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SOLAR TAX CREDITS. Green Homes and Sustainable Communities August 7 and 8, 2008 Jeffrey S. Lesk Nixon Peabody LLP. Affordable Housing. New Markets. Tax Credits. Historic. Renewable Energy. Affordable Housing. New Markets. Tax Credits. Historic. Renewable Energy. Why Solar?.

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SOLAR TAX CREDITS


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solar tax credits

SOLAR TAX CREDITS

Green Homes and Sustainable Communities

August 7 and 8, 2008

Jeffrey S. Lesk

Nixon Peabody LLP

slide2

Affordable Housing

New Markets

Tax Credits

Historic

Renewable Energy

slide3

Affordable Housing

New Markets

Tax Credits

Historic

Renewable Energy

why solar
Why Solar?
  • Escalating energy costs
  • Uncontrollable costs
  • Unpredictable costs
  • Caps on rental income
sizing and selecting solar array
Sizing and SelectingSolar Array
  • Consult with Engineer
  • Building Footprint/Configuration
  • Electrical Demand Load
  • Who pays utilities?
  • Cost (consider tax credits, rebates, net metering)
  • Amount of available LIHTCs
designing for sola r
Designing for Sola r
  • Building Footprint/Configuration
  • Lot Size
  • Land Use Restrictions
  • Battery Back-up/Inversion Equipment (design and location)
  • Integrated Design
  • Only part of the energy reduction puzzle
how the solar credit works
SOLAR ENERGY INVESTMENTTAX CREDITS (Section 48 of IRC)

INVESTMENT: 30% of cost of facility

All in year placed in service

Investment in qualifying equipment

TCs to owner of equipment

How the Solar Credit Works
slide17

Recapture potential: 5 years (20% vesting/year)

  • Reduced by grants, tax exempt bonds, subsidized energy financing
  • Reduces depreciable basis by 50% of the credit (depreciate 85% of equipment)
  • Depreciate over 5 years
slide18
Placed in service by 1/1/09
  • Cost Certification by third-party accountant
  • Submission to IRS on Forms 3468 and 3800 (General Business Credits)
structures
Structures
  • DEVELOPER/OWNER OWNS
    • Owner gets “free” energy
    • Owner qualifies for tax credits/depreciation
    • Owner syndicates
    • Owner maintains/repairs (and gets warranties)
  • SOLAR COMPANY OWNS
    • Owner purchases “cheap” energy + hedge
    • Solar Company qualifies for tax credits
    • Solar company syndicates
    • Power purchase agt./possible buy-out
issues with combining
Issues with Combining
  • Viewed as double dipping?
  • Per-unit cost and subsidy caps in QAPs
  • QAPs encourage --- but how much is too much?
  • Is it commercial property (excluded from basis) –sale of energy, RECs?
  • Includable in development cost from which Development Fee is based?
  • Utility allowance issue
  • Coordination with other project documents
  • Is there a market for the credits?
investor reaction
Investor Reaction
  • First year boost
  • 5-year ACRS (not all value)
  • Utility savings
  • More predictable energy costs
  • Low recapture potential
  • Qualified selection, installation, maintenance
  • Adequate Insurance
  • Carriage turns back into a pumpkin – 12/31/08
  • Green is good
thank you
Thank you!
  • Jeffrey S. Lesk
  • jlesk@nixonpeabody.com