Subject: FW: Opportunity to comment on CGC tax policy paper and Volcker Board presentation notes
From: "Neil Callahan" <[email-masked]>
To: "'Mike Muldoon'" <[email-masked]>, "'Eric Schwerin'" <[email-masked]>
Cc: "'Hunter Biden'" <[email-masked]>
Date: Fri, 23 Apr 2010 13:50:43 -0400

Hi guys,

This came through from Reed's group.  We have the opportunity to provide
feedback or advice. 

Let me know if you want to discuss and if we want to send back any
consolidated comments.

We own any comment end of day today - sorry for not getting this out to you
sooner.

Best,

Neil

----------------------------------------------------------------------------
--------------

Neil Callahan

Rosemont Seneca

401 Greenwich Street, Suite 400 | New York NY 10013 | 212-933-9965

1010 Wisconsin Avenue, Suite 705 | Washington DC 20007 | 202-333-1880

917-945-9516 (mobile) 

866-749-8879  (fax) 

From: Alexander Kragie [mailto:[email-masked]] 
Sent: Thursday, April 22, 2010 10:30 AM
To: Alexander Kragie
Subject: Opportunity to comment on CGC tax policy paper and Volcker Board
presentation notes

Good morning Supporting Participants of the Coalition for Green Capital (and
Potential Supporting Participants):

As a follow-up to Reed Hundt's testimony to House Ways and Means last
Friday, we are working on a tax policy paper to present to Ways & Means and
the President's Economic Recovery Advisory Board. In addition, you can find
attached the notes from the CGC's presentation to the President's Economic
Recovery Advisory Board (PERAB), also known as the Volcker Board.

Below and attached is a suggested outline of the paper.  Please contact
Genevieve Nowicki [email-masked] by COB this Friday if you:

(1) Have any additional items that you believe should be included and/or 

(2) You wish to help write and/or review one of the below sections.

Thank you,

Alex

I.              Lowering the cost of capital by expanding states existing
bonding authority 

a.    H.R.3525: Provide Tax Exempt Bond Financing for Clean Energy Projects

                                              i.     Current law provides
tax-exempt bond financing for certain publicly beneficial private activities
ranging from airport facilities to solid waste facilities, and including the
financing of garbage trucks and collection bins. This proposal would expand
that law to include tax exempt bond financing for renewable energy, energy
efficiency, demand side management, energy storage, electric transmission,
smart grid, zero emission vehicles, water efficiency and water conservation
projects.

                                            ii.     More specifically, the
proposal would amend the Internal Revenue Code to:

1.    Add additional categories of tax exempt private activity bonds for
renewable energy, energy efficiency, demand side management, energy storage,
electric transmission, smart grid, zero emission vehicles, water efficiency
and water conservation projects;

2.    Allow private companies to utilize both tax exempt bonds and federal
tax credits for new categories; and,

3.    Exclude these new categories of tax-exempt bonds from the statewide
volume cap (just like other tax exempt bonds for airports, non-profits,
schools and hospitals).

4.    Add at the end of Section 168(g)(5)(C) "or any property that is part
of a clean energy project within the meaning of Section 142(a)".

b.    HR 4967 (Renewable Energy Schools Act): allows entities with bonding
authority to enter into PPAs in order to capture the ITC, and use their
bonding authority to pay for renewable installations without running afoul
of anti-arbitrage tax provisions

                                              i.     In order for schools
and local governments to use tax-exempt bonds on a renewable energy system
the local government needs to own the system to get the bonds, except for
utilities (POUs). POUs are allowed to do pre-paid service agreements with
their tax exempt bonding authority. 

                                            ii.     This legislation would
allow local government and schools to both get the low interest financing
and take advantage of the ITC.

c.    Restore the deduction for bonds issued for renewable projects

                                              i.     Amend Section
265(b)(3)(B)(i) of the Code to provide that tax exempt bonds described in
Section 142(a) of the Code that are issued to finance a clean energy project
are "qualified tax-exempt obligations".

