A version of this article was published to Law360 on November 10, 2021.

On October 28, the House Rules Committee released a modified version of the budget reconciliation legislation, the Build Back Better Act (the Bill), including Subtitle D, Green Energy. Before release of the Bill, President Joe Biden announced a framework for the Build Back Better Act, reflecting the administration’s negotiations with Democrat senators and representatives. House Speaker Nancy Pelosi has indicated that the text of the Build Back Better Act is still up for consideration and review, and further changes to the Bill are expected. The Bill must be approved by the House Rules Committee before being considered by the House of Representatives.


Continue Reading House Rules Committee Modifies Green Energy Bill

The Biden administration earlier this year released a summary of its plans to invest in infrastructure, which included “direct-pay” options for the investment tax credit (ITC) and production tax credit (PTC) for clean energy generation and storage, as well as the Section 45Q credit for carbon capture and sequestration. The administration subsequently released the Green Book, its general explanations of the budget proposals for the fiscal year 2022, which contained more detailed information about the administration’s tax proposals but did not elaborate on the direct-pay options for the ITC, PTC, and Section 45Q credit. Congress has now passed a $3.5 trillion budget resolution, with proposed budget reconciliation legislation expected to include clean energy incentives. The applicable House and Senate committees will begin drafting the legislation later this month. In the absence of a draft budget reconciliation bill providing details on a direct-pay option, recent legislative proposals introduced in the current Congress can serve as helpful guideposts for considering how the direct-pay option will be structured.[1]

The recent proposals are consistent in many respects. All provide that the taxpayer may elect to be treated as if it has made a payment against income tax for the taxable year, thus making the taxpayer eligible for a refund of such payment if it exceeds its tax liability. The credit for which the taxpayer would otherwise be eligible is reduced, preventing a double benefit. Any payment received is excluded from gross income. Each proposal also provides that the Treasury secretary will determine the manner of making the election. However, the similarities generally end there. Below is a discussion of open questions based on the key variations between the recent proposals.
Continue Reading Direct-Pay Options: A Review of Recent Legislative Proposals

The COVID-19 pandemic has disrupted strategies for ensuring that solar and wind projects will satisfy the “beginning of construction” requirements for purposes of the ITC and PTC, with respect to both the procurement of equipment and the placing in service of projects.

Delays in Safe Harbor Equipment Procurement

To qualify for the 30% ITC, solar

On June 22, 2018, the Internal Revenue Service (the “IRS”) issued Notice 2018-59, which provides long-awaited guidance on when construction of energy property will have begun for purposes of the Investment Tax Credit (“ITC”) under section 48 of the Internal Revenue Code (the “Code”).

The guidance is similar in many respects to the beginning

Introduction

The emerging trend of energy private equity (“EPE”) funds is revolutionizing the renewable energy field, as renewable energy joins leveraged buyouts, venture capital and hedge funds as asset classes that institutional investors and high net worth investors are using to deploy their capital in a diversified manner, with the added “social good” of investing in a sustainable energy future. Sophisticated energy sponsors are increasingly eschewing the traditional project finance structure, in which capital stacks are created for each deal, in favor of a private equity fund structure in which committed capital is deployed by the sponsor in accordance with a specified investment strategy.  From the sponsors’ perspective, the goal is the “holy grail” of all private equity sponsors – permanent capital.  This trend can be seen as further evidence of renewable energy maturing as an asset class within the larger investment world.  Since this trend is so new, the terms of EPE funds vary tremendously.  However, some common terms are summarized below.
Continue Reading A Revolution Coming in Renewable Energy Finance: The Emergence of Energy Private Equity Funds