Cherrytree Group LLC Blog

Warren A. Kirshenbaum, CEO, to lead series…

Warren A. Kirshenbaum, CEO of the Cherrytree Group, a Newton, MA tax credit broker, syndicator and consulting firm, has developed a Speaker Series to educate the public about the role of tax credits in development.

Kirshenbaum said that his organization will provide a speaker to any real estate, civic, business or fraternal group seeking to learn more about what tax credits are available for development.

“Many developers are unaware of the prevalence of tax credits for historic rehabilitation, environmental remediation, and other areas that can make a significant difference in the bottom line cost of the project,” said Kirshenbaum. He added, “There are credits available both at the federal and the state level, and they can be quite sizeable.” He noted that the speaker Series would educate people on the various types of credits that are available and how to take advantage of the opportunities.

Tax credits in a development project can be used for a variety of purposes. Some developers and investors use the tax credit as an equity investment. Others utilize for the tax advantages. One of the more versatile advantages of tax credits is that these credits can be re-sold. Typically, it is larger investors who purchase tax credits from other entities but not always.

To request a speaker or learn more about tax credits, please contact Warren Kirshenbaum at 781-235-8485.

About Cherrytree Group
Cherrytree Group assists developers and business owners interested in securing available tax credits at both the federal and state levels.  With significant industry expertise in the brownfields and environmental remediation fields, as well as tax credit brokerage and syndication areas,  Cherrytree Group advises business owners, real estate owners and developers on ways to monetize expenditures. In addition to tax credits, the firm assists with raising and syndicating private equity. Other services include monetizing, or trading tax credits, incentives, or grants; developmental finance; and the structuring to finance and acquire distressed real estate assets.

The firm focuses on tax advantaged development or "green" development such as the structuring and syndication of transactions involving Brownfields, historical rehabilitation, and renewable energy tax credit transactions. Additionally, Cherrytree Group advises clients on the structuring of real estate ownership entities, leasing, land use, and zoning/permitting.

The Waterfront is an example of brownfield redevelopment on a large scale. Hundreds of acres of contaminated and underutilized land are being cleaned up and converted into residential towers, medical buildings and educational facilities.

A recent Metro report suggests that thousands of other acres of brownfields in Portland, Boston and Portsmouth could boost the economy and provide needed housing if they were cleaned up and redeveloped, too.
 
The Regional Brownfield Scoping Project estimates there may be thousands of properties in the region that are potentially contaminated and either vacant or underutilized. This represents a large percentage of all commercial, mixed use and industrial zoned lands within the urban growth boundary.

Redevelopment of the entire inventory could yield up to 71 million square feet of new development, including 138,000 new dwelling units and work space for about 69,000 more jobs, generating nearly $1.4 billion in additional wages and as much as $427 million in new property tax revenue.

However, there are many obstacles to converting the brownfields to productive uses. They include a lack of money and other incentives to clean them up. However, there are tools you can use— ranging from tax incentives to new state funds — that could be used to hasten the process.

Sustainable development vision
 
There are many programs already exist on the federal, state and local levels to foster the redevelopment of brownfields.

Increasing the rate of redevelopment of underutilized and contaminated properties, known as ‘brownfields,’ is critical to achieving growth management and sustainable development.
 
According to Metro Regional Planning Manager John Williams, the report is not based on a physical inspection of all known and suspected brownfields. Instead, it includes educated guesses about where they are likely located, based on historic development trends in the region.

Brownfields are generally concentrated in heavily urbanized areas, and downtowns. Some are well-documented. Others are suspected to be in the urbanized centers that developed along major transportation corridors.

But brownfields can also be scattered in more rural counties. Brownfields aren’t only created by industrial use. They can also be farms where pesticides were heavily used or fuel spills occurred.
 
Brownfields are also likely to be located in a communities that are underserved, which measures such factors as family incomes.

Construction costs

It is no surprise that brownfields are harder to redevelop than other properties. After all, they have to be cleaned up. But cleanup costs vary tremendously from brownfield to brownfield. A study of 100 cleanup projects found the costs ranged from $58,920 to $695,639 per acres.
 
But the cleanup costs are a relatively small percent of overall redevelopment costs.

Depending on the kind of project, constructions costs can be a lot more than cleanup costs.

As a result there are a wide range of incentives and other tools for encouraging the cleanup and redevelopment of brownfields. They include tax credits and abatements to offset cleanup costs, the creation of a dedicated state fund for the cleanup of brownfields, and new programs to encourage the investment of additional private capital in such projects.
 
