Purchasing Oregon Business Energy Tax Credits ( BETC ) Presented by: Rob O Neill MOSS ADAMS LLP 1
AGENDA Overview Purchasing BETC Who can or should consider purchasing BETC How a BETC is claimed Process of purchasing BETC Other considerations MOSS ADAMS LLP 2
BETC OVERVIEW Oregon State program that provides an income/excise tax credit equal to 35% or 50% of eligible costs for investment in conservation or renewable energy projects. Taken as a tax credit over 5 years, with an 8-year carry forward. After a project is completed: o Project owner can have the tax credit issued to the project owner, or o Sold through the State pass-through program. Certification process involves an independent CPA and the State Department of Energy ( DOE ). Cannot sell until it is certified by the DOE. MOSS ADAMS LLP 3
PURCHASING BETC Pass-through option o Project owner can sell their BETC eligibility to a qualified/ eligible taxpayer. o Lump sum cash payment to the project owner equal to the present value of the credit. o The present value or pass-through rate is set by the DOE. o The rate has historically remained unchanged until recently. o The new pass-through rate for projects with preliminary certificates after January 1, 2010 is 73.6% of face value. o The pass-through rate for the BETC of current Moss Adams client s looking to sell is 67% of face value. BETC can only be issued by the DOE once and cannot be resold after purchased through the pass-through program or issued to the project owner. MOSS ADAMS LLP 4
WHO CAN OR SHOULD CONSIDER BUYING BETC Candidates for purchasing the BETC: o Eligible taxpayer, which includes: individual, a C corporation, a tax-paying trust and an S corporation. o Any member of a consolidated group filing an Oregon unitary return and used by all members. o Companies or Oregon resident individuals with consistent tax liabilities over $100,000 per year Depending on the timing of the purchase, the BETC purchase can yield an internal rate of return in excess of 20%. Once purchased, the BETC is not revocable by the DOE. MOSS ADAMS LLP 5
HOW THE BETC IS CLAIMED Moss Adams has current client s looking to sell BETC that is 50% BETC used evenly over 5 years. The BETC cannot be used to offset Oregon minimum income tax. A federal state taxes paid deduction is allowed for the amount paid for the BETC amortized over 5 years. A BETC cannot be used earlier than the tax year in which it is purchased by the pass-through partner. MOSS ADAMS LLP 6
PROCESS TO PURCHASE A BETC Once a project and a buyer are matched, Moss Adams (as a qualified intermediary) submits the one page pass-through partner agreement form to the DOE. This serves as written intent to purchase an identified amount of BETC from a specific project owner. The DOE sends the buyer or qualified intermediary a pass-through payment letter indicating the amount of BETC to be purchased, purchase price and tax year for which it can first be used. The purchaser sends payment to the project owner. The project owner notifies the DOE when payment is received. The DOE sends the buyer a BETC certificate. MOSS ADAMS LLP 7
OTHER CONSIDERATIONS The price of the 50% BETC has recently increased. The supply of BETC available at the 67% of face value purchase price is limited. The BETC program is scheduled to sunset and the opportunity may be limited to purchase BETC in the future. 2010 BETC can still be purchased, but the transaction must be complete by December 31, 2010 in order to have the credit apply to the 2010 tax year for most companies and all individuals. MOSS ADAMS LLP 8
QUESTIONS? Moss Adams LLP Contact Robert A. O Neill, CPA Partner State and Local Tax Practice 805 SW Broadway, Suite 1200 Portland, OR 97205 D (503) 478-2339 T (800) 820-4476 C (503) 708-2600 F (503) 274-2789 The material appearing in this presentation is for informational purposes only and is not legal or accounting advice. Communication of this information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials may have been prepared by professionals, they should not be used as a substitute for professional services. If legal, accounting, or other professional advice is required, the services of a professional should be sought. MOSS ADAMS LLP 9