Solar developments often use a bank for back-leveraged construction and permanent financing with the completed project sold to a tax equity investor who takes advantage of the extensive tax benefits for renewables including Investment Tax Credit (ITC) and MACRS accelerated depreciation. In many cases, there is a buy-back provision after the tax benefits have been used and US Solar Value can estimate the residual value in, say, five years.

Appraisals for tax equity investors need to address key issues to be acceptable for submission to IRS. US Solar Value appraisals address IRS Tax Code issues such as:
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- Definition of Fair Market Value (FMV) set forth in IRS Revenue Ruling 59-60.
- Statement and rationale on Limited Use Property per IRS bulletin 2001-19.
- Statement of no restrictions on disclosure per Internal Revenue Code sections
6011, 6111 and 6112 and related sections; compliance with disclosure under the
Reportable Transaction Rules and Regulations
- Analysis and conclusions of Economic Useful Life (EUL).

The IRS Tax Code specifies that a partnership transaction purchase price can be based on Fair Market Value established by appraisal, This makes the appraisal a key element in the transaction. The purchase price may be used to calculate the eligible basis for the ITC calculation in a partnership flip, an inverted lease, or other qualifying transaction.

Alta Wind Case

Alta Wind Energy Center applied for $703 million in Section 1603 Recovery Act grants for its wind farms. A Claims Court decision in 2016 was favorable to the taxpayer but the Appellate Court subsequently ruled favorably for the government in July 2018. While the case involved a wind farm and a grant, it is also applicable to other types of energy property and ITC transactions.

The Appellate Decision was clear on some matters but left open-ended questions as remanded to a Claims Court. This very recent decision has left advisors and appraisers in a position of re examining their methodology for estimating and allocating values for Investment Tax Credits.

The salient conclusion of Alta was that the Residual Method of Allocation should be used to allocate the purchase price for purposes of determining ITC eligibility between asset classes such as tangible and intangible assets, goodwill and going concern value.

US Solar Value consults with sponsor and investor legal and accounting advisors to carefully consider IRS 26 CFR Code Sections §338, §197, §1060 and others to thoughtfully allocate purchase price and cost components to calculate ITC and MACRS benefit

US Solar Value’s methodology has been approved for IRS submission by tax attorneys and accountants for parties of interest in hundreds of transactions. US Solar Value appraisals have also been used and approved by tax liability insurers.