Cherrytree Group LLC Blog

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.

...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

Just a few years after eliminating a state historic preservation tax credit, Rhode Island lawmakers are considering reviving it as an economic development tool.

Reinstituting the incentive to rehabilitate abandoned mills and empty warehouses would create work for construction companies and trade workers while protecting the state's historic character.

"It will mean jobs for architects, engineers, craftsmen," said Martha Werenfels, a Providence architect who has worked on several historic preservation projects. "Right now projects are not moving forward. They're going to Connecticut and they're going to Massachusetts because there are tax credits available."

The proposal would award tax credits equaling up to 25 percent of the cost of rehabilitating historic buildings for commercial use.

Lawmakers voted to stop giving new credits to commercial preservation projects in 2008. The program cost taxpayers $300 million since it was enacted a decade ago, but supported 237 projects worth more than $1.2 billion, according to the state's Historical Preservation & Heritage Commission.

Local government officials support the tax credit as a way to spur redevelopment in the state's many old mills and commercial buildings. Supporters noted that several companies have turned vacant warehouses and mills into modern corporate headquarters. East Providence Planning Director Jeanne Boyle cited the multimillion-dollar redevelopment of a former industrial site in her city as proof the tax credit works.

"Without the historic tax credit that project never would have happened," she said.

Original article by By David Klepper – Boston.com

Previous posts have discussed the differences between a tax deduction and a tax credit.  Transferability is the key distinction between the two.  While we all have deductions that we can take against our gross income, these deductions are personal to each individual.  

A tax credit is a direct credit against bottom line taxable income, and may be transferable to other taxpayers. There are restrictions to transferability based upon the type of tax credit, but in general, the portability of a tax credit has created a marketplace for the sale and transfer of many different types of tax credits. This is a very useful source of finance, equity, or reimbursement, especially in this economy.  

At The Cherrytree Group, we advise many clients on the use, transfer, and sale of their tax credits, but in developing a market for tax credits, it is important that clients consult with us prior to conducting a project, rather than in the latter stages of a transaction.  We can assist with developing the potential tax credit equity into a proposed budget or development pro-forma, which can lead to more control over financing costs.

Cherrytree has grown into a financial services company that has its own capital, credit lines and equity facilities, as well as a warehouse of tax credit buyers that include banks, insurance companies, Fortune 500 companies, multinational corporations, and high net-worth individuals.  We have the capacity and capability to purchase your tax credits for our own account, or broker a sale of the tax credit to one of our buyers.  For more information on this process, contact The Cherrytree Group.

...by Warren Kirshenbaum

The Emergency Economic Stabilization Act of 2008 is legislation which contains a number of tax incentives designed to encourage businesses to make investments in solar energy, including extensions of the business solar investment tax credit (ITC). The following is a brief summary of the provisions directly and indirectly benefiting the solar industry.

Provisions Directly Benefitting the Solar Industry:

The Business Solar Investment Tax Credit bill extends the 30% Income Tax Credit for solar energy properties for eight years through December 31, 2016. The bill allows the Tax Credit to be used to offset both regular and alternative minimum taxes and permits public utilities to directly invest in solar facilities and claim the Income Tax Credit. The five-year accelerated depreciation allowance for solar property is permanent and unaffected by the passage of the eight-year extension of the solar ITC.

Provisions Indirectly Benefiting the Solar Industry:

Extension of Energy-Efficient Buildings Deduction. Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for property installed in commercial buildings as part of:

•   Interior lighting systems,
•   Heating, cooling, ventilation, and hot water systems,
•   The building envelope.

Expenditures must be certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison to certain established standards. The bill extends the energy efficient commercial buildings deduction through December 31, 2013. (This is section 179D in the Internal Revenue Code).

Qualified Energy Conservation Bonds. The bill creates a new category of tax credit bonds, "Qualified Energy Conservation Bonds" to finance State and local government initiatives designed to reduce greenhouse emissions. QECBs can be issued to finance capital expenditures incurred for:

•   Reducing energy consumption by at least 20%;
•   Implementing green community programs;
•   Rural development involving the production of electricity from renewable resources.

The bonds can also be used to finance research facilities and provide research grants for, among other things, technologies to reduce peak use of electricity. There is a national limitation of $800 million, allocated to States, local and tribal governments.

...by Warren Kirshenbaum


There are numerous cities across the United States which can be considered "cleantech capitals." With a large array of renewable resources, a dedication by businesses and homeowners to become more energy efficient, and a large hub for research and development, a lot can be accomplished when it comes to creating new, efficient and sustainable clean technologies. There are many factors that make up a "capital for cleantech," and although there are more than ten cities around the nation that are involved in clean technologies, here are six of the top cities.

