Using Inverted Leases to Finance Renewable Energy Projects

Evaluating Tax Risks, Navigating Structural Variations, Leveraging Pass-Through Election

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, March 29, 2017
Recorded event now available


This CLE webinar will provide guidance to counsel for parties involved in financing energy projects on using inverted lease tax equity structures. The webinar will be a deep dive into inverted leases and current issues in such transactions. The panel will also discuss broader trends in renewable energy financing.

Description

When using inverted leases, the renewable energy company assigns customer agreements and leases to a tax equity investor who collects the customer revenue and pays most of it to the renewable company as rent. The company passes through the investment tax credit to the tax equity investor but keeps the depreciation. The energy company takes the asset back when the lease is terminated.

Inverted leases provide several advantages, including lower exit costs, more efficient use of depreciation benefits, and no basis reduction. However, they also come with some downsides, including a potentially higher tax structure risk and tax equity that is not shielded from risk.

When considering financing for solar energy projects, counsel and their clients must understand the pros and cons of inverted leases and how they fit in the tax structure and tax credits.

Listen as our authoritative panel provides an in-depth discussion of inverted lease tax equity structures. The panel will discuss the business, financial and tax reasons behind choosing to use the inverted lease structure. The panel will also examine inverted leases in solar investment tax credit transactions, the different structural variations and the tax risks involved.

Outline

  1. Current state of the solar finance market and trends for the near future
  2. Inverted leases
    1. ITC
    2. Pass-through election and designation
    3. Tax risks
    4. Lease terms
  3. Structure variations

Benefits

The panel will review these and other key issues:

  • Impact of corporate tax reform and planning in anticipation of tax law changes
  • Tools available to adjust to a market where falling electricity prices mean less cash flow
  • The pros and cons of using an inverted lease versus alternative tax equity structures and of using different variations of inverted leases

Faculty

Keith Martin, Partner
Chadbourne & Parke, Washington, D.C.

Mr. Martin is a transactional lawyer whose principal areas of practice are tax and project finance. He acted for 178 companies last year and worked on transactions in the United States and eight foreign countries. He also lobbies Congress and the Treasury Department on policy issues. He is co-head of the Firm’s project finance group.

Jorge Medina, Assistant General Counsel, Tax
Tesla, San Mateo, Calif.

 


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