Eversheds Sutherland has been advising clients on the section 45Q carbon capture and sequestration (CCS) tax credit since the original statute was enacted in 2008 and since it was revised by Congress in 2018. Now, with the recent release by the Internal Revenue Service of substantial new section 45Q guidance, we are guiding clients in understanding how this tax incentive could support their investments in future CCS projects. Combining our long experience in the energy industry with our deep knowledge of tax, we have helped clients to understand the applications of the section 45Q tax credit, as we have with the section 45 Production Tax Credit (PTC) and section 48 Investment Tax Credit (ITC) related to the renewable energy industry, and to stay in the loop on shifting requirements. We frequently speak with and before industry professionals and government officials, and are often quoted in the tax and energy press, on Section 45Q and other tax credit matters.
- Advising several clients on CCS projects
- Extensive tax equity investment experience
- Industry knowledge throughout our CCS team
- Experience in advising clients on other energy tax credits including the ITC and PTC for renewable energy and the fuels tax credits
- Experience in tax credit M&A and litigation
Ready, Set, Sequester? An updated guide to the Section 45Q Carbon Capture and Sequestration Credit Guidance
Statutory Provisions
Regulations
IRS Guidance
- Notice 2009-83 (Interim Guidance)
- Notice 2011-25 (Modification of Interim Guidance)
- Notice 2018-93 (Applicable Dollar Amount of Credit)
- Notice 2019-31 (2019 Inflation Adjustment Factor)
- Eversheds Sutherland Analysis of Notice 2019-31
- Notice 2019-32 (Request for Comments on 45Q Credit)
- Eversheds Sutherland Analysis of Notice 2019-32
- Notice 2020-12 (Beginning of Construction Guidance)
- Revenue Procedure. 2020-12 (Partnership Safe Harbor)
- A client in obtaining favorable section 45Q guidance.
- A client in a novel tax credit litigation matter.
- The sponsor in the negotiation of a construction financing facility for a utility-scale solar project to be located in California; negotiation and finalization of tax equity documents for the funding of tax equity investments upon completion of construction; and negotiations with the term lender for a term loan to refinance the construction loan.
- A sponsor in its acquisition and tax equity financing of a 110-MW Texas wind project. In addition to the negotiation of a purchase agreement for the equity of the project company, the transaction included the negotiation of the tax equity investment agreements, an engineering, procurement and construction (EPC) contract for the development and construction of the wind farm and a turbine supply agreement as well as advice on safe-harbor and “beginning of construction” issues in connection with the availability of production tax credits.
- Kaua’i Island Utility Cooperative (KIUC), an electric cooperative, in developing a 12-MW solar generating facility in Koloa located on Kaua’i Island’s South Shore. We advised KIUC on requirements for qualification for federal tax incentives, EPC contracting, Rural Utilities Service requirements and securities law matters related to seeking tax investors for its project, and also assisted in securing the tax equity investment for the project.
- A major sponsor in the acquisition of a construction-ready wind farm in Texas with more than 249 MW of capacity, including negotiation of a purchase agreement for the equity of the project company, negotiation of the tax equity investment agreements, an EPC contract for the development and construction of the wind farm and a turbine supply agreement as well as advice on safe-harbor and “beginning of construction” issues in connection with the availability of production tax credits.
- The commodities division of a financial institution in connection with the acquisition and development of two solar power projects in development in Georgia, totaling more than 25 MW (AC), including due diligence, acquisition agreements and EPC contracts, as well as a tax abatement “bond-for-title” transaction.
- The development division of a utility in the acquisition of an 80% equity interest in a 40-MW (AC) solar PV electric generating facility in Texas, for which the utility obtained 80% of the Investment Tax Credit. We also negotiated the joint venture agreement that would govern the joint venture after the client’s purchase.
- A sponsor in its acquisition and tax equity financing of a 103-MW wind project in PJM. In addition to the negotiation of a purchase agreement for the equity of the project company, the transaction included the simultaneous negotiation of the tax equity investment agreements, an EPC contract for the development and construction of the wind farm, a turbine supply agreement, offtake agreements including a corporate VPPA, a fixed volume hedge and a REC swap, as well as advice on safe-harbor and “beginning of construction” issues in connection with the availability of production tax credits.
- Several hydroelectric developers in satisfying the beginning of construction requirements and preparing for future tax equity investment.
- A tax equity investor in acquiring an investment in a portfolio of solar projects in Georgia.
- A tax equity investor in an investment involving a portfolio of residential solar projects in California.
- A lender participating in a warehouse and back-leverage facility for a major sponsor of commercial and industrial solar installations on tax equity structures, investment tax credits and commercial risks involving back-leverage.
- Developers/owners in connection with sale-leaseback tax equity financings of small utility-scale solar projects.
- An organization of electric cooperatives in developing numerous community solar projects in areas served by electric cooperatives. The firm’s work involved all legal and structuring matters to address the tax equity investment, construction and operations of the facility and the ability to utilize federal and state tax credits and grants.
- A generation and transmission cooperative that serves parts of Indiana and Illinois in a series of lease tax equity transactions for 1-MW solar projects.
- A sponsor in the acquisition of pre-commercial wind facilities, together with related turbine supply agreements, “beginning of construction” issues associated with the availability of production tax credits, balance of plant EPC contracts and other activities in connection with the development of the projects and related tax equity financing.
- A major private equity fund on a bid to acquire two wind farms in Texas, aggregating approximately 300 MW in capacity, together with negotiations with tax equity investors and back-leverage providers. Work included conducting due diligence and negotiating acquisition agreements, advising on the availability of production tax credits and “beginning of construction” and safe-harbor issues and negotiations with turbine suppliers and EPC contractors.
- The sponsor in the acquisition of preferred cash streams payable to tax equity investors in connection with a portfolio of wind farms located in the US, with a generating capacity exceeding 800 MW.
- A national renewables organization in the development of a tax equity project financing program for the financing of community solar projects.
- A hedge provider in a lien-secured hedge on a 200-MW wind facility in SPP, including negotiations with tax equity and construction lenders.
- Structuring transactions for developers of biomass, wind, solar, municipal solid waste, combined heat and power and hydropower projects to optimize utilization of federal production and investment tax credits and Treasury grants.
- Defending companies in IRS audits challenging claimed renewable energy tax credits.
- Advised clients on tax incentives for renewable energy facility construction and acquisition.
- Represented a client in the acquisition of wind and solar projects, developing plans to qualify projects for ITCs and PTCs and sell interests to tax equity investors.
- Proposed Regulations for 45Q Carbon Capture and Sequestration Tax Credits, June 24, 2020, Eversheds Sutherland Coop of Coffee
- 45Q tax credit panel, April 7, 2020, ACC Houston Energy Committee