Senate’s Tax Bill’s Impact on the Tax Equity Market: Five Differences from the House Bill

Mayer Brown - Tax Equity Times

The US tax reform bill that the Senate passed on December 2, 2017—along partisan lines in a 51 to 49 vote—is a mixed bag for the tax equity market. The bill is now headed to the conference committee, consisting of House of Representative and Senate leaders, to be reconciled with the tax reform bill passed by the House on November 16.

Below we describe the five differences from the House bill that are of greatest significance to the renewable energy tax equity market. (See also our prior analysis of the ramifications for the tax equity market of the House bill.)

Amounts of and Eligibility for Tax Credits

First, the amount of renewable energy tax credits available and the rules for qualifying for those credits are unchanged from current law under the Senate bill. Specifically, the inflation adjustment that applies to production tax credits is left in place and the “start of construction” rules are unchanged. The fact that the Senate bill left these provision alone is positive for wind and solar, which are in the midst of a phase-out, for wind, and a phase-down, for solar.

However, the Senate bill also left alone the lapsed tax credits for the “orphaned” renewable energy technologies that were inadvertently omitted from the 2015 extension that benefited wind and solar. The orphaned renewable energy technologies are fuel cells, geothermal, biomass, combined heat and power, landfill gas, small wind, solar illumination, tidal power and incremental hydroelectric.

Proponents of those technologies may have more negative views of the Senate bill. There is still discussion of the tax credits for the orphaned technologies being included in an “extenders bill” to possibly be taken up after the tax reform process is over.

Corporate Tax Rate

Second, the Senate bill delays the reduction of the corporate tax rate to 20% until tax years starting after 2018. That means another year for which tax equity investors would value depreciation deductions based on a 35% tax rate and calculate their tax appetite using a 35% tax rate. So on the margin this is a positive for tax equity. In contrast, under the House bill, the 20% corporate tax rate starts in 2018.

President Donald Trump on December 2 told reporters that he would be open to a 22% corporate tax rate. That would be incrementally beneficial for new projects and new tax equity investments versus a 20% corporate tax rate.

Given the president’s receptiveness to up to a 22% corporate tax rate, we expect that the rate may be raised to 21 or 22% and may be effective in 2018 (as the delay until 2019 would no longer be necessary from a tax revenue perspective).


Third, the Senate bill, like the House bill, provides for “expensing” or 100% immediate depreciation. However, the expensing provision is not permanent in the Senate bill as it is in the House bill. Rather, expensing under the Senate bill would be available for property acquired starting on September 27, 2017, and then would phase down by 20% a year for property placed in service after December 31, 2022, and before January 1, 2027.

Further, property eligible for expensing would not include “used” property under the Senate bill. The inclusion of used property as eligible for expensing in the House bill created an opportunity for investors that acquire operating projects, including repowered projects. That opportunity would not be available under the Senate bill.

If the Senate’s 2019 effective date for the decrease in the corporate tax rate is retained by the conference committee, it would create a tremendous incentive for taxpayers to acquire assets eligible for expensing in 2018 and deduct the cost at a 35% tax rate (rather than the 20% tax rate that would be effective in 2019). However, as discussed above, we do not view the corporate tax rate being effective in 2019 as a likely scenario if the rate is increased to 21 or 22%.

Nonetheless, lobbying for expensing for used property is not a priority for the wind and solar industries as it pales in comparison to protecting the availability of tax credits under current law and avoiding the application of BEAT (as discussed below).

 Alternative Minimum Tax

Fourth, unlike the House bill, the Senate bill retains the alternative minimum tax (AMT) for both corporations and individuals. Fortunately, the investment tax credit is not an AMT “preference.” Further, production tax credits generated in the first four years of a project’s operation are not an AMT preference. Finally, bonus depreciation is not an AMT preference. It is not clear yet if expensing would be an AMT preference or not, but our guess is that like bonus depreciation, it would not be, as both would arise under section 168(k) of the Internal Revenue Code (Code).

The way the AMT works is that taxpayers pay the higher of their regular tax liability and their AMT liability. Under in the Senate and House bills, a corporation’s regular tax liability would be determined using a 20% tax rate (rather than the current 35%); however, that is the same as the 20% tax rate used to calculate AMT. Thus, if a corporation has any AMT “preferences” (i.e., tax benefits not permitted to be used in the AMT calculation), the corporation would end up paying AMT. Since production tax credits from projects more than four years old are an AMT preference, those credits would end up unable to be used for so long as the corporate regular tax rate and the AMT rate are each 20%.

Corporations receive a tax credit for the AMT they pay, and that tax credit can be carried forward indefinitely and applied against their regular tax liability once they exit AMT. Therefore, corporations would not lose their production tax credits from more than four-year-old wind projects so long as they manage to eventually exit AMT.

