Using Inverted Leases to Finance Renewable Energy Projects

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

Note: CPE credit is not offered on this program

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

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Conducted on Wednesday, March 2, 2022

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Course Materials

This CLE course will guide counsel to parties involved in financing energy projects on using inverted lease tax equity structures. The webinar will dive into inverted leases and current issues in such transactions.

Description

When using inverted leases, the renewable energy company assigns customer agreements to a tax equity investor who collects the customer revenue and pays most of it to the renewable company as rent. The energy company passes 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 tax benefits, and no basis reduction. However, they also have some downsides, including a potentially higher tax structure risk.

The structure is used mainly for solar projects but can be used for any project on which investment tax credits will be claimed. There are two forms of inverted leases.

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 such a structure, the different structural variations, and the tax risks involved.

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Outline

  1. Current state of the solar finance market and trends for the near future
  2. Inverted leases
    1. How they work
    2. Basic lease terms
    3. Timing considerations
    4. What is "market" on allocation of tax risks
    5. Other current issues in deals
  3. Structure variations

Benefits

The panel will review the advantages and disadvantages of:

  • An inverted lease versus alternative tax equity structures
  • Different variations of inverted leases

Faculty

Martin, Keith
Keith Martin

Co-Head of Projects
Norton Rose Fulbright US

Mr. Martin is a transactional lawyer whose principal areas of practice are tax and project finance. He acted for 178...  |  Read More

Medina, Jorge
Jorge Medina

Partner
Pillsbury Winthrop Shaw Pittman

Mr. Medina’s practice focuses on tax aspects of energy investment and financing transactions, including tax...  |  Read More

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