put or call of Investors
interest in Project.
Retains 0.01 of Project Ownership, Depreciation
and Residual Cash Flow receives fees to strip
out some cash flow buys out Investor after flip
in partnership interests
Renewable Energy Project Owner, LLC
Utility/Grid/ Dedicated End-User
10 year fixed PPA Utility makes base year
payment of 0.XX/kWh with X annual escalations
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The Captive Energy Company
Equity Investor 99
Fund Manager 1
General Partner 1

Investment Fund 99

Developer

PPA/Lease Agreement
PPA/Lease Revenue
Managing Member 1
Energy Credit Investor 99

Dev. Fee
30 ETC
Installation Agreement
Systems Integrator/Installer
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Sample ITC Master Lease Structure
Tax Credit Investor, Corp.
Renewable Energy Project Developer
Investor contributes equity 1.XX per ITC at
completion of project receives pass-thru ITCs
and depreciation plus X cash priority for 5
years and XX put proceeds at end of 5th year
(both s based on contributed equity)
Retains 51 of Project Ownership and
Depreciation receives fees to strip out most
cash flow buys out Investor after 5 years
Master Tenant, LLC
10 year fixed PPA Utility makes base year
payment of 0.XX/kWh with X annual escalations
ITCs passed via Master Lease Master Tenant
operates equipment and makes lease payments to
Owner
Utility/Grid/ Dedicated End-User
Renewable Energy Project Owner, LLC
Contributes Investors equity into Owner
receives 49 of Project Ownership and
Depreciation for 5 years
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Sale Leaseback Structure
Solar Developer
Purchase Agreement
Solar Developer, LLC Lessee
Corporate Investor Lessor
Solar Developer may provide certain guarantees to
Corporate Investor and funds would be held in
escrow accordingly. Yield guarantees, OM,
Insurance etc. Funds released to Solar Developer
as guarantees burn off.
Lease Agreement
Sales Proceeds
Sale of SEFs and Lease Payments
Lessor is owner of SEF, Investment Tax Credits,
Tax Losses (Depreciation Deductions), Rebates,
RECs, Recipient of lease payments, Potential
residual buyout
PPA/Lease Agreements
Solar 1, LLC
Solar 2, LLC
Solar 3, LLC
Engineering, Procurement and Construction
Agreement (EPC)
Solar Installation Host 1
Solar Installation Host 2
Solar Installation Host 3
Systems Integrator/Installer
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Investment Tax Credits for SolarThe Basics
Tax Credit Investor Tax Benefits Tax Credit Investor Tax Benefits Tax Credit Investor Tax Benefits Tax Credit Investor Tax Benefits Tax Credit Investor Tax Benefits Tax Credit Investor Tax Benefits Tax Credit Investor Tax Benefits

Structure Structure Tax Credits Tax Deprec. Basis Adjust. Book Deprec.

Flip Yes Prob. Prob. Prob.
Sale/Leaseback Sale/Leaseback Yes Yes Yes Yes
Lease Pass-Through Lease Pass-Through Yes No No No
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Investment Tax Credits for SolarThe Basics
Tax Credit Investor Cash Benefits Tax Credit Investor Cash Benefits Tax Credit Investor Cash Benefits Tax Credit Investor Cash Benefits

Structure Structure Cash Inflow Cash Outflow

Flip PPA LPA Distribution
Sale/Leaseback Sale/Leaseback Lease Note Payments
Lease Pass-Through Lease Pass-Through PPA Lease Payments
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ARRA Grant Program

• Placement in service in 2009 or 2010
• Or placed in service before 2017 if construction
  commenced prior to 2011
• Application deadline is September 30, 2011
• Guidance forthcoming

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Contacts
Michael J. Goldman Nixon Peabody LLP 401 Ninth
St., NW Suite 900 Washington, DC
20004 202-585-8289 mjgoldman_at_nixonpeabody.com
Donald Nimey Reznick Group, P.C. 7700 Old
Georgetown RoadSuite 400Bethesda, MD 20814-6224
301-280-1846 don.nimey_at_reznickgroup.com
Daniel J. SmithNovogradac Company LLP303 West
Third StreetDover, Ohio 44622 330-602-4600dan.sm
ith_at_novoco.com
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