Project Finance Publishes David Burton Article on Declining Interest in Tax-Enhanced Investments

“Base jumping,” an article by Akin Gump tax partner David Burton on the reduced U.S. corporate appetite for tax-enhanced investments, has been published by Project Finance in its December 2012/January 2013 issue.

The article discusses the reduction in the number of tax equity investors and outlines seven factors that have “combined to squeeze the US corporate tax base”: globalization, employee stock options, domestic manufacturing deduction (DMD), the mortgage crisis, check-the-box regulations, the growth of master limited partnerships (MLPs) and bonus depreciation.

Burton offers three strategies for the renewable energy industry to develop more generating projects through a decreased cost of capital:

  • identify new entrants in the form of established public companies with primarily U.S. operations
  • convince Congress to increase taxes on foreign earnings, reduce the deduction for stock options and eliminate the DMD while continuing accelerated depreciation a well as the production tax credit for wind projects and the investment tax credit for solar
  • push Congress to expand MLP rules to include renewables and widen the pool of tax equity investors to individual investors, creating a U.S. retail market for tax equity.