For help in applying for or selling Brownfields tax credits in Boston and New England, contact The Cherrytree Group.

Portland Tibune

Tax incentives and the push to lessen economic and environmental costs of fossil fuel production are encouraging companies to develop renewable energy. The flexibility and reciprocal effects of two federal tax credits—renewable energy credits and investment tax credits—are tailored to help produce a renewable energy economy.

Despite the higher costs that accompany the production of renewable energy, an organization can benefit financially from supporting renewable energy. These savings are not only generated through savings on energy costs or greater efficiency of resources; the federal government offers an added financial incentive for organizations to support renewable energy— through tax credits. Tax credits, which can be used as a direct dollar-for-dollar credit against taxes or sold to generate cash, should be thought of more in terms of as an economic engine, rather than as ‘‘subsidies,’’ especially given that they originate from the creation of renewable energy.

The means by which we are able to alter our utilization of fossil fuels can only be aided by the development of new sources of energy, such as renewable energy. To encourage and facilitate the creation of renewable energy, there are many incentives, including two federal tax credits: (1) the renewable energy credit, or certificate (REC), which is given for each unit of renewable energy produced; and (2) the federal investment tax credit (ITC), which amounts to a reimbursement of approximately 30% of the cost of construction of renewable energy facilities.

These tax credits and/or certificates have been especially designed to incentivize the development and deployment of renewable energy technology and the production of renewable energy.

Federal tax incentives for renewable energy projects are designed to improve the economics of the renewable energy economy by creating jobs in renewable energy exploration and providing cash flow and investment reimbursement as a means of encouraging investment in socially responsible forms of energy production, as well as to encourage investment in renewable energy research and development.

What Are RECs?
RECs are production tax credits that provide owners of renewable energy projects such as wind, biomass, hydroelectric and solar facilities with a credit for each megawatt hour of electricity generated. These credits are based on the electrical output of renewable energy facilities.

ITCs, or investment tax credits, on the other hand, are credits given for a capital investment in renewable energy equipment. ITCs are earned when the equipment is placed into service, thereby serving to offset the upfront investment in renewable energy projects, and providing an economic incentive to develop and deploy more capital-intensive renewable energy technologies, such as photovoltaic solar panel systems, geothermal HVAC and other energy-efficient utilities, and automotive fuel cells.

For information on applying for buying, selling or syndicating REC’s or ITC’s, contact The Cherrytree Group.

Excerpts from Bloomberg BNA article, to read full article click here.

Expiration of the payroll tax deduction, changes to the capital gains tax rates, expiration of the Bush-era tax cuts, health insurance mandates, and diverging opinions between Democrats and Republicans on how to reform the Tax Code are creating much anxiety for both business and individual taxpayers alike. Tax issues are of paramount importance to businesses when faced with investment, expansion, or hiring decisions, and in the case of smaller businesses these decisions often flow through to the principals’ tax planning strategies.

Regardless of your political affiliation, the availability and usage of mechanisms that aid tax planning are important economic drivers. This article focuses on highlighting the role of tax credits as an economic engine, rather than their incorrect labeling as “subsidies”, particularly when they originate from the creation of renewable energy. The demise of companies such as Evergreen Solar and Solyndra, which received expensive loan guarantees or other subsidies only to fail spectacularly, costing taxpayers vast sums has only added to the political distaste for subsidies.

Tax credits, are an incentive that allows the outsourcing of governmental functions to the private sector. Tax credits, which allow a taxpayer an offset against taxes due, usually dollar for dollar, or are sale-able in the marketplace create a financing source for projects that otherwise would not exist. There are tax credits for remediation of environmentally contaminated properties, rehabilitation of historic buildings, producing renewable energy, and the creation of affordable rental housing, to name a few. The market for tax credits is fluid and vibrant, and it is important that the market for these tax credits remains strong. Take the conversion of biomass into renewable energy. Technologies that can perform such a conversion create energy and avoid the need to landfill industrial waste, yet these deals are difficult to finance through traditional lending channels. Generating tax credit equity for such ventures, while providing tax planning benefits to buyers of tax credits, such as large corporations, institutions, and individuals frees up businesses to invest in equipment, personnel, upgrades and other business needs that would inevitably be scrapped if these dollars were being paid as taxes.

Warren Kirshenbaum is the president of Cherrytree Group, LLC, Newton, Mass., a tax credit consultant, broker, and syndicator.

