Photo of David K. Burton

David K. Burton is a partner in Mayer Brown's New York office and a member of the Tax Transactions & Consulting practice.  He leads Mayer Brown's Renewable Energy group in New York.  He advises clients on a wide range of US tax matters, with a particular emphasis on project finance and energy transactions. In addition, he also advises clients on tax matters regarding the formation and structuring of domestic and offshore investment funds.

Read David's full bio

We were pleased to participate in Power Finance & Risk’s (PFR) Tax Equity Roundtable.  We were joined in the roundtable discussion by Rich Dovere of C2 Energy Capital, Marshal Salant of Citi, Kathyrn Rasmussen of Capital Dynamics Clean Energy and Infrastructure, Pedro Almeida of EDP Renewables North America and as moderator PFR’s editor, Richard Metcalf.  The topics covered included tax equity structuring, tax reform, tax equity syndication and the challenges and opportunities associated with distributed generation solar.  We are pleased to be able to make available to our readers PFR’s report: PFR Tax Equity.

Here’s the presentation on the Qualified Opportunity Zone rules that was used in today’s webinar. It addresses the Qualified Opportunity Zone proposed regulations and revenue ruling that the IRS released on October 19 that are discussed in our previously posted white paper of October 23.  I thank my Mayer Brown colleagues Mark Leeds and Maria Carolina Grecco for their collaboration on the presentation and the webinar.

On October 19, 2018, the US Internal Revenue Service released initial guidance on the Qualified Opportunity Fund (QOF) rules. The QOF rules allow US taxpayers to defer capital gain taxation by investing an amount equal to the gain in a QOF within 180 days of the gain recognition event. While not answering every question, the initial set of rules provides a working roadmap for implementing QOF transactions. Please join me and my Mayer Brown colleagues Mark Leeds and Maria Carolina Grecco for a webinar to discuss the new rules.

Our white paper on the new rules is available at white paper link.

United States
12:00 p.m. – 1:00 p.m. EDT
11:00 a.m. – 12:00 p.m. CDT
10:00 a.m. – 11:00 a.m. MDT
9:00 a.m. – 10:00 a.m. PDT

Europe
5:00 p.m. – 6:00 p.m. CEST
4:00 p.m. – 5:00 p.m. BST

Approval for CLE credit is pending.

Click Here to Register

For additional information, please contact Shilpa Patel at spatel@mayerbrown.com.

Mayer Brown’s David K. Burton and Jeffrey G. Davis both Tax Transactions & Consulting partners and part of the firm’s Renewable Energy group co-hosted a heavily attended webinar on how tax reform is impacting the tax equity market and certain renewable energy structures with Vadim Ovchinnikov, CFA, CPA and Gintaras Sadauskas of Alfa Energy Advisors. Topics addressed, included: The latest industry trends such as, the feds raising interest rates; the increase in project M&A activity for both development and operating assets; plans for large offshore wind projects in several east coast states; changes in PPA’s and revenue models; compressed margins and why developers and investors are moving towards commercial and industrial (C&I) solar projects. Additional topics, included:

  • New bonus depreciation rules and impact on tax equity transactions and modeling;
  • Compressed financing margins for wind and solar;
  • Strategies for “starting construction” to qualify for the maximum investment tax credit and rules for transferring safe harbored equipment between wind projects; and,
  • An overview of HLBV GAAP accounting for tax equity investments as a challenge for public companies.

Over 480 clients and contacts registered for the co-hosted webinar. Due to the volume of interest and post-presentation questions, we would like to share the slides from the presentation: webinar presentation.

We are reviewing and preparing responses to all of the questions that were submitted electronically during the webinar.  We will be sharing those questions with our answers in a subsequent blog post.

Here’s a link to Mayer Brown’s white paper – Window of Opportunity: the IRS Releases Initial Guidance on Qualified Opportunity Zone Rules.  The white paper discusses the proposed regulations and a revenue ruling that were released by the IRS on October 19.

The new rules address a number of issues that investors and sponsors were waiting for guidance on.  The IRS has promised further guidance to address issues that remain in need of clarification.

On the heels of this guidance, it is expected there will be many Qualified Opportunity Funds formed, considerable capital invested in them by taxpayers seeking to defer tax on capital gains and significant investment by them in Qualified Opportunity Zones.

 

I was a panelist at an event held at Mayer Brown’s New York office addressing Environmental, Social and Governance (“ESG”) investing on October 4.  On the panel, I addressed the tax benefits associated with certain ESG investments, with a focus on Qualified Opportunity Zone Funds and solar investment tax credits (ITC).  Here are the slides that I presented to describe each on a high level: Qualified Opportunity Zone and ITC Slides for ESG Event.

