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Lease Financing of Solar Power

By Philip H. Spector
July 31, 2007

Hardly a day goes by without major media attention to global warming and the need to develop and invest in sources of alternative energy. Legislation to encourage investment in renewable energy has bipartisan support. Tax legislation passed in 2005 and 2006 extended the renewable energy production tax credit and the energy investment tax credit to facilities placed in service before Jan. 1, 2009. Further extension and expansion of these credits is expected from the current Congress. The extension of the tax credits, the adoption of minimum alternative energy requirements by many states, and greater public and political support for alternative energy resources have increased interest in the development and financing of wind, biomass, geothermal, and solar facilities. An active financing market has developed.

This article reviews the market and tax law background to financing solar power projects in the United States, focusing in particular on tax incentives for solar power development and opportunities to structure solar power financings as leases.

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