Frequently Asked Questions (FAQs)
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The Guaranty is intended to satisfy the “at-risk” requirements (IRS Code Section 465) to increase your basis to claim depreciation above your capital contribution using debt basis. There will not be a lender's claim against you or any other investor as the Guaranty is made to the upper-level entity, which is not incurring any debt. The project level entity would be incurring the debt. At most, there could be an additional capital call to the extent of your Guaranty amount.
An investor can use an existing LLC if they are comfortable with multiple assets in the same LLC.
The solar basis is what determines the tax credit amount. If it’s a $100K investment and a 30% tax credit, then the solar basis will be $267K, as that will give you an $80K Investment Tax Credit (ITC). If it’s a 40% credit then the solar basis is $200K to give you an $80K Investment Tax Credit (ITC).
Minimum gain recapture occurs in year 6 of an investment due to investors claiming depreciation and tax credits based on non-recourse debt in years 1-5. In Year 6 when the investor is exited from the partnership the debt is repaid causing the investor to report income that year to offset some prior tax benefits, hence a minimum gain recapture.