The solar ITC slides ignores tax equity structures and assumes outright ownership, so the numbers are a little simplified relative to many transactions in the market.

We are still waiting on Qualified Opportunity Zone regulations.  Currently, the regulations are being reviewed by the Office of Management and Budget and are expected to be released any day.

On the solar front, we have heard from an IRS attorney that the IRS has resumed work on the regulations defining “energy property” for ITC purposes, but the regulations are not expected to be released until 2019.

 

Please join Mayer Brown and Alfa Energy Advisors for a webinar.  The webinar will address how tax reform is impacting the tax equity market and certain structures in particular.  Additional topics include:

  • The latest industry trends
  • New bonus depreciation rules and their impact on tax equity transactions and modeling
  • Compressed financing margins for wind and solar
  • Strategies for “starting construction” to qualify for the maximum investment tax credit and rules for transferring safe harbored equipment between wind projects
  • An overview of HLBV GAAP accounting for tax equity investments as a challenge for public companies

Register Here >>

CLE credit is available.

Tuesday, October 23, 2018          

United States

1:30 p.m. – 3:30 p.m. EDT

12:30 p.m. – 2:30 p.m. CDT

11:30 a.m. – 1:30 p.m. MDT

10:30 a.m. – 12:30 p.m. PDT

Europe

8:30 p.m. – 10:30 p.m. CEST

7:30 p.m. – 9:30 p.m. BST

 

Below are soundbites from panelists from the Renewable Energy Finance Forum (“REFF”) Wall Street on June 19 and 20. The mood was upbeat.  There were many references to a “wall of cash chasing projects” as a metaphor for how competitive it is to win bids to finance or purchase projects.

The soundbites are edited for clarity and are organized by topic, rather than in chronological order.  They were prepared without the benefit of a transcript or recording.

The topics covered include the tax equity, debt and M&A markets, C&I solar, offshore wind, bonus depreciation, storage, YieldCos and others.

Tax Equity Market

“Solar tax equity is 30 to 38 percent of the capital stack of a project.  Wind tax equity is 47 to 62 percent of the capital stack of a project.”  – Managing Director, Boutique Investment Bank

“We are seeing a lot more wind.  We are using our tax equity capacity in wind in 2018.  Solar is looking good for 2019 and beyond.”  Managing Director, Trust Company

“This year we will invest more in wind than in solar.” – Managing Director, Money Center Bank

“We are seeing tax equity portfolios that are seasoned trade in a secondary market.  [Generally These are tax equity portfolios] that haven’t flipped on time or that [have the benefit of material cash distributions] but not tax” credits.  – Managing Director, American Multinational Financial Services Company

“There is more tax equity now than there was before tax reform.”  Managing Director, REIT

“2018 is a slow down due to tax reform and tariffs.”  Managing Director, National Bank

“There is a lot less tax equity capacity due to the lower tax rate.” – Managing Director, American Multi-National Investment Bank

[Explained: there may be more tax equity investors in the market than last year; however, last year the corporate tax rate was 35 percent, and this year it is 21 percent, so a typical tax equity investor has 40 percent less tax appetite (and ability to invest in tax equity) in 2018 than it did in 2017.]

“If you are in BEAT [(i.e., the base erosion anti-avoidance tax in enacted as part of 2018 tax reform)], you cannot compete in tax equity.  A couple of investors were hit with BEAT and exited.” – Managing Director, American Multi-National Investment Bank

“We get ten requests for tax equity a week and say ‘yes’ to less than one a week.  We have to prioritize opportunities.”  – Managing Director, American Multi-National Investment Bank Continue Reading Renewable Energy Finance Forum Wall Street Soundbites: the Tax Equity, Debt and M&A Markets, etc.

We have published our Legal Update on the Federal Circuit’s opinion in the Alta Wind case involving the calculation of eligible basis for 1603 Treasury cash grant purposes.  The 1603 Treasury cash grant rules “mimic” the investment tax credit (ITC) rules, so the case has implications for ITC transactions being structured and end executed today.  Our Legal Update is available here.


If you would like to read the Federal Circuit’s opinion, it is available here.

A Word About Wind has published my article about offshore wind in the United States as part of its Legal Power List 2018 special report.  The article discusses how offshore wind projects, such as Vineyard Wind, have certain advantages over onshore wind, particularly with respect to tax credits for storage.  Here is a link to the special report; alternatively, if you are not a member of A Word About Wind, we are pleased to make the offshore wind article available.