1) Boston, Massachusetts. Boston is said to enjoy some of the most supportive policies in the United States for energy efficiency and renewable energy. After California, Boston is second in clean technology venture capital investments. With an environment that is ripe for cleantech startups, numerous companies are moving their business to Boston. The MIT Clean Energy Prize is a venture and innovation creation competition that encourages clean energy innovation. Its objective is to provide educational opportunities and supply incentives to ventures demonstrating the clean energy affordability. As well, the development of MIT's cleantech incubator will provide Boston with more access to cleantech flow, increasing the demands for all future building to be constructed in accordance to LEED standards set up by the U.S. Green Building Council.

2) San Jose, California. San Jose, part of California's Silicon Valley, has been very productive in clean technologies. The city has expanded a number of clean technology investments and because of the research and development institutions in the area, many cleantech companies are coming to make their home in San Jose. San Jose's, "Long-time leadership in engineering know-how, combined with semi-conductor, nanotechnology and optics R&D gives it a leg up in renewable energy development, particularly in solar energy applications." San Jose is also home to the Environmental Business Cluster, a non-profit technology commercialization center assisting startup cleantech companies developing goods and services to positively impact the environment.

3) Austin, Texas. Austin has long been Texas' hub for solar, wind, geothermal, and biomass power, as well as fuel cell technologies. Its commitment to the environment and sustainability has made it not only a national cleantech player, but a global one as well. Austin is home to some of the largest cleantech companies on a global level. A large research and development hub, the University of Texas at Austin has created several research expenditures to elevate research into energy efficiency and renewable energy. This includes a project by the College of Natural Sciences to create biofuel from blue-green algae and hybrid-electric automobile programs developed by The Center for Electromechanics.

4) San Francisco, California. California is one of the top cleantech states in the United States and it is cities like San Francisco that makes it happen. Currently, San Francisco is well on its way to becoming the first city to be completely run by renewable energy by the year 2020. With projects like Sunset Reservoir Solar Project, which is the largest municipal solar facility in the state, and a new $250,000 grant to increase renewable energy capabilities.
 
5) Seattle, Washington. Seattle has been leaving its mark in cleantech society by increasing the need for green standards. The Green Building Sustainable Communities Program, for example, creates city projects that meet sustainable outcomes. Tax breaks and loans are provided to businesses and residences that utilize green practices. Seattle has been a leader in using their garbage to get electricity. They have invested into electricity from garbage landfills.
 
6) Chicago, Illinois. Over 20 percent of total power in Chicago is coming from renewable sources. Due to the increase in the need for renewable energy and energy efficiency, Chicago has been able to create numerous job opportunities while, at the same time, increasing solar power and saving on CO2 emissions. Chicago is also becoming one of the major investment locations for international businesses. Chicago also has a number of green initiatives, including the Chicago Green Office Challenge.

Kirshenbaum Law and Cherrytree Group LLC can help you structure your tax credit transaction. Let us guide you through the process of applying for and securing renewable energy tax credits. These transactions typically require a lawyer, a consultant, and a syndicator, and Cherrytree Group and Kirshenbaum law can act in all three capacities, saving you time and money on your transaction.

The original article was written by Shawn Lesser, and can be seen at http://www.reuters.com/article/2011/03 /28/idUS317857292020110328

The U.S. Treasury Department has awarded Pittsburgh's Urban Redevelopment Authority $35 million in tax credits to stimulate investment in low-income communities.

The URA was one of 99 applicants to receive the New Market Tax Credits; more than 250 government entities, nonprofits and other groups applied.

The tax credits will go to investors in "Community Development Entities," groups formed to undertake projects in low-income neighborhoods. The cedits are designed to draw private investment into those communities.

"This is great news for Pittsburgh," Mayor Luke Ravenstahl said in a statement. "This award will leverage millions of dollars of investment into businesses and real estate projects to create jobs and promote growth in our neighborhoods."

U.S. Sen. Bob Casey, D-Pa., and Rep. Mike Doyle, D-Forest Hills, supported the URA's application.

By Joe Smydo, Pittsburgh Post-Gazette

State Auditor Suzanne Bump intends to review public subsidies for Evergreen Solar, the energy company that recently announced plans to shutter its Devens plant and move more 800 jobs elsewhere despite receiving millions of dollars in public funds, as part of a broader review of the state’s entire system of tax incentives.

With the Patrick administration saying it could recoup $13 million of the $31 million the state invested in Evergreen Solar, the News Service asked Bump if she was considering an examination of the public subsidies in the company.

Bump’s press secretary Christopher Thompson responded with a statement noting that before she took office, Bump had described reviewing the state’s broad system of tax incentives as a priority.

“She has developed an internal team and a strategy to evaluate these investments with a focus on accountability and tax payer [sic] benefit,” Thompson said. “The Auditor’s review will take a broad look at many different tax incentives, and the tax incentives granted to Evergreen Solar will be reviewed in this broader context.”

