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Sample Buyout Agreement for Llc by bvu64416

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Sample Buyout Agreement for Llc document sample

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									Michael J. Goldman, Esq.
Donald Nimey, CFA, FRM
    Daniel J. Smith, CPA
Energy Credit
• Section 48 of the Internal Revenue Code
• Energy property using solar energy to generate electricity, to
  heat or cool (or provide hot water for use in) a structure, or to
  provide solar process heat, but not to generate energy for
  the purposes of heating a swimming pool
• Must be new property
Solar Energy Credit
• 30% of the facility’s basis, if placed in service prior to
  January 1, 2017
• 10% of the facility’s basis, if placed in service after
  December 31, 2016
Solar Energy Credit
• Credit is claimed in the year the facility is placed in service
   – (although it could be claimed based on “progress expenditures”
     over more than one year)
• Recapture possible for 5 years
   – (credit vests 20% per year)
Who Claims The Credit?
• The owner of the solar facility
   – If there are multiple owners, it is shared in accordance with
     profits sharing
• The lessee
What is the credit basis?
• Cost of the facility
   – Not all items includible
   – Cost Certification
• Fair market value of the facility
   – Lease passthroughs
   – Appraisal
When are the tax benefits claimed?
• Placement in service
   – Credits
   – 50% bonus depreciation
   – Depreciation
Who participates, and who cannot participate?
• Corporate investors
• Individuals
   – Issues with respect to at-risk and passive activity rules
• Tax-exempt entities
   – Qualified allocations
Exit strategies
• Flip
• Put/Call
Special considerations
• Profit motive
• Timing
• Rebates
• Utility subsidies
• Transfers of Interests
• Self-owned
• Partnership
• Lease Passthrough / Inverted Lease
• Sale-Leaseback
Sample ITC Single Tier Structure – Flip
                  Energy                                                                  Tax Credit
                   Project                                                              Investor, Corp.
                                                  Investor contributes equity equal to $1.XX per
                                                  ITC at completion of project; receives 99.99%
  Retains 0.01% of
                                                  of Project Ownership, Depreciation, Residual
  Project Ownership,
                                                  Cash Flow (after fees) and ITCs. A yield-
  Depreciation and
                                                  based or timing-triggered flip of partnership
  Residual Cash Flow;
                                                  interests typically precludes a put or call of
  receives fees to strip
                                                  Investor’s interest in Project.
  out some cash flow;
  buys out Investor
  after flip in
  partnership interests

                Renewable         10+ year fixed PPA; Utility makes base year
                               payment of $0.XX/kWh with X% annual escalations         Utility/Grid/
                                                                                      Dedicated End-
              Project Owner,
The Captive Energy Company
                          Fund                   Operating Partnership
Equity Investor
                                                                                     General Partner

         $                                 $
                           99%             $
                                                PPA/Lease         PPA/Lease              Developer
                                                 Revenue          Agreement

                                                   Developer Energy
                                                    Company, LLC                 Managing
        Energy Credit Investor                                                  Member 1%
                99%                                                                Dev. Fee
                                     30% ETC
                                                                              Installation Agreement

                                               Systems Integrator/Installer
Sample ITC Master Lease Structure
               Energy                                 Tax Credit
                Project                             Investor, Corp.
                                                                 Investor contributes equity $1.XX per ITC at completion of
                                                                 project; receives pass-thru ITCs and depreciation plus X%
   Retains 51% of                                                cash priority for 5 years and XX% put proceeds at end of 5th
   Project                                                       year (both %s based on contributed equity)
   Ownership and
   receives fees to                                     Master
   strip out most
   cash flow; buys
                                                      Tenant, LLC
                                                                                                     10+ year fixed
   out Investor after                                                                                PPA; Utility
   5 years                                                                                           makes base
                                                                                                     year payment
                                 ITCs passed via Master                                              of $0.XX/kWh
                                 Lease; Master Tenant                                                with X% annual
                                 operates equipment                                                  escalations
                                 and makes lease
                                 payments to Owner
                                                                                      Dedicated End-
           Project Owner,
                            Contributes Investor’s equity into Owner;                      User
                LLC         receives 49% of Project Ownership and
                            Depreciation for 5 years
  Sale Leaseback Structure
   Solar Developer                                                Purchase Agreement

Solar Developer may provide                                        Lease Agreement
certain guarantees to Corporate
Investor and funds would be held     Solar Developer, LLC                                    Corporate Investor
in escrow accordingly. Yield                Lessee                  Sales Proceeds                Lessor
guarantees, O&M, Insurance etc.
Funds released to Solar                                            Sale of SEFs and
Developer as guarantees burn off.                                  Lease Payments

                                                                                           Lessor is owner of SEF,
                  PPA/Lease Agreements
                                                                                           Investment Tax Credits, Tax
                                                                                           Losses (Depreciation
                                                                                           Deductions), Rebates, RECs,
                                                                                           Recipient of lease payments,
                                                                                           Potential residual buyout
  Solar 1,              Solar 2,           Solar 3,
   LLC                   LLC                LLC         Engineering, Procurement and Construction
                                                                   Agreement (“EPC”)

   Solar                Solar               Solar
Installation         Installation        Installation                              Systems Integrator/Installer
  Host #1              Host #2             Host #3
Investment Tax Credits for Solar—The Basics

                           Tax Credit Investor Tax Benefits

                         Tax       Tax       Basis     Book
                        Credits   Deprec.   Adjust.   Deprec.

   Flip                  Yes       Prob.     Prob.     Prob.

   Sale/Leaseback        Yes       Yes        Yes       Yes

   Lease Pass-Through    Yes        No        No        No
Investment Tax Credits for Solar—The Basics
                             Tax Credit Investor Cash

                               Cash         Cash
                              Inflow       Outflow

        Flip                   PPA       Distribution
        Sale/Leaseback         Lease      Payments
        Lease Pass-Through     PPA        Payments
ARRA Grant Program
• Placement in service in 2009 or 2010
   – Or placed in service before 2017 if construction commenced
     prior to 2011
• Application deadline is September 30, 2011
• Guidance forthcoming

  Michael J. Goldman              Donald Nimey                Daniel J. Smith
   Nixon Peabody LLP            Reznick Group, P.C.       Novogradac & Company LLP
    401 Ninth St., NW        7700 Old Georgetown Road        303 West Third Street
        Suite 900                    Suite 400                Dover, Ohio 44622
  Washington, DC 20004       Bethesda, MD 20814-6224            330-602-4600
      202-585-8289                 301-280-1846    

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