Sustainable Land Development Today - July/August 2008 - (Page 15) Under current law, beginning January 1, 2009, the amount of the credit will decrease to 10 percent of the tax basis of energy property, and equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight will no longer qualify for the energy credit. In addition to the investment-based energy tax credit, solar energy property may qualify for greatly accelerated depreciation deductions. Solar property that qualifies for the tax credit generally also qualifies for depreciation deductions over five years using the doubledeclining balance method, which can generate significant tax savings. A developer that has little or no ability to use tax credits (e.g., because it has little or no taxable income) may nevertheless be able to obtain the benefit of the energy credit and the accelerated depreciation deductions by entering into an arrangement with an investor that is able to utilize the credits. For example, a developer could enter into a partnership with an investor that is willing to contribute cash to help fi- nance the solar facility. The partnership could then operate the facility and, within certain limits, the energy credit could be allocated to the partner able to utilize the credits. This and other potential techniques for “monetizing” the energy credit require careful tax planning. on a project’s bottom line. Congress’s reluctance to make the incentives permanent is unfortunate, but many experts expect that Congress will renew these tax incentives before they expire at the end of 2008. In the meantime, developers would be well served to analyze the impact these tax incentives would have if property is placed in service before the relevant sunset date or if the sunset dates are extended. Finally, while federal tax incentives can be a significant part of financing a green building project, it is important to investigate the full array of financial incentives, both public and private, that are available for green buildings. SLDT About the authors: Chris Heuer (503-294-9206; ckheuer@stoel.com), Kevin Pearson (503-294-9622; ktpearson@stoel.com), and Adam Kobos (503-294-9246; ackobos@stoel.com), are attorneys at Stoel Rives LLP, a leading provider of legal services to developers of and investors in sustainable projects. Conclusion The federal tax incentives for green building can make a significant impact Circle 159 • or www.SLDTonline.com/webcard www.SLDTonline.com 15 http://www.bluebeamrevolution.com http://www.bluebeamrevolution.com http://www.SLDTonline.com/webcard http://www.SLDTonline.com
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