- The REIT model is particularly suitable to solar photovoltaics (PV) because they produce dependable output independent of future fuel prices or carbon regulatory regimes.
- While the organizational, asset, and distribution requirements of tradtional REITs are clear and expected to be compatible with solar, the income requirements may disqualify solar without a legislative change providing safe harbor status.
- Under a traditional REIT structure, an entity must earn 75 percent of its income from rents from real property. It is unclear whether income from a Power Purchasing Agreement (PPA) would qualify.
- Granting safe harbor status for solar legislatively makes intuitive sense since healthcare-REITs allow a significant portion of hospital income to qualify that otherwise would not as rents from real property.
- S-REITs are not a replacement to other federal tax incentives (e.g. accelerated depreciation and ITC), which would have to be modified or extended legislatively to work in conjunction with S-REITs.
- Although other federal incentives could have a phase-out period of 10-15 years, the S-REITs should be permanent.
- The lack of certainty for the extension of the solar Investment Tax Credit (ITC) stifled new development before its renewal in 2008.
- Even after the extension to 2016, the ITC did not sufficiently address the needs of investors.
- 75 percent of assets for traditional REITs must be real estate assets, cash instruments, or government securities.
- The Internal Revenue Service sent a private ruling letter on MArch 13, 2007, that held that income gained from a solar array would qualify as revenue for Section 856 purposes.
- Current law would not allow REITs to take full advantage of federal tax credits
- The initial REIT concept to spur solar energy investment was recommended by Ken Zweibel, former Director of the GW Solar Institute.