II.            Changes to current tax provisions, revenue neutral
provisions??? 

a.    Change the law to allow Master Limited Partnerships to be also used
for renewable energy projects.  

                                              i.     Currently they are
limited to midstream oil/gas and other not generating/producing
infrastructure.

                                            ii.     Provide that items of
deduction and credit arising from ownership of an interest in a renewable
energy master limited partnership will not be limited by the provisions of 

b.    S. 3137 SUN act: allows individuals to capture tax credit for Solar
purchases that are not on their property (they can buy into community solar
projects) this allows renters and those with unsuitable sites/rooftops to
invest in solar

c.    Levelize all administrative and recapture provisions of grant-in lieu
of the tax credit and investment tax credit (ITC). 

                                              i.     Sec 1603, Grants-in
lieu of energy tax credits have been promulgated with regulations that
define recapture more clearly and flexibly than ITC recapture rules,
removing risk of recapture to investors, for example if a project changes
ownership during the five-year compliance period, to a different US
Taxpayer. These same regulations should be applied to ITCs, to reduce
recapture risk for those who select ITCs over Grants. This will reduce
inter-creditor friction and transaction cost and time to complete renewable
energy financing

d.    Fixes the tax-exempt investor ban for ITC and grant in lieu of tax
credit

                                              i.     . One instance in which
ITC rules are more rational than Grant guidance concerns non-qualified
owners and investors, who may not invest to any extent at all in projects
that seek Sec 1603 Grants.  There, the ITC principal that the fraction of
non-qualified ownership should be removed from ITCs should also apply to
Grants-in-lieu.

e.    Continues most of the beneficial rules currently provided in Treasury
guidance (e.g., liberal recapture provisions; ability to use "blockers" with
respect to tax-exempt owners; ability to use sale-leasebacks with tax-exempt
lessees; and, in the case of partnerships, payments will be made to the
entity, rather than the partners.)

III.         Energy Efficiency Provisions

a.    HR 4226 (Rep. Reichert), Expanding Building Efficiency Incentives Act
of 2009 (increases the Energy Efficient Commercial Building Tax Deduction
from $1.80 per square foot to $3.00 per square foot for energy efficient
building systems in new or existing buildings).

b.    HR 2198 (Rep. Bean), To amend the Internal Revenue Code of 1986 to
provide a shorter recovery period for the depreciation of certain systems
installed in nonresidential real property or residential rental property
(provides accelerated depreciation for energy-efficient HVAC systems).

c.     HR 4296 (Rep. Halvorson), Mechanical Insulation Installation
Incentive Act of 2009 (provides a tax deduction for installing and
maintaining mechanical insulation).

d.    HR 4455 (Rep. Thompson), Expanding Industrial Energy Efficiency
Incentives Act of 2009 (benefits advanced motors and combined heat and power
systems

IV.          Extending Previous Tax provisions

a.    Extend the Renewable energy grants (grants in lieu of ITC) in ARRA
<http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US53F&>
http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US53F&

b.    Renew the ARRA bonus depreciation for qualifying renewable energy
property
<http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F>
http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F

c.    Expand Section 48C

V.            Low Income programs

a.    LIHEAP fuels switching tax credit: 

                                              i.     Add a program to
convert oil furnaces for participants in low income heating assistance
program through tax credits.  The subsidizing oil heating has been tens of
billions annually for a generation since the oil shocks of the seventies.
Switching to gas or preferably ground source heat pump, heat pump and wood
could potentially be scored as a savings in the ten-year budget window.

b.    Section 8 housing energy efficiency tax credit

                                              i.     Create a tax credit for
foreclosed houses/properties to be bought and energy updated as part of an
energy efficiency low-income housing program.  Model leases where energy
usage incentives are split between landlord and tenant, sub metering at the
residence level, energy star or equivalent measures of efficiency
compliance.

 

 

-- 
Alexander Kragie
202.579.2354
[email-masked]