[authors: R. Thomas Hoffmann, Darin Lowder]
Guidance issued by the IRS earlier this week removes uncertainty related to qualified energy conservation bonds (QECBs), and may result in expanded sources of funding for energy efficiency and renewable energy projects.
QECBs have been underused since they were created in 2008, due in part to uncertainty over rules related to energy efficiency improvements and financing for green community programs. With much of the uncertainty resolved, QECBs may become a more attractive financing tool because they can qualify for interest subsidies that could bring borrowing costs to near-zero percent interest rates and terms of up to 21 years.
The IRS guidance provides certainty related to measuring energy efficiency improvements and determining whether a clean energy financing program or other similar community energy conservation strategy will qualify as a “green community program” under the federal tax code. Given the new clarity the guidance provides, states, localities, public housing authorities, energy services companies, and private renewable energy developers may want to take a fresh look at using QECBs as a financing tool for energy efficiency and renewable energy projects.
The attorneys in Ballard Spahr’s Energy and Project Finance Group and Tax Group have substantial experience in the allocation and issuance of QECBs in transactions ranging from simple equipment purchases to complex power generation projects.
For more information, see our Tax alert, IRS Issues Guidance on Qualified Energy Conservation Bonds.