On the campaign trail last year, Bump talked up plans to examine tax incentives, saying they should be measured by the benefits provided to Massachusetts citizens and taxpayers and that accountability for public investments “must be built into state government.”

As a candidate, Bump said that all state tax incentives and credits should be reviewed for effectiveness and that she would begin with economic development tax incentives. She estimated state government would forego $1.7 billion in fiscal 2011 due to tax incentives and credits.

Bump also pledged to conduct audits of agencies charged with providing or documenting tax incentives to determine whether agency managers used appropriate procedures, provided objective analysis, measured outcomes as intended, and held recipients accountable for performance.

State Housing and Economic Development Secretary Greg Bialecki said last week that Evergreen had received $21 million in cash grants - $20 million to help build its facility and $1 million for workforce training - $7.5 million in investment tax credits and a long-term lease on state land valued at $2.7 million.

Evergreen has received other forms of public aid, but Bialecki said he did not count in his estimate $13 million in state grants used to build road and utilities infrastructure at Devens and some state taxes the company avoided when paying for equipment.

Bialecki estimated the state can recoup $13 million, including the $7.5 million investment tax credit, which he said won’t be claimed, $3 million in state grants that were tied to a job creation formula, and land costs.

"We’re looking very carefully at what happened here and what lessons can be learned," Bialecki said last week. "This wasn’t so much an investment in Evergreen Solar as it was in the clean energy sector. The purpose wasn’t to benefit a company but to grow an industry and the investment really put us on the map."

In announcing its Devens plant closing plans, Evergreen Solar President Michael El-Hillow said the firm’s production costs in Devens were “much higher than those of our low cost competitors in China.”

“Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry,” El-Hillow said in a statement. “While the United States and other western industrial economies are beneficiaries of rapidly declining installation costs of solar energy, we expect the United States will continue to be at a disadvantage from a manufacturing standpoint.”

MassGOP Chairman Jennifer Nassour has called the state’s investments in Evergreen “reckless policy” and urged the Patrick administration to offer a more broad-based approach to economic incentives for companies.

House Minority Leader Brad Jones has said that the Evergreen case should serve as a “lesson to Governor Patrick that throwing money at companies in industries he approves of won’t necessarily translate into success.” Jones said Patrick and Lt. Gov. Tim Murray “should turn their attention to creating an economic climate where all businesses can succeed and thrive.”

Gov. Deval Patrick has defended his administration in light of the Evergreen controversy, saying the process of doling out incentives to individual companies or industries "works well."

"I am disappointed that we are losing these manufacturing jobs to China, but Evergreen produced over 900 jobs for each of the years in question (two or three times what they promised) and that was good for the workers who got those jobs," Patrick said during a recent online chat.

"Evergreen did not use about half of the benefits that were offered to them and we have recovered or will recover most of the rest. Beyond that, we need to ask ourselves whether we are serious about competing for jobs on the same playing field as other states. Far more often than not, we win in a competition. But we have to compete to win."

Senate President Therese Murray told WCVB-TV Sunday that Evergreen “paid us back” $11 million based on an initial state investment of $2.5 million. “I think that’s pretty good,” Murray said.

But Murray added, “Probably their five or ten-year plan was a little aggressive . . . It’s still a loss. There should have been a bit more due diligence. I would have had a bigger clawback - that if the jobs left that the money came back.”

Murray said she’s been told that “solar doesn’t make a profit,” adding, “I’m still grappling with that.”

House Speaker Robert DeLeo, who has also called into question the Evergreen investments, on Wednesday reiterated his support for tax incentives aimed at stimulating film industry business. DeLeo noted that “The Social Network,” “The Town” and “The Fighter,” which all have a Massachusetts connection, tallied 16 Oscar nominations this week.

“These movies, filmed right here in Massachusetts, are a good reminder of how important the film tax credit has been to our state’s economy in these challenging times,” DeLeo said in a statement, referencing House votes from nearly a year ago to block efforts to reduce incentives available to the film industry.

A Department of Revenue report released this month found that the film tax credit cost the state $82.4 million for productions filmed in 2009 and generated $319 million in spending, of which $104 million was spent in Massachusetts. Of the $215 million spent outside of Massachusetts, $82 million paid salaries of $1 million or more to actors, according to the report.

Over the four years in which the tax credit program has been on the books, the total credit-eligible spending for 449 productions claiming the tax credit was $1.047 billion, with 32 percent or $335.5 million paid to Massachusetts residents and 68 percent or $712.3 million paid to non-residents or out-of-state businesses, according to the Department of Revenue.

On Wednesday, Patrick said his newly unveiled budget proposal included a continuation of the film tax credit program.