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Please join Mayer Brown and Alfa Energy Advisors for another session of our popular webinar addressing how tax reform could affect various tax equity structures, how the market is allocating tax reform risk between sponsors and tax equity investors.

Key Event Information
Date & Time
Wednesday, June 28, 2017
12:00 p.m. – 1:30 p.m. EDT
Register here for this complimentary webinar.

Topics to be covered in the seminar will include:

• Trends in the tax equity market

• Impact of potential tax reform on flip partnership structuring

o Wind PTC projects
o Solar ITC projects
o Earnings per share impact analysis
o Key takeaways

• Comparison of time- and yield-based partnership flip structures

• The IRS’s updated “start of construction” guidance for tax credit qualification

Continue Reading Tax Equity Structuring & Impact of Potential Tax Reform Webinar June 28

On May 11, 2017, Senators Edward J. Markey (D-Mass.) and Sheldon Whitehouse (D-R.I.) introduced the Offshore Wind Incentives for New Development Act or, simply, the Offshore WIND Act (here).  The Offshore WIND Act would extend the 30% investment tax credit (ITC) under Section 48 of the Internal Revenue Code (Code) for offshore wind through 2025. Continue Reading Wind in the Sails of Offshore Wind Farms: Recent Developments in Incentives for Offshore Wind Generation

On May 2, Mayer Brown and Alfa Energy Advisors presented the seminar/webinar Tax Structuring and Impact of Potential Tax Reform.  A copy of the presentation is available here.  The webinar was sponsored by Bloomberg BNA.

The webinar participants (but not the seminar participants) had the opportunity to answer polling questions.  The sample size, which varied by question, may not be large enough to be statistically valid. Here are the webinar polling results:

1.  How likely is it that a reduction in the corporate tax rate will be effective in 2018?

Answers:

Very likely – 0%

More likely than not – 42.9%

Somewhat likely – 57.1%

It is not going to happen – 0%

2.  How likely is it that the federal corporate income tax rate will be reduced below 30% during the current Trump administration?

Answers:

Very likely – 14.3%

More likely than not – 21.4%

Somewhat likely – 57.1%

It is not going to happen – 7.1%

3.   Which is your preferred partnership structure for solar tax equity transactions?

Answers:

After-tax IRR based flip – 72.7%

Time based flip – 27.3%

On April 17, 2017, Oklahoma Governor Mary Fallin signed into law House Bill No. 2298, which moves the deadline for a wind project to be operational to qualify for the state’s production tax credit for wind power to June 30, 2017 – three and a half years earlier than the December 31, 2020 deadline under prior law.  The state’s tax credit is a $0.0050 per kilowatt-hour credit for electricity generated by eligible zero-emission facilities.  The credit is available for 10 years from the date the project becomes operational and is refundable for up to 85 percent of its face amount.  Eligible zero-emission facilities are those located in the state that produce electricity from wind, moving water, sun or geothermal energy, and have a rated capacity of one megawatt or greater.  The bill does not change the sunset date for the credit for any type of eligible facility other than wind (i.e., the end date for solar, moving water and geothermal facilities remains at January 1, 2021).  In addition, all existing wind farms and those that are operational before July 1 of this year will continue to receive the 10-year production credit under the same terms as previous law. Continue Reading Oklahoma State PTC Ends for Wind Projects Not Operating Prior to July 1, 2017

Please join Mayer Brown, Alfa Energy Advisors and Bloomberg BNA for a seminar at Mayer Brown’s New York office. We will address how tax reform could affect various tax equity structures, how the market is allocating tax reform risk between sponsors and tax equity investors and these topics:

  • The IRS’s updated “start of construction” guidance for tax credit qualification
  • Trends in the tax equity market
  • Impact of potential tax reform on flip partnership structuring
    • Wind PTC projects
    • Solar ITC projects
    • Earnings per share impact analysis
  • Comparison of time and yield based partnership flip structures

Tuesday, May 2, 2017
12:00 p.m. – 12:30 p.m. Registration & Lunch
12:30 p.m. – 2:00 p.m. Program

Location
Mayer Brown
1221 Avenue of the Americas
New York, NY 10020-1001
+1 212 506 2500

Attendance in person at the live event is free of charge. Click to Register to Attend in Person (or go to http://reaction.mayerbrown.com/reaction/RSGenPage.asp?RSID=HNeQeRsxYjYPrH4jAN4fZqQ2XuFuZTe2pLLslTkJ177lkEoGqbiUt_0a9DqRcwMz)  

If you are unable to join in person, the program will also be available via webinar.

