JANUARY 12TH, 2024

Basis Webinar: Lessons Learned from the First Year of Clean Energy Tax Credit Transfers

On Tuesday, January 9th, we hosted a panel of industry experts from Deloitte, Aon, Akin Gump, and Vinson & Elkins who transacted several billion dollars’ worth of tax credit transfer transactions in 2023. While most of these advisors have been focused on the larger, more complex part of the market, we do believe there are many insights for smaller transactions and developers as well.

Watch the video and read our key takeaways (too long didn't watch).
Key Takeaways
  • The tax credit transfer market in 2023 was very active. Between the panelists the group covered over 30 transfer deals, worth billions of dollars. Expectations for 2024 are very high with more guidance and precedent being established by the first year of transfer deals.
  • Production Tax Credit transfers were highly coveted due to their risk profile but the panelists saw the highest volume of transactions from Investment Tax Credit transfers. 
  • One panelist pointed out that ITCs associated with merchant battery storage have proven to be relatively easy technology assets to transfer given that there are less contractual agreements to diligence. 
  • In 2023 Hybrid Structure deals (tax equity with a transfer out / sale of tax credits) were a popular option to enable large tax credit sellers to “step-up” the value of their tax credits and monetize depreciation alongside tax credits. It also allows buyers to rely on tax equity investor diligence and indemnities.
  • Insurance continues to be very important for ITC transfer transactions. Tax insurance is used to reallocate risk from the sellers to an investment-grade insurer to protect the buyer in a recapture or disallowance scenario. This is especially important for cases where smaller developers are selling credits to larger buyers.
  • Tax credit buyers can simplify transactions by focusing on underwriting the insurance product more than the project and developer counterparty risks.
  • Expert accounting and tax consulting is necessary for multinational buyers to consider implications of BEAT, Pillar II, and other complex tax strategies.
  • With a number of on-shore manufacturing facilities coming online in 2024/25, we could see an avalanche of 45X credits. These are perfect for transfer given the seller can't achieve step-up – meaning there is little financial upside to tax equity-like sales, no recapture risk, and credits are easy to diligence. 
Webinar discussion with Lauren Collins (Vinson & Elkins), Shariff Barakat (Akin), Jaime Park (Deloitte Tax), and Corey Lewis (Aon). Moderated by Erik Underwood (CEO, Basis Climate).

Erik Underwood

Thank you. We are there. Okay. Well, thank you, everybody, for joining. And good morning. Good afternoon. Thanks for taking the time with us today. My name is Eric Underwood. I'm joined today by an illustrious panel, including Shariff Barakat, Lauren Collins, Corey Lewis, and Jamie Park, to discuss what actually happened in 2023 with tax credit transfers, lessons learned, and what we expect in 2024. So this is not a 101 on what tax transferability is. I invite you to join or to see previous recordings of other panels on there. But this is IRA related tax credit transfers for clean energy, qualifying tax credits from the IRA. So we'll cover topics, basically that are relevant to monetizing clean energy tax credits. The individuals on this panel have supported a wide range of deals in the first year of transferability, which really will help inform the nearly 400 registrants that we have on this panel.

So excited to have such a wide ranging audience today, including developers, investors, financiers, corporates, and other service providers, such as legal firms and accounting firms as well. So I'm really excited to talk about what makes a deal go well and what we expect for 2024. We will hold some time at the end in the last ten minutes for Q&A. So please feel free to send through any questions that you might have during the session and in the q and a portal. And then we will also be posting a recording on this. If you're not able to attend the entirety of this session or if you're not able to attend at all, you'll be listening to this on a recording.

I do also finally want to acknowledge that we have some members of the press on today's panel. So hopefully this helps us spread the word about transferability to the wider us corporate tax audience. And with that being said, I'd like start kick off by inviting each panelist to do a brief introduction of themselves and the role of their firm, and then we'll take it off from there. So, Sharif, do you want to start?

Shariff Barakat

Sure. Thanks, Erik. Thanks for having us all on here today. Excited to speak. I'm Sharif Barrickat. I'm a tax partner with Akin Gump in Washington, DC. I'm part of the projects and energy transition group here, which is sort of a full service, everything related to renewables assets. And I joke with the IRA coming along, everything generates a tax credit now. So you have to really understand a whole lot more asset types. And transferability has really come in and changed the game in terms of what used to be just tax equity kind of is the only way to monetize in many instances. So we've been really working on the forefront trying to think through these types of transactions with a lot of the people who are on this call, actually. Right. So looking forward to the discussion. Thanks again for having me.

Lauren Collins

Thanks, Erik. Yeah, I'm Lauren Collins. I'm a tax partner at Vinson & Elkins. Have been working in the energy transition space for over a decade, but things have really been super exciting and taken off since IRA was enacted. Goodness, over a year and a half ago now. So all sorts of new asset classes, as Sharif mentions, transaction type, tax equity, transferability, debt finance, all sorts of new and exciting deals. And transferability has really been at the forefront of that. So excited to talk to you all today.

Corey Lewis

Thanks, Erik. Those of you don't know me, my name is Corey Lewis, co head of our north american tax insurance practice here at Anne. We are an insurance brokerage firm. I really lead our tax credit insurance efforts. Been with Ann for coming up on nine years. Former practicing tax attorney. Before AON, I was at PwC and the International Tax department, focusing mostly on up on real estate investing. I'm looking forward to talk about tax credit insurance on transfers.

Jaime Park

Hi, everyone. I'm Jamie Park. I'm a managing director in our Washington national tax at Deloitte. I'm in the federal tax credits and incentives Group, and I focus on all areas of energy credits and incentives. I've been with the former for about one and a half years. And prior to that, I was with the office of chief counsel at the IRS for about 16 years, working on many of these ITC and PTC work. But most recently, I was at the House Ways and Means Committee, and I was involved with many of these energy related tax provisions that were in the Build back better act but now implemented in the IRA. So it's been exciting times and there are a lot of questions and a lot of regulations and guidance coming out. So it's been super fun.

Erik Underwood

Yeah. And I think the constant trickle of guidance coming up makes things even more exciting every time we get those news. So it's good to see that. And it's great to have each of your experiences on. Thank you all. So I think to kick off, I'd like to start discussing what 2023 really looked like for everyone. First question would be a quick fire impression about the adoption of transferability. Specifically, did tax credit transferability exceed your expectations, meet your expectations, or fall short for 2023? Just give me a couple of sentences on what you thought. I'll leave it open for the panels.
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