Any such change would be part of a clean energy and infrastructure bill that is expected to move through Congress by early fall. The renewable energy trade associations are urging Congress to allow owners of new renewable energy projects to apply for refunds from the IRS for the tax credits. Two banks – JPMorgan and Bank of America – accounted in both years for more than half the market. Renewable energy tax equity was a $12 to $13 billion market in 2019. ![]() Competition from $3-to-$6 billion offshore wind projects and from a potentially rapidly growing market for carbon capture projects that qualify for section 45Q tax credits is expected to add to the challenges. Many developers had a hard time finding tax equity during 2020, and 2021 is expected to remain a challenging year. More than 40 tax equity investors did transactions in the 18 months before the COVID-19 lockdowns started in March 2020. The developer must fill in the rest of the capital stack with debt or equity. The percentages should increase if, as expected, Congress increases the corporate tax rate from the current 21% to between 25% and 28%. It accounts for 35% for a typical solar project, plus or minus 5%. Tax equity accounts for 65% of the capital stack for a typical wind farm, plus or minus 10%. Therefore, finding value for them is the core financing strategy for many US renewable energy companies. ![]() Few developers can use the tax benefits efficiently. They amount to 44¢ to 49¢ per dollar of capital cost for the typical wind or solar project that was under construction in time to qualify for tax credits at the full rate. ![]() The US government offers two tax benefits: a tax credit and depreciation. This article describes how the structure works and current issues that are taking up time in partnership flip transactions. They are not the only structure for doing so, but they are the most common, and they are the only way to raise tax equity for wind farms and other projects on which production tax credits will be claimed. Partnership flips are used to raise tax equity in the US renewable energy market.
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