Overview
Federal tax credits and other incentives provide important commercial opportunities and capital for renewable energy and low-carbon projects. But realizing these benefits requires careful planning and execution spanning tax and corporate/organizational planning, project ownership, commercial agreements, site selection, financing, construction, licensing and permitting, operations, to name a few.
Foster Swift provides holistic advice to developers, project owners, manufacturers, agricultural businesses, utilities, municipalities, tax-exempt entities, lenders, investors, and tax credit buyers in the green and renewable energy space. Our tax, corporate, real estate, finance, municipal, environmental, and regulatory attorneys collaborate from inception to closing to reinvestment and throughout project life cycle.
Energy Tax Credits
We advise on federal investment tax credits, production tax credits, and related incentives, including:
- Section 48 energy investment tax credit and Section 48E clean electricity investment tax credit.
- Section 45 renewable electricity production tax credit and Section 45Y clean electricity production tax credit.
- Section 45Q carbon oxide sequestration credit.
- Section 45Z clean fuel production credit.
- Section 45V clean hydrogen production credit.
- Section 45X advanced manufacturing production credit.
- Section 48C qualified advanced energy project credit.
- Credits for alternative fuel vehicle refueling and charging property.
- State and local tax incentives, grants, loans, property tax relief, and brownfield incentives.
Our services and advice relate to:
- Direct transfers of eligible credits under Section 6418, payment elections under Section 6417, and related pre-filing registrations.
- Eligible facilities, energy property, qualified costs, and tax basis.
- Start of construction, including physical work and applicable safe harbors, continuous construction and continuous efforts requirements.
- Placed-in-service requirements, commissioning, testing, operational readiness, and project permiting.
- Ownership, original use, depreciation, tax-exempt use, and related-party issues.
- Prevailing wage and apprenticeship, domestic content, energy community, and low-income community bonus credits.
- Foreign entity planning and restrictions, and Foreign Entity of Concern (FEOC) rules.
- Credit calculation, allocation, substantiation, reporting, and recapture issues.
- Cost segregation, appraisals, and valuation issues.
- Interpreting IRS guidance, legislative changes, legacy and transitional rules.
Tax Credit Transactions: Direct Transfer and Direct Pay
We represent tax credit sellers, buyers, developers, project owners, investors, lenders, municipalities, and tax-exempt entities in transactions involving US federal income tax credits related to green and renewable energy projects.
Internal Revenue Code Section 6418 allows an eligible taxpayer to transfer all or part of an eligible credit to an unrelated buyer for cash. Eligible credits include those described in Sections 30C, 45, 45Q, 45U, 45V, 45X, 45Y, 45Z, 48, 48C, and 48E, subject to the applicable qualification rules. For direct transfers under Section 6418, Foster Swift can:
- Structure and negotiate ITC and PTC transfer agreements.
- Conduct buyer-side or seller-side tax and legal due diligence.
- Review and assist in preparation of cost segregation reports, appraisals, tax memoranda and legal opinions, project contracts, permits, construction records, and placed-in-service analysis.
- Prepare or review transfer election statements and related closing documents.
- Address pre-filing registration and federal income tax reporting.
- Negotiate representations, warranties, covenants, closing conditions, indemnities, guaranties, escrows, holdbacks, and other credit support.
- Assess and allocate risks involving qualification, excessive credit transfers, recapture, basis, valuation, partnership structure, bonus credits, and IRS challenges.
- Review, negotiate, and draft provisions regarding tax credit and general M&A insurance, indemnification, guarantees, tax and legal due diligence.
- Structure credit transfer bridge loans, debt and equity facilities, and other available financing through private and government lending programs.
We also advise governmental entities, political subdivisions, tax-exempt organizations, rural electric cooperatives, and other eligible entities in the context of direct (elective) payment transactions under Section 6417, including:
- Entity selection, check-the-box elections, and related organizational and structural questions.
- Pre-filing registrations, elective payment elections, and related reporting issues.
- Project and property ownership and joint operating arrangements.
- Partnerships, pass-throughs, and related limitations regarding elective payment eligiblity.
- Tax-exempt grants, forgivable loans, bond financing, and other financing alternatives.
- Domestic content rules and related credit limitations.
- Tax basis adjustments, recapture, documentation, and post-filing compliance.
Tax Equity and Project Ownership
Tax credit transfers do not replace or eliminate the importance of traditional tax-equity structures. Foster Swift provides counsel regarding:
- Partnership-flip and t-flip structures.
- Sale-leasebacks and inverted leases.
- Credit pass-through arrangements and hybrid tax-equity and direct-transfer transactions.
- Joint ventures and co-ownership arrangements.
- Special-purpose entities.
- Sponsor equity and preferred equity.
- Capital contributions, distributions, preferred returns, liquidation rights, and entity limitations.
- Capital accounts, tax basis, inside and outside basis in partnership assets, deficit restoration obligations, and minimum gain issues.
- Allocation of income, gain, loss, deduction, credits, and other tax items.
