Analysts and tax experts say an attempt by the United States administration to use tax breaks to boost solar energy businesses falls short of expectations among industry officials.
They said the proposal released by the Internal Revenue Service would do little to increase the number of the projects that could qualify for a tax-saving business structure known as a “real estate investment trust.”
Reuters Newsagency reports the administration of President Barack Obama had hoped the move would lure more investors to solar energy projects.
For years, the clean energy industry has sought to have large-scale solar production facilities qualify for Real Estate Investment Trust (REIT) status.
Those hopes dimmed with the IRS’s latest guidance, industry experts said.
Reuters reports to qualify as a REIT, a business must have at least 75 per cent of its holdings in real estate assets.
REITs are not required to pay corporate tax but must distribute most of their income to investors.
David Burton, a tax lawyer with Akin Gump Strauss Hauer and Feld, said the IRS proposal would open REIT status only to a small number of solar projects.
“It’s going to be a drop in the bucket,” he said.
The IRS proposal coincided with a speech given by President Obama promoting renewable energy investments as a way to address climate change.
“The renewable enthusiasts in the White House had their ambitions tempered by the conservative green eye-shade folks at IRS,” said Christine Tezak, managing director at ClearView Energy Partners, a consultancy.
REITs were created in 1960 to encourage real estate investment, and many retail investors hold publicly traded REITs in their investment portfolios.
Reuters reports other lawyers said the IRS proposal was appreciated because solar businesses will have a better understanding of what might qualify for REIT status.
“It is going to stimulate more thinking about these issues and looking more seriously about the possibility of creating renewable energy REITs,” said Kelly Kogan, a lawyer with Chadbourne and Parke.
The IRS proposal was needed to give renewable energy businesses more clarity about what qualifies for REIT status within the law, the Treasury Department said.
“Even though these rules are generally consistent with current IRS administrative practice, they will provide important clarity to industry and investors,” said Mark Mazur, the Treasury Department’s assistant secretary for tax policy, in a statement on the Treasury website.
