WASHINGTON May 13 An attempt by the Obama
administration to use tax breaks to boost solar energy
businesses falls short of expectations among industry officials
who were hoping to lure more investors for their projects,
analysts and tax lawyers said on Tuesday.
They said the proposal released on Friday by the Internal
Revenue Service would do little to increase the number of the
projects that could qualify for a tax-saving business structure
known as a "real estate investment trust."
For years, the clean energy industry has sought to have
large-scale solar production facilities qualify for REIT status.
Those hopes dimmed with the IRS's latest guidance, industry
To qualify as a REIT, a business must have at least 75
percent of its holdings in real estate assets. REITs are not
required to pay corporate tax but must distribute most of their
income to investors.
David Burton, a tax lawyer with Akin Gump Strauss Hauer &
Feld LLP, said the IRS proposal would open REIT status only to a
small number of solar projects. "It's going to be a drop in the
bucket," he said.
The IRS proposal coincided with a speech given by President
Barack Obama on Friday promoting renewable energy investments as
a way to address climate change.
"The renewable enthusiasts in the White House had their
ambitions tempered by the conservative green eye-shade folks at
IRS," said Christine Tezak, managing director at ClearView
Energy Partners, LLC, a consultancy.
REITs were created in 1960 to encourage real estate
investment. Many retail investors hold publicly traded REITs in
their investment portfolios.
Other lawyers said the IRS proposal was appreciated because
solar businesses will have a better understanding of what might
qualify for REIT status.
"It is going to stimulate more thinking about these issues
and looking more seriously about the possibility of creating
renewable energy REITs," said Kelly Kogan, a lawyer with
Chadbourne & Parke LLP.
The IRS proposal was needed to give renewable energy
businesses more clarity about what qualifies for REIT status
within the law, the Treasury Department said on Tuesday.
"Even though these rules are generally consistent with
current IRS administrative practice, they will provide important
clarity to industry and investors," said Mark Mazur, the
Treasury Department's assistant secretary for tax policy, in a
statement on the Treasury website.
The public can submit suggestions for changes to the
proposal through Aug. 12. A public hearing is scheduled for
(Reporting by Patrick Temple-West; Editing by Howard Goller and