By Justin Boose, | Renewable Energy World
Expanding the development of renewable energy facilities, such as solar power, has become a growing domestic priority in recent years. In 2012, $30 billion was invested in renewable energy in the U.S. However, the sunset of existing tax incentives may stunt industry growth. With partisan gridlock at an all-time high and natural gas prices at record lows, the industry needs novel ways to facilitate the continued growth of renewables.
One emerging concept, supported by both the renewable energy and real estate finance sectors, is the application of the real estate investment trust (REIT) structure to solar development. For purposes of this article, an “S-REIT” means a REIT that is predominately invested in the ownership and operation of solar systems, independent from ownership of the underlying real property, and derives income primarily from the sale or lease of such assets to third-parties. Whether existing REIT rules allow for such a structure is unclear, and there are growing calls for clarification. San Francisco-based Renewable Energy Trust Capital, Inc. recently requested that the IRS classify solar projects as “real property” to facilitate their inclusion in S-REITs. Also, in December 2012, twenty-six members of Congress asked the Treasury Department to issue a broad ruling approving the use of REITs for renewable energy. While there are several arguments that support the eligibility of S-REITs under existing rules, formal clarification may be necessary to provide sufficient certainty to promote widespread S-REIT development.