The "Commercial Building Tax Deduction" establishes a tax deduction for expenses incurred for energy efficient building upgrades made by a building owner . The deduction is  for $1.80 per square foot of the property, with allowances for partial deductions for improvements in interior lighting, HVAC and hot water systems, and building envelope systems.

Commercial real estate owners and business owners who have upgraded their buildings to be more energy efficient may qualify for tax deductions or investment tax credits. Consumers and business people should take advantage of the tax incentives. Generally, a tax credit is more valuable than a tax deduction because a tax credit reduces your taxes. A tax deduction only reduces the taxes that you owe by a percentage.

As a commercial real estate owner, if you have improved the energy efficiency of your commercial property or added energy efficient systems into your new building, you could be eligible for a tax deduction of up to $1.80 per square foot.

To qualify for the full deduction, the energy efficient investments must reduce energy costs by at least 50%.  A partial deduction of $0.60 per square foot is available for investments in one of three systems—lighting; heating and cooling; or building envelope. Remember, tax deductions reduce your overall taxable income which reduces the percentage of taxes you owe.

Do you want to know if you qualify for energy efficient tax credits or tax deductions? Contact The Cherry Tree Group, a Massachusetts based business consultant, and broker and syndicator of tax credits.

Wind power is facing a make-or-break moment in Congress, with renewable-energy firms' projects on hold as lawmakers debate whether to extend subsidies for new wind farms this month.

Currently U.S. tax credits are available only for facilities that come online before the end of 2012. Iberdrola Renewables, the second-largest U.S. wind operator, has suspended work on new U.S. projects for "anything we can't build in 2012," said Rich Glick, vice president of government affairs for the unit of Spain's Iberdrola SA.

Industry players see two main chances for Congress to act this year. One comes in February, when the wind subsidies could be tacked on to an extension of payroll-tax cuts. The other would come in the lame-duck session after November elections, when lawmakers must address the expiration of tax cuts from 2001.

The tax credit has helped bring down the cost of wind power, making it more competitive with rival producers, but wind's backers say they need a few more years to build out a U.S. supply chain. The sharp fall in U.S. natural-gas prices has made this a particularly sensitive moment for wind energy by giving gas-fired power plants an extra cost advantage.

Previous delays in extending the wind-farm tax credit have led to drop-off in wind installations. The credit, designed to help level the playing field with coal and other fossil fuels, is worth 2.2 cents per kilowatt-hour of electricity produced during the first 10 years a wind farm is in operation.

A delay could also stunt efforts to bring down the cost of wind-power technology. "We face the loss of domestic expertise and the momentum to build a strong domestic supply base," said Luis Miguel Fernandez, chief corporate officer for the North American arm of Spain's Gamesa Corp., which has a factory in Pennsylvania.

Last month, Vestas Wind Systems said it will cut 1,600 U.S. workers if the tax credit isn't renewed, on top of 2,300 jobs it is already shedding world-wide. An industry-backed study by Navigant Consulting said in December that thousands of additional job cuts could occur if the credit expires.

About 6.8 gigawatts of wind power were installed in the U.S. in 2011, bringing the total nationwide capacity to nearly 47 gigawatts, enough to power about 12 million homes at any given time, according to the American Wind Energy Association. That is about 3% of total U.S. generating capacity.
 
Without the wind tax credit in place, Navigant said, about two additional gigawatts of wind capacity would be installed in 2013, as opposed to more than eight gigawatts expected to be added in 2012, when the tax credit will still be in place.
 
Other predictions are more dire. Iberdrola's Mr. Glick said there would be "close to zero" gigawatts of wind capacity installed next year without an extension soon.

Some in Congress say it is time to end subsidies for renewable energy. The wind industry "simply cannot continue to rely on the American taxpayer," said Rep. Mike Pompeo (R., Kan.), who has a bill that would cut many energy-related credits from the tax code. "Each time it comes up to a year of expiration, they say, 'If we just get a few more years our technology will mature and we will become more competitive.' It's time for them to figure out how to do that."

The industry's supporters argue that Chinese manufacturers also get government support, and they say companies need more time to build a U.S. supply chain and drive down costs.

Denise Bode, president of the American Wind Energy Association, said that in several years' time "we will not need" the tax credit but losing it now could stunt efforts to attract new investment.

Some U.S. facilities may keep going without the credit, thanks to foreign demand and mandates in many states for utilities to buy increasing amounts of renewable power.

Twenty-three governors have backed a bill that would extend the tax credit by four years. Senate Majority Leader Harry Reid (D., Nev.) said late last month the credit is "extremely important" and suggested it should be included with the extension of the payroll-tax break.

