The New Tax Equity
Dave Levy and Sean Shimamoto are tax partners, and Nick Gianou is a tax associate, at Skadden, Arps, Slate, Meagher & Flom LLP.
In order to encourage the development of wind energy projects, the government has created a number of tax incentives designed to make those projects economically attractive. These incentives include a production tax credit (PTC) that’s contingent on the amount of energy produced and sold by the project, an investment tax credit (ITC) for money invested in certain energy property, a cash grant from the U.S. Treasury in lieu of tax credits, and accelerated depreciation—including bonus depreciation—for certain types of machinery and equipment used to produce wind energy.
The power of these energy tax incentives to attract capital for wind energy projects has proved remarkable. Industry sources estimate that the PTC alone is responsible for two-thirds of wind energy investments in the United States.