Wind Farms in Puerto Rico
Wind farms in Puerto Rico and other US possessions qualify for accelerated US tax depreciation — and by extension, investment tax credits or Treasury cash grants — the IRS said in a private ruling.
However, the wind farm must have as its ultimate owners all US corporations or US citizens to receive the full subsidy. It is okay for such persons to own the project through a chain of limited liability companies or partnerships as long as all of the intermediate entities are “transparent” for US tax purposes.
Bringing in a local or foreign partner is a problem, unless the partner owns its interest through a US entity treated for US tax purposes as a corporation. It does not matter if any intermediate entities, including the project company, are formed outside the United States as long as they are considered transparent for US tax purposes.
The IRS issued a similar ruling earlier this year to the owner of a solar project in Puerto Rico. (See earlier coverage, "Renewable Energy Projects in Puerto Rico" in the June 2011 NewsWire.) The new ruling is Private Letter Ruling is 201136018. The agency made it public in September.