Page 23 - North American Clean Energy September/October 2019 Issue

Stanley S. Fishbein, JD, LLM (Tax) is Managing Partner and Cofounder at CleanView Capital, an equipment finance company specializing in making ownership of solar and other clean energy systems affordable and profitable for commercial and industrial companies nationwide. Stan
has more than 35 years’ experience in all aspects of the equipment finance industry, including origination, structuring, and syndication.
CleanView Capital /// www.cleanviewcapital.com
The comparison assumes that a company can obtain full value from the assigned tax benefits. Any limitation of the company’s ability to use the tax credit or deductions for interest or depreciation within the company makes the operating lease the unquestionable preferred alternative.
An operating lease is particularly attractive for the following types of entities:
• Pass-through entities, such
as S Corporations, LLCs, and partnerships, where taxable income and tax credits pass through to
the entity owners. Allocating a tax credit among multiple individual owners in a family-owned business or professional company (doctors, architects, engineers, etc.) could diminish the attractiveness of an income tax credit; in any event, it does not conserve cash within the business. Some pass-through entity owners, such as employee stock ownership plans (ESOPs) are tax exempt and cannot use a tax credit.
• Regular “C” Corporations where the business already has ample depreciation, tax credits, and/or net operating loss carryovers that minimize its current tax liability, or has reached a limitation on tax- deductible interest.
• Any entity with capital budget constraints, and the desire to utilize its operating budget, where the energy savings will be realized.
• Any entity that wants to conserve cash in the business, and keep its bank lines available for working capital and re-investment purposes.
Other financing alternatives include
a finance (capital) lease, which is a
loan documented as a lease, and the Commercial Property Assessed Clean Energy Program (C-PACE) where loan payments are documented as property tax. The Power Purchase Agreement (“PPA”) and its first cousin, the Solar Operating Lease (based upon the same economic model as the PPA), emphasize energy savings rather than ownership.
In comparing these alternatives to
the “traditional” operating lease, it is important to look at the after-tax as well as before-tax value of the offering to a customer over the estimated life of the asset, and not simply an analysis over the term of the financing.
Anyone involved in solar sales should make a point to ask a lot of questions about a company’s situation. Only after you’re armed with the information
you need can you offer financing choices that you can be confident will address your customer’s broader needs and objectives.
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