It Still Ain’t Easy Being Green – For a Real Estate Investment Trust (REIT)

A discussion of selected tax developments and considerations


Numerous federal incentives have been enacted to accelerate capital investment in renewable energy and conservation technologies including the production tax credit, the investment tax credit, bonus depreciation, Internal Revenue Code Section 179D expense deductions and cash grants. The “greening” trend continues to accelerate, as many states have adopted a variety of renewable portfolio standards which require or promote minimum thresholds of power generation from renewable sources. Several states have also adopted renewable energy certificate programs creating an open market for certificates that can be traded among multiple parties.

In our previous publication, The Changing Environment of R&R (REITs and Renewables), we addressed the difficulties real estate investment trusts (REITs) encounter in taking advantage of the emerging framework of tax incentives seeking to stimulate investment in renewable energy. We explored why their unique tax status and applicable regulatory regime, prevented REITs from being able to utilize these incentives in the same manner as non-REIT commercial property owners, thus placing them at a significant market disadvantage.

In this point of view, we will return to the analysis in our prior publication of the interplay between REITs and energy-related incentives and then explore the emerging and evolving landscape of REIT requirements and these valuable energy incentives. We will use solar renewables as a focal point for the discussion to explore the use of REITs as a vehicle to finance capital investment into renewables while leveraging the REITs’ status as an entity with a single level of tax and an increasingly popular form of investment, both public and private.