- Purchase options, call rights, put rights, withdrawal rights, and exit planning.
- Transfer restrictions, change-of-control provisions, defaults, remedies, and dissolution.
Biogas, Renewable Natural Gas, and Anaerobic Digesters
Our clients include agricultural operations, dairy farms and cooperatives, wastewater facilities, landfills, food and waste processors, ethanol producers, utility companies, and developers of biogas and renewable natural gas projects, and many small to large factory, farm, and technology operators.
Our clients’ operations involve anaerobic digesters, cleaning and conditioning property, gas upgrading equipment, waste feedstock collection systems, landfill gas collection systems. In addition to transactional and tax credit planning, we provide these clients with environmental, SALT, municipal, non-tax regulatory, litigation, and other advice regarding:
- Anaerobic digesters.
- Wastewater and waste feedstock systems.
- Manure, landfill gas, food waste, and organic waste projects.
- Biogas cleaning and conditioning equipment.
- Renewable natural gas upgrading equipment.
- Gas gathering, compression, storage, metering, and pipeline interconnection.
- Productive use, sale, flaring, and process heat fuel.
- Renewable fuel and environmental attributes.
In addition to planning, we assist in documenting and closing deals involving a wide variety of technologies and related project documents, such as:
- Feedstock supply agreements.
- Manure supply agreements.
- Wastewater handling agreements.
- Waste disposal or processing agreements.
- Permeate supply agreements.
- Biogas purchase and sale agreements.
- Renewable natural gas offtake agreements.
- Gas transportation and pipeline interconnection agreements.
- Environmental attribute and renewable identification number agreements.
- Engineering, procurement, and construction agreements.
- Construction manager at risk (CMAR) agreements.
- Equipment purchase and supply agreements.
- Operation and maintenance agreements.
- Ground leases, facility leases, easements, and access agreements.
- Credit agreements, guaranties, security agreements, and environmental indemnities.
- ITC transfer agreements, tax-equity documents, and tax credit indemnification agreements.
Ethanol, Biofuels, and Biomass
We advise ethanol producers, agricultural businesses, biomass facilities, and clean fuel developers on tax, commercial, financing, and operational matters.
Our services include:
- Section 45Z clean fuel production credit analysis.
- Carbon intensity, production, sale, and substantiation issues.
- Section 45Q planning for carbon captured from ethanol or other industrial processes.
- Biomass and process heat fuel analysis.
- Biogas and renewable natural gas use in production.
- Wastewater treatment and anaerobic digestion.
- Project ownership and separation of ethanol, wastewater, and energy assets.
- Recapture analysis in connection with asset or equity transfers.
- Construction and equipment financing.
- Tax credit transfers and tax-equity structures.
- Federal and state fuel, environmental, and tax compliance.
Relevant project documents may include:
- Corn, biomass, and other feedstock supply agreements.
- Natural gas, biogas, and process heat fuel supply agreements.
- Water, wastewater handling, and permeate supply agreements.
- Ethanol offtake and marketing agreements.
- Distillers grain purchase and sale agreements.
- Carbon dioxide capture, purchase, transportation, and sequestration agreements.
- Clean fuel credit agreements.
- Shared services, operating, and facility use agreements.
- Asset purchase, contribution, lease, and joint venture agreements.
- Construction manager at risk, equipment supply, and operation and maintenance agreements.
- Credit, security, guaranty, and intercreditor agreements.
Carbon Capture and Sequestration
We advise emitters, capture-facility owners, fuel producers, utilities, transporters, storage operators, investors, and credit investors on Section 45Q projects. Our work may include:
- Qualification of capture equipment and facilities.
- Ownership and operation of capture equipment.
- Applicable capture thresholds and credit rates.
- Secure geological storage and qualified utilization.
- Measurement, monitoring, verification, and reporting.
- Credit elections and allocation among project participants.
- Direct pay and Section 6418 transfers.
- Recapture and contractual risk allocation.
- Project company, partnership, and joint venture structures.
- Pipeline, pore space, easement, lease, and site-control matters.
- Permitting, environmental review, and regulatory compliance.
Project documents may include:
- Carbon capture services agreements.
- Carbon dioxide purchase and sale agreements.
- Transportation and pipeline agreements.
- Interconnection agreements.
- Injection and sequestration agreements.
- Pore space leases.
- Surface use and access agreements.
- Monitoring and verification agreements.
- Operation and maintenance (O&M) agreements.
- Indemnification and recapture agreements.
- Tax credit transfer and tax-equity documents.
Solar, Wind, Storage, and Geothermal Projects
We advise on utility-scale, community, commercial, industrial, and distributed energy projects involving solar, wind, battery storage, geothermal, cogeneration, and related infrastructure.
Our related services include:
- Site acquisition and project development.
- Project company and joint venture formation.
- ITC and PTC qualification.
- Start-of-construction and placed-in-service analysis.
- Tax-equity and credit-transfer transactions.
- Construction and permanent financing.
