Tax Reform and Renewable Energy: Planning Techniques, 100% Expensing, BEAT, Tax Credits and Interest Deduction Limitations

Description

The new tax law has had a significant impact on the renewable energy sector requiring a careful analysis of its effect on the investments and planning of renewable energy projects. An understanding of key provisions of the new tax law such as the reduction in the corporate tax rate, the limitation on interest deductions, 100% expensing and the imposition of base erosion and anti-abuse tax (BEAT) is critical to properly advising clients engaged in renewable energy projects.

The new tax law forces corporations and partnerships within the renewable energy sector to consider methods to optimize capital structures to achieve the most advantageous tax treatment. The most significant change under the new tax law is the reduction of the maximum corporate tax rate to 21%, which impacts the amount of tax equity that can be raised for renewable energy projects and causes a ripple effect on a companies ability to use tax credits and deductions.

Also, tax equity investors with multi-national operations must evaluate BEAT. For tax equity investors subject to it, BEAT reduces the value of renewable energy tax credits investors can use to offset its tax liability. The BEAT excludes 20% of renewable energy tax credits that otherwise would have been available to offset any BEAT tax owed by multinational tax equity investors.

Renewable energy projects may be eligible for 100% bonus depreciation of qualified property. The new rules eliminate the "original use" provision allowing for the expensing of both new and used property under certain conditions and recent regulations affect the ability of partners to claim 100% bonus depreciation in some cases.

Listen as our panel discusses the effect of the new tax law on renewable energy projects and provides methods to optimize tax benefits, credits, and deductions and avoid pitfalls.