On May 27, 2020, the US Internal Revenue Service (the “IRS”) released Notice 2020-41 (the “Notice”), updating the IRS guidance on the start-of-construction rules for the production tax credit (“PTC”) and energy investment tax credit (“ITC”) by extending the continuity safe harbor for projects that began construction in either calendar year 2016 or 2017.1 Additionally, the Notice provides relief under the so-called 3 ½ month rule where payments were made on or after September 16, 2019, but the services or property were not expected to be provided until 2020, as long as they are actually received by October 15, 2020.
On May 12, 2020, the US Internal Revenue Service (IRS) released a notice providing the inflation-adjustment factors and reference prices for the calculation of renewable electricity production tax credits (PTCs) under Internal Revenue Code (IRC) section 45 for 2020. Continue Reading IRS Releases 2020 Section 45 Production Tax Credit Amounts
The U.S. Department of Treasury plans to modify the rules regarding the continuity safe harbor for the start-of-construction rules under Treasury guidance for the production tax credit (PTC) and energy investment tax credit (ITC). This plan was announced today, May 7, 2020, in a letter from Frederick W. Vaughan, Principal Deputy Assistant Secretary, Office of Legislative Affairs, U.S. Department of the Treasury to The Honorable Charles E. Grassley, Chairman of the Senate Committee Finance. Although it is not clear what the plans are, the four-year safe harbor presumably will be extended (perhaps to five years, which is what a group of six Senators, including Chairman Grassley, suggested in an April 23, 2020 letter to The Honorable Steven T. Mnuchin, Secretary of the Treasury).
Please click here to read our latest client alert, which discusses some of the tax-related concerns that the renewable energy is facing due the COVID-19.
On July 17, 2019, the US Internal Revenue Service (IRS) issued final regulations (T.D. 9872) providing guidance on the rules under Internal Revenue Code (IRC) section 50(d)(5) that require an income inclusion by the lessee in the so-called “pass-through lease” structure used with investment tax credit property. The final regulations adopt, without change, the proposed regulations issued in July 2016. Read about the final regulations in this Mayer Brown Legal Update, which discusses the IRS’ and Treasury’s response to taxpayer comments and modifications made by the final regulations to Revenue Procedure 2014-12, the safe harbor for transactions involving IRC section 47 rehabilitation credits.
On June 6, 2019, the US Internal Revenue Service (IRS) published a notice providing the inflation-adjustment factors and reference prices for the calculation of renewable electricity production tax credits (PTCs) under Internal Revenue Code (IRC) section 45 for 2019.
The notice provides that the PTC for electricity produced from wind, as well as closed-loop biomass and geothermal energy, increased from 2.4 cents per kilowatt-hour (kWh) to 2.5 cents per kWh for 2019. The notice also includes the PTC amounts for electricity produced from other qualified energy resources. Specifically, the PTC for electricity produced from open-loop biomass, landfill gas, trash, qualified hydropower, and marine and hydrokinetic resources remains at 1.2 cents per kWh for 2019. The PTC for refined coal also increased from $7.03 per ton to $7.173 for 2019. Continue Reading IRS Releases 2019 Section 45 Production Tax Credit Amounts
As previously discussed on this blog, Maryland, in 2017, become the first state in the county to offer an income tax credit for energy storage systems and, to our knowledge, as of 2019, it remains the only state to do so.
On February 21, 2019, the Maryland Energy Administration (“MEA”) announced that it is now accepting applications for the 2019 Maryland Energy Storage Income Tax Credit Program. Continue Reading Maryland’s Energy Storage Tax Credit Turns Two
According to a related presale report (and as had been announced in an earlier request for proposal), the Connecticut Green Bank (Green Bank) is monetizing certain solar renewable energy credits (SHRECs) generated under its Solar Home Renewable Energy Program and sold to Connecticut Light and Power (d/b/a Eversource Energy) and United Illuminating (UI).
Under the SHREC program, the utility SHREC buyers are directed by statute to enter into purchase agreements for the related SHRECs. Pursuant to separate Eversource and UI Master Purchase Agreements and related Eversource and UI Confirmations, the utility SHREC buyers pay $50 for the SHRECs generated by the first 6788 PV systems in so-called “tranche 1” and $49 for each generated SHREC for the next 7250 PV systems in “tranche 2” over a fifteen year term. Eversource buys 80% of the applicable SHRECs and UI buys the remaining 30%. Connecticut’s Public Utilities Regulatory Authority reviewed the purchase agreements and approved cost-recovery by the utility SHREC buyers.
There are 2 classes of rated Notes – $36,800,000 of Class A (rated A- (sf)) and $1,800.000 of Class B (rated BBB- (sf)) Notes. Interest on the Class B Notes is deferred and funds are used to amortize Class A Notes if a specified DSCR falls below a threshold level.
While the presale report states that the transaction was analyzed under the rating agency’s related ABS methodology, the report also describes the significant analysis of the counterparty utility SHREC buyers, the quasi-public nature of the Green Bank, the statutory authority for, and related regulatory review and approval of, the SHREC program, a required independent engineering report to estimate PV generation and other related features of the transaction.
Below are soundbites from panelists who spoke at Infocast’s Wind Finance & Investment Summit on February 6 and 7 in Carlsbad, CA. The attendance at the event appeared strong, and the mood was generally optimistic.
Despite the title of the conference being wind, many of the panelists touched on solar and storage, so readers who do not work in the wind industry may nonetheless find some points of interest below.
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.
Topics covered below include the tax equity market, the 2020 soft deadline for the full production tax credit (“PTC”), the impact of the PTC phase out, PG&E’s bankruptcy, storage and more.
State of the Tax Equity Market
“There was $12 billion of combined wind and solar tax equity investment in 2018. This up from $10 billion of tax equity investment in 2017; however, the actual new volume was down in 2018 as $3 billion of the $12 billion in 2018 was secondary market transactions” (i.e., one tax equity investor selling down to another tax equity investor). Managing Director, Money Center Bank
“Tax equity has done well in terms of how it has worked out for the banks that invested in it.” Tax Equity Head, Corporate Investor Continue Reading Infocast’s Wind Finance & Investment Summit Soundbites
The recently released the Joint Committee on Taxation’s Blue Book explanation of the Tax Cuts and Jobs Act confirms that qualifying tangible property leased to a regulated public utility is eligible for the new 100 percent expensing rules, also called full expensing, even if the property would not be eligible for full expensing if it were owned by the regulated utility.
As discussed below, there was some concern in the industry that an exception applicable to certain property used by a regulated utility, or the regulated utility exception, might extend to an owner/lessor leasing to a regulated utility. With the release of the Blue Book, we would expect there to be more lessors prepared to offer advantageous lease financing rates to regulated utilities, reflecting the lessor’s ability to claim full expensing. Continue Reading Blue Book Confirms Bonus Depreciation for Equipment Leased to Utilities