Christina M. Berkow

  • March 28, 2018

Tax Reform’s Changes to the Treatment of Non-Shareholder Contributions to Capital

Development Incentives, Financing, Tax
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The 2017 tax reform act amended Section 118 of the Internal Revenue Code, to dramatically reduce the ability of a corporation to exclude from its gross income grants that the corporation receives from federal, state, or local governments or from civic groups to incentivize corporate investments. Many energy infrastructure projects benefit from exactly these kinds of incentives. Now and in the future, project developers need to be aware of and understand these changes, so that they can work to minimize the adverse consequences of the tax reform act’s amendment.

Before Tax Reform. Before the passage of the tax reform act, Section 118 provided that a corporation’s gross income did not include any contribution to the capital of the corporation. The regulations that accompanied this section explained that this exclusion applied to contributions received from persons other than shareholders (i.e., so-called “non-shareholder contributions to capital”). Thus, for example, if the government or a civic group contributed property to a corporation in order to

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  • March 15, 2018

Carbon Dioxide Capture Credit Enhanced

Biomass, Clean Energy, Development Incentives, Financing, Tax, Tax Credits
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The Bipartisan Budget Act of 2018 extended and enhanced a tax credit that incentivized carbon dioxide capture, storage, and utilization.

The enhanced credit, known as the “45Q tax credit,” offers a tax credit of up to $50 per ton for carbon oxide (not just dioxide) that is sequestered and up to $35 per ton for carbon oxide that is reutilized.  The credit amounts began at $22.66 per ton of sequestered carbon oxide and $12.83 per ton of reutilized carbon oxide in 2017, and are set to increase linearly until hitting $50 and $35 per ton of sequestered and reutilized carbon oxide, respectively, in 2026.  Businesses have six years to begin qualifying projects and have twelve years from the time they begin operations to take advantage of the credits.  For sequestered carbon oxide to qualify for the credit, it must be:

  • captured from an industrial source,
  • amounts that would otherwise be released into the atmosphere as an industrial emission,
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  • March 09, 2018

A New Incentive for Energy Infrastructure?

Development Incentives, Financing, Renewable Energy, Tax, Tax Credits
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The Tax Cuts and Jobs Act of 2017 (better known as the tax reform bill) created a significant—and little-discussed—economic development program that encourages long-term investments in so-called “Opportunity Zones” by offering temporary tax deferral for capital gains re-invested in the Opportunity Zone and a permanent exclusion for gains from the Opportunity Zone investment.  This program has the potential to be one of the most significant economic development programs in the country and has broad applicability to a variety of industries.  Any person or business seeking to invest capital, raise capital, or that will recognize significant capital gains in the next few years should be aware of the benefits of this program.

What are Opportunity Zones?  Opportunity Zones are low-income areas (determined on a census tract basis), which are designated by the governor of each state as Opportunity Zones.  Each governor must designate his or her state’s Opportunity Zones from the pool of eligible low-income census tracts and certain contiguous tracts.[1] 

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