Members of the Sheppard Mullin Energy, Infrastructure and Project Finance Team wrote an article published in the March 16, 2020 edition of Tax Notes Federal regarding the practical impacts on tax equity financing for renewable energy projects of a private letter ruling (“PLR”) published by the IRS in late 2019. The PLR addressed normalization and loss disallowance rules applicable to public utilities. These rules have posed significant challenges to public utilities that want to own renewable energy generation facilities, make efficient use of the tax benefits they provide (via the tax equity market) and recover their costs from ratepayers.
In our experience of having represented the tax equity providers in the structuring and negotiation of what we believe is the only wind production tax credit transaction to have achieved a binding commitment between a regulated utility and a tax equity provider, while the issuance of the PLR is an important step in reducing the barriers to utility-sponsored tax equity transactions, careful, detailed and comprehensive advanced planning by the utility is critical to successfully completing a transaction and avoiding the many pitfalls that lie along the path.
Read the full article here: Walking the Path of Utilities’ Ownership of Wind and Solar