The For The Internal Revenue Code

3449 Words Sep 19th, 2016 14 Pages
to distort the original intent Congress had when Section 7704 was added to the Internal Revenue Code.

PART II B. THE INVESTMENT TAX CREDIT, THE PRODUCTION TAX CREDIT AND THE YIELDCO.

The yieldco has evolved as an effective means for producers of renewable energy to raise public capital in a world where the MLP structure is unavailable due to the current definition of qualifying income.82 Essentially looking to create a synthetic MLP, the producers of the wind or solar energy producing assets (again, the sponsor) contribute these assets along with the tax credits they generated into a newly formed corporation.83 The tax credits are a key part of the equation in that they allow the yieldco to shield tax and thus make tax free distributions.84 In most circumstances, the sponsor has already completed building these assets and, in many cases, has already entered into long term contracts for the electricity these assets will produce.85 The result is a corporation owning completed projects with the ability to produce long term stable yield that will be tax free for a period of time.86 The sponsor will usually retain a voting majority

82 Felix Mormann, Beyond Tax Credits: Smarter Tax Policy for a Cleaner, More Democratic Energy Future, 31 Yale J. on Reg. 303, 342 (2014).
83 Michael R. Braverman & Stephen C. Braverman, Chasing Yield: How the Worldwide Glut in Capital is Financing Energy Investment, 29 NAT. RESOURCES & ENV?T 3, 6 (2014).
84 See The YieldCo…
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