ABSTRACT
The elections and assumptions made for accounting reasons have little or no effect on the tax side. Federal tax incentives provide the largest source of external help for all renewable energy projects. Some of the most important are based on tax credits and tax deductions. A tax credit is an actual reduction of tax liability (after-tax) and a tax deduction reduces taxable income (pre-tax). The Investment Tax Credit (ITC) was first suggested in late 1961 for the purpose of increasing economic growth. The ITC is based on the capital cost of the equipment and is taken in the year that the capital asset is deemed placed in service. Most financial transactions in renewable energy systems are structured as either a leveraged lease or a power purchase agreement. The real marketing reason so much time is spent structuring the transaction properly prior to the project financing commitment is that the two parties usually want off-balance sheet treatment of the transaction.