- Power sales and project revenue contracts.
- Zoning, land use, permitting, and municipal approvals.
- Property tax, special assessment, exemption, and valuation matters.
- Acquisitions, dispositions, refinancing, and project restructuring.
Project documents may include:
- Power purchase agreements.
- Virtual power purchase agreements.
- Renewable energy certificate agreements.
- Energy storage services agreements.
- Tolling agreements.
- Interconnection agreements.
- Engineering, procurement, and construction agreements.
- Construction manager at risk agreements.
- Balance-of-plant contracts.
- Module, turbine, battery, and other equipment supply agreements.
- Build-transfer agreements.
- Operation and maintenance agreements.
- Asset management agreements.
- Ground leases, wind leases, solar leases, easements, and access agreements.
- Decommissioning agreements and financial assurance documents.
- Credit agreements, mortgages, security agreements, collateral assignments, and guaranties.
- Tax-equity contribution agreements and ITC or PTC transfer agreements.
Real Estate and Site Control
Energy projects depend on enforceable rights to use the project site, utility corridors, water, subsurface formations, and related facilities.
Our real estate attorneys assist with:
- Land acquisition and disposition.
- Option agreements and development rights.
- Ground, facility, wind, solar, geothermal, and equipment leases.
- Pipeline, transmission, utility, access, drainage, and construction easements.
- Pore space and carbon sequestration rights.
- Title commitments, surveys, mineral rights, and recorded restrictions.
- Zoning, site plans, permits, and land use approvals.
- Lender consents, estoppels, subordinations, nondisturbance agreements, and collateral assignments.
- Environmental diligence and remediation obligations.
- Decommissioning, restoration, and financial assurance.
Municipal and Public Entity Matters
We represent municipalities and other public entities in renewable energy development, regulation, financing, and direct pay matters. Our services include:
- Renewable energy zoning ordinances.
- Compatible renewable energy ordinances.
- Moratoria, special land use permits, site plans, and variances.
- Administrative appeals, ordinance enforcement, and litigation.
- Development agreements and host community agreements.
- Road use, drainage, emergency response, and decommissioning agreements.
- Public infrastructure and utility coordination.
- Property tax valuation, exemption, and Michigan Tax Tribunal matters.
- Brownfield plans, tax increment financing, grants, and loans.
- Public finance, bonds, and other capital funding.
- Direct pay elections for eligible governmental projects.
- Open Meetings Act, public hearing, and approval procedures.
Foster Swift’s municipal practice advises public entities on zoning, land use, infrastructure finance, environmental matters, bond issues, and renewable energy facilities.
Project Finance and Transactions
We represent borrowers, lenders, investors, sponsors, project companies, municipalities, and other financing parties. Related services include:
- Construction loans and permanent financing.
- Tax credit bridge loans.
- Equipment financing and leasing.
- Public and tax-exempt financing.
- Sponsor equity and preferred equity.
- Tax-equity investments.
- Hybrid tax-equity and transfer structures.
- Grants, forgivable loans, and other public funding.
- Intercreditor and lien-priority arrangements.
- Project acquisitions, dispositions, restructurings, and refinancings.
Financing documents may include credit agreements, notes, mortgages, security agreements, pledges, guaranties, environmental indemnities, deposit account control agreements, collateral assignments, intercreditor agreements, direct agreements, consents, and forbearance agreements.
Diligence, Insurance, and Dispute Resolution
At Foster Swift, we excel at planning, negotiating, and closing deals. Like other deals, transactions in the green and renewable energy space carry significant risk and require careful project and transactional diligence and mitigation. This may include:
- Review of project contracts, organizational documents, permits, title materials, construction records, invoices, appraisals, cost segregation reports, engineering reports, tax returns, and registrations.
- Tax memoranda, risk assessments, qualification opinions, and transaction opinions.
- Tax credit insurance applications, underwriting requests, policies, exclusions, retentions, limits, and claims.
- IRS applications, examinations, information requests, administrative appeals, and credit disputes.
- Excessive credit transfer, recapture, penalty, and indemnification matters.
- Coordination with accountants, engineers, appraisers, brokers, insurers, return preparers, and other advisers.
Planning Early
Tax credit qualification often depends on facts established before construction begins or a project is placed in service. Entity formation, ownership, equipment selection, contracting, site control, financing, construction records, operations, and tax reporting should and often must be aligned.
The benefits of early planning include, for example:
- Assessment of suitability of production- versus investment-based credits.
- Document start of construction, continuous progress, placement in service, and eligibility sunsets.
- Ensuring feasibility and eligibility for bonus adders and engaging appropriate suppliers or labor.
- Addressing municipal, real estate, environmental, and regulatory requirements in unison before they may be time-prohibitive or compliance becomes unduly expensive.
- Identifying, minimizing, and/or adequately insuring against known and unforeseen risks.
Foster Swift provides coordinated legal advice spanning from project planning and site control through financing, construction, operation, disposition, and dispute resolution.