Some House Republicans have supported the four-year extension. But Rep. Dave Camp, a Michigan Republican and lead House negotiator on the payroll-tax bill, has said energy tax credits shouldn't be part of the payroll-tax discussions.

Original Article – Wall Street Journal

An interesting transactional focus for year-end which could create some much needed impetus in the renewable energy arena is the expiration of the 1603 Treasury Grant, and the solar depreciation acceleration for 2011, which expire on December 31, 2011. The possible expiration of these valuable incentives should spur, in particular, increased activity in solar installations in order to meet the spending parameters of the grant by the end of December 2011.

An experienced consultant can assist in the 1603 grant process and in tax incentive deals generally. Consultants are also able to piece together financing sources and partners in the solar development marketplace that can be strategically helpful to clients needing to take advantage of tax credit for solar installations.
 
Cherrytree is an innovative real estate and business consulting company that advises business and real estate owners, developers, property managers, and landlords.  

Our services include the representation of clients in the renewable energy area, particularly solar installations and tax credits as well as providing sophisticated value added services to green development projects, i.e. developments that utilize energy efficient development incentives.

For information, assistance or questions regarding the 1603 Tax Credit, Solar Energy Credits, Brownfields Tax Credits or other Commercial Real Estate transactions, contact the Cherrytree Group.

“Sophistication, Value and Follow-Through”

...by Warren Kirshenbaum

The Community Renewal Tax Relief Act was passed in 2000. Part of that act is the New Markets Tax Credit, the purpose of which is to spur approximately $15 billion in investments into privately managed investment institutions (CDE) who in turn will make loans and capital investments to businesses in low-income communities.

The New Markets Tax Credit is one of several key business tax breaks that are set to expire at year end unless Congress acts. Businesses should be aware of the expiring tax provision. Businesses interested in investigating or applying for the New Markets Tax Credit should consult with a commercial real estate tax lawyer to determine whether they should take advantage of this tax break  and/or if they need to plan for the expiration of other tax credits which they have previously taken advantage of.

What is New Markets Tax Credit ("NMTC")? A taxpayer who holds a qualified equity investment in a qualified community development entity ("CDE") may be entitled to a NMTC of 39% of the qualified equity investment during a seven-year credit period. Under current law, the last NMTC dollar limitation is for 2011.

...by Warren Kirshenbaum

A New York City budget watchdog says up to $2.9 billion in tax credits intended to boost the local economy after the Sept. 11 attacks have gone unclaimed.

The Independent Budget Office says it is difficult to track how many companies took advantage of the federal tax credits aimed at spurring hiring and business investment. Local elected officials have not succeeded in persuading the federal government to convert the tax breaks to cash.

But the report released Wednesday finds that most of the rest of New York City's $20.5 billion federal aid package has been spent or will be spent on redevelopment in lower Manhattan.

The biggest chunk of money, $4.6 billion, is being spent on transportation projects including a new World Trade Center transportation hub.

Original article Wall Street Journal

by...Warren Kirshenbaum

The U.S. Department of Interior (DOI), announced a Call for Information and Nominations to develop wind on the Outer Continental Shelf.

Wind developers are invited to submit proposals that identify locations within the designated call area where they would seek commercial leases to develop wind energy projects.

The Call area is off the shores of Rhode Island and Massachusetts -- both states agreed to explore offshore wind development in July 2010. The announcement is part of DOI's Smart from the Start initiative.  Launched in November of last year, the initiative is a coordinated federal-state effort to speed the siting, leasing and construction process of new offshore wind energy projects.

In February, BOEMRE identified four offshore wind areas in Delaware, Maryland, New Jersey, and Virginia and expects to begin the leasing process in those states as early as 2012.

Cape Wind Project -- the first lease for an offshore wind farm in the federal waters of the United States, is now closing in on its construction phase.

The most recent announcement from DOI comes one month after the Incentivizing Offshore Wind Power (IWOP) Act was introduced in the U.S. Senate.

This legislation seeks to provide "the offshore wind industry with enhanced stability by extending investment tax credits for the first 3,000 MW of offshore wind facilities placed into service – which is an estimate of 600 wind turbines."

The tax credits are necessary because of the longer lead time needed to permit and construct offshore wind turbines, relative to onshore wind energy. Developers would have five years to install the offshore wind farm after receiving the tax credit. Companies would not be able to receive other production or investment tax credits in addition to the offshore wind investment tax credit, however.

Original article on Energyboom.com