Bloomberg BNA Registration: $224
For 25% off registration, use promo code: FIRMDISC17

Click to Register to Participate via Webinar (or go to https://www.bna.com/tax-equity-structuring-m57982085993)

Speakers

David K. Burton
Partner
Mayer Brown

Vadim Ovchinnikov, CFA, CPA
Director
Alfa Energy Advisors

Gintaras Sadauskas
Director
Alfa Energy Advisors

On April 11, the IRS announced an inflation adjustment increase in the production tax credit (“PTC”) for power sold in 2017 that is generated by wind, closed-loop biomass, geothermal projects to 2.4 cents from the prior 2.3 cents per kWh.  The inflation adjustment announcement will be published in the Federal Register on April 12.

Such inflation adjustments are welcomed news when announced and slightly goose the economics of the pertinent projects.   Continue Reading Wind PTC Increased from 2.3 Cents to 2.4 Cents per kWh

On March 9, 2017, Oklahoma’s House of Representatives passed H.B. 2298, which would end the Oklahoma production tax credit for wind energy production three and a half years earlier than current law. This measure was first proposed in Governor Fallin’s 2018 Executive Budget. See our prior coverage.

The bill provides a July 1, 2017 sunset date for wind facilities to be eligible for the zero-emission tax credits. Wind facilities must be placed in operation prior to that date to be eligible for the tax credits. The rate of the tax credit is unchanged at 0.5 cents per kilowatt-hour.

Interestingly, the early deadline only applies with respect to electricity generated by wind. The bill retains the original January 1, 2021 deadline for other zero-emission facilities, such as solar or geothermal facilities. However, the vast majority of zero-emission energy production in Oklahoma is from wind. Continue Reading Oklahoma House Votes for Early Sunset of State Wind PTC

Oklahoma governor Mary Fallin (R) recently released her proposed 2018 Executive Budget, which includes two new anti-wind tax proposals.[1] The first proposal would end the zero-emission tax credit for wind facilities placed in service after 2017. The second proposal would begin taxing the production of wind energy at $0.005 per KwH produced.

Oklahoma is facing a budget shortfall that has been projected to be nearly $900 million. One of the primary causes of the revenue shortfall is less tax revenue due to low oil prices and an increase in wind energy production resulting in greater tax credits. Governor Fallin’s tax proposals would reduce the amount of tax credits available for wind energy production and increase revenue by imposing a new production tax of electricity generated by wind.[2] Continue Reading Oklahoma Gov. Proposes New Tax on Wind, Early End to Wind Tax Credits

Below are soundbites from panelists at the Infocast Wind Power & Finance Investment Summit on February 28, 2017 in Rancho Bernardo, California.  The soundbites are organized by topic, rather than in chronological order, and were prepared without the benefit of a transcript or a recording.  The soundbites were edited for clarity.

Prospects for Tax Reform

 “Generally in Congress things take longer than they want them too.” – In House Lobbyist

“Tax reform won’t take shape until next year, and that is probably early.” – Regulatory Affairs Executive

“Amidst the unknowns, if you are not taking into account the uncertainty of the corporate tax rate, you are probably not getting it right.” – Regulatory Affairs Executive

“If tax reform is good for corporate America, then in the grand scheme it is good for us, given the [number of] corporate buyers” of wind power.  – CEO of Texas Wind Developer

 

Allocation of Tax Reform Risk in Transactions

“There is a risk that early deals that have to get done set a standard for the allocation of tax reform risk [between the tax equity investor and the developer] that is not sustainable.” – Renewable Energy Executive

“If corporate tax reform remains uncertain, it poses a risk of such a big swing in the economics [of a wind project] that no one is prepared to absorb that risk.”  – Executive from East Coast Utility

“Our [utility] commission has been okay with a clause in a power purchase agreement requiring renegotiation of the pricing for tax changes.  If there is an adverse tax change, we will be buying power at the higher rates in any event at that time.”  – Executive from Midwest Utility

  Continue Reading Infocast Wind Power & Finance Investment Summit Soundbites

On December 15, 2016, the US Internal Revenue Service (the “IRS”) released Notice 2017-4 (the “Notice”), which updates previous IRS “start of construction” guidance by extending the Continuity Safe Harbor (described below) to December 31, 2018, and modifying and clarifying Notice 2016-31.1 The Notice is good news for developers with projects for which physical construction started during 2013 in that the extension gives them five years to complete construction and have the project placed in service. The Notice also means they need not worry about whether minimal amounts of physical construction during 2013 would cause these projects to be ineligible for the extension if the extension was only available to projects that commenced construction during 2014.

As discussed in more detail below, the Notice provides that a facility will be deemed to automatically meet the continuous construction requirement if it is placed in service by the later of (i) December 31, 2018 (a two-year extension of the prior deadline) or (ii) the end of the calendar year that is four years after the year in which construction started (the “Continuity Safe Harbor”). Continue Reading IRS Extends Continuity Safe Harbor Until December 31, 2018