On the night of September 10, 2021, the House Ways and Means Committee released legislative text covering a range of green energy tax incentives, a bill that it hopes will be enacted through the budget reconciliation process and it expects to begin markup of on Tuesday, September 14. This Legal Update provides further detail on

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

Senator Martin Heinrich (D-NM) introduced  S. 3159 (available at: www.heinrich.senate.gov/download/energystoragetaxincentiveanddeploymentact2016) to make energy storage eligible for an investment tax credit (ITC) under section 48.  The bill introduced last month would make energy storage systems with a capacity of at least five kilowatt hours, regardless of whether it was supplied by a renewable resource, investment tax credit eligible.  For instance, a stand-alone storage project that drew power from the grid would be ITC eligible under this bill.

The bill would also allow individuals to own a storage system with a capacity of at least three kilowatt hours used at their homes and to claim a residential energy efficient property tax credit under section 25D.  Like the proposed ITC rules for storage, an individual could qualify for the credit even if the storage system was unrelated to a solar system.

Importantly, the bill has a Republican co-sponsor: Senator Dean Heller (NV). To emphasize, the bipartisan support of the bill, Senator Heller issued a press release (available at http://www.heller.senate.gov/public/index.cfm/pressreleases?ID=E2A22E55-5453-4CD6-B6B7-49AF0D22F0F6).  Five other Democrats co-sponsored it: Franken (MN), Merkley (OR), Reed (RI) and Hirono (HI); further, Senator King (I-ME) co-sponsored it.
Continue Reading Senators Introduce Storage ITC Bill

New Tax Regulations Curtail Pass-Through Lease Structure Benefit

The US Internal Revenue Service (IRS) recently released new proposed and temporary regulations addressing certain investment tax credit issues in a so-called “pass-through lease” structure. A pass-through lease is a structure in which the lessor of an investment tax credit-eligible asset makes an election to pass through the investment tax credit to the lessee of the asset, which lessee is frequently a partnership. The term “inverted lease” is sometimes used to refer to a pass-through lease structure in which each of the lessor and the lessee is a partnership, and the lessor and lessee partnerships are related to each other. The new regulations apply an “aggregate” treatment to partnerships (and S corporations) to ensure that any investment tax credit is appropriately taxable to the taxpayer that used the credit.

As discussed in more detail below, if a partner in a partnership that claimed an investment tax credit transfers its partnership interest during the deemed income period, these new regulations require the remaining income inclusion to be accelerated and to be recognized by the transferor. Further, under these regulations, the deemed income inclusion occurs at the partner level such that it does not result in an increase to the partners’ outside basis.

Although these temporary regulations are primarily directed at the structuring of historic tax credit transactions, the temporary regulations do have a limited effect with respect to solar transactions where the credit is passed through to a partnership (particularly the outside basis adjustment in the case of partnership lessees, as discussed below).
Continue Reading New Tax Regulations Curtail Pass-Through Lease Structure Benefit

First published by Law 360 on June 27, 2016

On April 21, 2016, Rep. Jared Polis, D-Colo.,[1] introduced in the U.S. House of Representatives the Solar Expansion of Distributed Generation Exponentially Act (the Solar EDGE Act) to provide a two-year increase in the credit available under Section 25D and Section 48 of the Internal Revenue Code for certain solar energy property that has a nameplate capacity of less than 20 kilowatts.[2]

Section 25D of the code provides a tax credit (residential solar tax credit) to individuals for expenditures for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence[3] by the taxpayer (qualified solar electric property expenditures).
Continue Reading Bill to Increase Solar Tax Credits Highlights Inconsistent Standard for Residential Credit