First published in Bloomberg BNA’s Daily Tax Report of November 25, 2014

In many renewable energy transactions, a ‘‘developer fee’’ is a critical feature—it is often the means by which the developer extracts its profits from months or years of work and risk.

In addition, all or part of the fee may be included in the property’s eligible basis for purposes of accelerated depreciation and the investment tax credit, thereby increasing the tax benefits available to a tax investor. Yet there is very little guidance in the tax law for determining when a developer’s fee will be respected as reasonable and included in the asset’s basis for tax purposes.

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