tailieunhanh - An Explanation of Clean Renewable Energy Bonds

In July, 2005, Congress passed the Energy Tax Incentives Act of 2005 (the “Act”). Among a number of other tax incentives, the Act permits State and local governments, cooperative electric companies, clean renewable energy bond lenders and Indian tribal governments to issue “clean renewable energy bonds” (“CREBs”) to finance certain renewable energy and clean coal facilities. Part I of this article addresses the mechanics of issuing CREBs, including those projects that may be financed through the issuance of CREBs. Part II of this article discusses how the tax benefits of CREBs flow to investors. CREBs are a new form of tax credit bond in which interest on. | ORRICK An Explanation of Clean Renewable Energy Bonds Authored By Edwin Oswald Michael Larsen In July 2005 Congress passed the Energy Tax Incentives Act of 2005 the Act . Among a number of other tax incentives the Act permits State and local governments cooperative electric companies clean renewable energy bond lenders and Indian tribal governments to issue clean renewable energy bonds CREBs to finance certain renewable energy and clean coal facilities. Part I of this article addresses the mechanics of issuing CREBs including those projects that may be financed through the issuance of CREBs. Part II of this article discusses how the tax benefits of CREBs flow to investors. CREBs are a new form of tax credit bond in which interest on the bonds is paid in the form of federal tax credits by the United States government in lieu of interest paid by the issuer. CREBs therefore provide qualified issuers qualified borrowers with the ability to borrow at a 0 interest rate. The federal tax benefit to the holder of a CREB is greater than the benefit derived from taxexempt municipal bonds in that the tax credit derived from a CREB can be used to offset on a dollar-for-dollar basis a holder s current-year tax liability as opposed to excluding interest from gross income as permitted for tax-exempt bonds. Unlike tax-exempt bonds CREBs are taxable obligations and the tax credits received are treated as interest and included in a bondholder s taxable I. The Mechanics of CREBs. Added by the Act Section 54 of the Internal Revenue Code of 1986 the Code 2 provides that the term clean renewable energy bond means any bond issued as part of an issue if 1 the bond is issued by a qualified issuer 2 the bond is issued pursuant to an allocation by the Secretary of the Treasury to such issuer of a portion of the national clean renewable energy bond volume authority 3 95 or more of the proceeds of the issue are to be used for capital expenditures incurred by qualified borrowers for one