Fortunately, the issues with the corporate AMT and a 20% tax rate impact many industries, including oil and gas, real estate and banking; therefore, there is a broad constituency working to address this issue. Those efforts already are gaining traction as we understand that a proposal to lower the AMT rate to 15% or less is already being given serious consideration on Capitol Hill. Because 15% percent still sounds a little high with the regular corporate tax rate being 35% and the AMT rate being 20% under current law, to maintain that ratio suggests that the AMT rate should be approximately 11%.

Another possible outcome is that the corporate tax rate is raised to 21 or 22%, and that raises sufficient revenue to allow the corporate AMT to be eliminated, as was done in the House bill.

It seems likely that the AMT problem will be addressed legislatively in one manner or another. If it is not, it is generally unheard of for tax equity investors to have an indemnity or flip protection for AMT; therefore, for existing production tax credit partnerships the AMT impact would be borne solely by tax equity investors.


Finally and most importantly, the Senate bill contains the base erosion anti-abuse tax (BEAT), which the House bill does not. BEAT appears to be the biggest threat to tax equity investors with a foreign parent. BEAT, in theory, could be a problem for US-owned tax equity investors, but it remains to be seen as to how large a problem that would be.

BEAT is extremely complicated. Here’s how it operates at a high level:

  1. Does the corporation have more than $500 million of gross receipts for the tax year?
  2. Are 4% or more of the corporation’s deductions attributable to payments to foreign affiliates or depreciation of property acquired from a foreign affiliate?
  3. If the answers to both items 1 and 2 are “yes,” then the corporation must determine if it is subject to BEAT by following steps 4-6 below.
  4. The corporation calculates its “regular tax liability” for the taxable year.
  5. The corporation calculates BEAT. That calculation is the same as the standard income tax calculation but with four key changes:

(a) there is no deduction for payments to foreign affiliates (other than (i) derivative contracts entered into by a taxpayer that is a bank and (ii) payments subject to US withholding tax);

(b) there is no deduction for depreciation for property purchased from a foreign affiliate;

(c) prior to 2026, the only “general business credit” allowed is the research and development tax credit (i.e., the investment tax credit, the production tax credit, the low income housing tax credit, the rehabilitation (historic) tax credit and the new market tax credit are not allowed (the “Monetization Tax Credits”)); and

(d) the tax rate applied is only 10% (or 12.5% after 2025); however, in the case of a bank, the tax rate is 11% (or 13.5% after 2025).

  1. The corporation then pays the greater of its (i) “regular tax liability” and (ii) its BEAT liability.

That means that if the taxpayer pays BEAT prior to 2026, then it effectively received no tax benefit from any Monetization Tax Credits. For instance, if the taxpayer in 2019 has production tax credits from a wind project it invested in 2010 and is subject to the BEAT liability, then its 2019 production tax credits are effectively of no value to it. Further, it is unable to carry forward the 2019 production tax credits to use them in a future year, as such credits were used in the regular tax calculation and BEAT has no concept of carry forward of tax credits. Very few existing tax equity partnership or lease agreements would provide an indemnity, extension of the flip date or other protection for the tax equity investor due to the loss of use of tax credits resulting from  a change in law like BEAT.

Further, “regular tax liability” as the term is used for BEAT purposes does not include AMT. (See §§ 26(b)(1), (2)(A) of the Code.) Therefore, if a corporation owes more tax under AMT than its regular tax liability, it has to pay that excess. Then if the corporation owes more tax under BEAT than it does under regular tax, it has to pay that excess, too. This means there is further pressure to eliminate either BEAT or the corporate AMT in the conference committee.

Most tax equity investors have gross receipts of more than $500 million. That leads to the question of how many tax equity investors (i) have annual deductible payments to (or depreciation from property purchased from) foreign affiliates (other than derivatives payments for banks) that are at least 4% of their total deductions and (ii) owe more tax under the BEAT calculation (with the 10%/11% tax rate) then they do under their regular tax calculation.

There are three ways for the tax equity industry to avoid the BEAT: (i) BEAT is excluded from the reconciled bill produced by the conference committee; (ii) in conference BEAT is modified to allow the offset of the Monetization Tax Credits in all years; or (iii) few tax equity investors actually end up paying BEAT. However, clause (iii) is impossible for anyone other than the tax equity investors’ tax departments to determine. Further, the mere threat of BEAT could cause current or potential tax equity investors to shy away from transactions involving Monetization Tax Credits due to the threat that they could be subject to BEAT and lose the value of the Monetization Tax credits for tax years prior to 2026.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mayer Brown - Tax Equity Times | Attorney Advertising

Written by:

Mayer Brown - Tax Equity Times

Mayer Brown - Tax Equity Times on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.