Solar Financing Structure Empowers Tax Disregarded Entities to Reap ARRA and Rebate Benefits
By Steve LoRusso
Vice President, Commercial Sales, HelioPower
Nonprofits have seemingly been out of the luck when it came to monetizing the 30% federal cash grant for renewable energy installations provided by the American Recovery and Reinvestment Act (ARRA). Tax disregarded entities have not been able to take advantage of the lucrative 30% treasury cash grant or the federal and state depreciation benefits (IRS 200 MACRS). However with the participation of a lease partner, organizations that were previously left out of the ARRA funding picture now have a new opportunity to build solar power generating systems on their buildings utilizing the support of the ARRA cash grant for renewable energy installations.
This solar financing structure involves an interested third party utilizing the tax incentives in the role of a Site-Delivered Equipment Provider. The resulting solar financing product is much simpler and less costly to arrange than a solar power purchase agreement (PPA) for smaller sized solar power installations. The minimum transaction size is $200,000.
This solar lease structure is available to well-established, creditworthy U.S. based companies and nonprofit organizations. It can also benefit municipalities, churches, schools, and 501c3 structured entities that want to leverage ARRA funds and state utility rebates to go solar. The effectiveness of this solar financing structure will be impacted by construction site considerations and the financial strength of the host as it would be in any other type of solar installation.
HelioPower is working with financial partners who are able to offer a low cost seven (7) year financing program for solar photovoltaic (PV) systems to financially strong commercial firms and nonprofit entities in California and surrounding states. We work with our solar financing partners to provide 100% financing of a PV system at a fixed payment for 7 years with an 8.5 year amortization. Normally no additional collateral is required other than the solar equipment. The nonprofit entity applies to the U.S. Treasury for the 30% cash grant which, when received, is applied against the financing agreement. Additionally the monthly lease payments required from the organization are offset for the first five years by the CA State Performance Based Rebate payments to the property owner.
We see great promise for endowment foundations, grant makers and personal contributors that make annual contributions to their selected charities, to rethink their contributions. These contributions could take the form of milestone payments on energy leases. Thus the supported solar panel system benefits the organization for decades – generating electricity from a self-generated and sustainable source, hedging the nonprofit against escalating and unpredictable power rates thus creating a stabilized utility burden.
As in the Old Chinese Proverb, “Give a man a fish, he’ll eat for a day. Teach a man to fish, he’ll eat for a lifetime.” When supporters fund a turnkey solar electric system through a true lease solar financing structure they empower the organization to create their own electricity for years to come as well as enable them to benefit from ARRA federal cash grants and CA state solar incentives.
Disclaimer: This is not tax advice. We encourage you to talk with your tax advisor before proceeding with any financial agreement.
American Recovery and Reinvestment Act
U.S. Department of the Treasury
Click here for link to page that includes Frequently Asked Questions:
21. Question: Is an applicant who owns eligible energy property eligible to receive payment if the energy property is leased to a non-profit or otherwise ineligible entity?
Answer: Yes. If the owner of the energy property is the applicant and is otherwise eligible, the fact that the property is being leased to an ineligible entity does not impact the eligibility of the owner/applicant provided it is a true lease and not a disguised sale.
For more information contact Steve LoRusso directly at [email protected].