Dino Barajas, David Burton Discuss Impact of IRS Ruling on Native American Renewables Development
Akin Gump global project finance partner Dino Barajas and tax partner David Burton were quoted by Daily Journal in its article “IRS ruling could help fuel renewable energy projects on tribal land,” regarding the impact of this ruling on Native American renewable energy project development.
In March, in response to a request for investment tax credit for a lessee developing a project on tribal land, the Internal Revenue Service issued a private letter stating that “we conclude that Tribe may elect to pass investment credits associated with the Renewable Energy Assets to Lessee under § 50(d)(5).” This decision, while explicitly nonprecedential, is being considered by some to mark a potential shift by the IRS that could, in turn, lead to greater interest by Indian tribes in renewable project investment.
Barajas says, “California is probably now the most active renewable energy market. And given the number of Indian tribes in the state, they're going to want to look for ways to participate.”
Burton notes that it would come as no surprise to him were other taxpayers to request similar rulings and that the outcome would likely be similarly favorable for both the investor and the tribe, offering the example of a Native American tribe that leases to a bank a solar project that the tribe has bought for which the bank would enjoy a 30 percent tax investment credit while paying rent to the tribe: “Effectively the bank is providing very inexpensive funding to the Indian tribe. The bank is willing to apply very substantial rent to the Indian tribe to basically share that investment tax credit.”