Advantages of flip solar photovoltaic projects

How does a partnership Flip work in solar tax equity financing?

This is similar to how a partnership flip works in solar tax equity financing. In a partnership flip, the solar project developer teams up with a tax equity investor. The investor contributes a significant portion of the upfront capital, while the developer brings expertise and resources to build and operate the solar project.

Do flip guidelines apply to solar projects?

The IRS said in an internal memo released in June 2015 that the flip guidelines do not apply to solar projects or other projects on which investment tax credits are claimed. The memo said to apply general partnership principles to test whether the investor is really a partner. It is CCA 201524024.

How much does a flip raise a solar project?

A flip raises 35% of the project value, plus or minus 5%. A sale-leaseback raises in theory the full fair market value, but in practice, the solar company is usually required to return 15% to 20% of the amount at inception as prepaid rent.

What are the benefits of investing in solar energy?

These investors, such as corporations or financial institutions, provide upfront capital to fund the development and installation of solar energy projects. In return, they receive tax benefits, such as depreciation deductions and tax credits, associated with renewable energy investments.

How long does a solar partnership flip last?

Yield-based flips in the solar market price to reach yield in six to eight years. Fixed-flip deals flip at five to six years. Investors want at least a 2% pre-tax yield, but treat the tax credits as equivalent to cash for purposes of these calculations. For more detail on partnership flips, see "Partnership Flips" in the February 2021 NewsWire.

How does a solar partnership work?

The partnership allocates taxable income, loss and tax credits 99% to the tax equity investor until the investor reaches a target yield, after which its share of income and loss drops to 5% and the solar company has an option to buy the investor's interest. Cash may be distributed in a different ratio before the flip.