SETC Transactional Structures
While there are various transaction structure configurations that can be employed for energy tax credit transactions, CCG Energy Partner Funds relies on a multi-tier lease structure, of which there are many variations, for its energy tax credit investments.
Under the multi-tier lease transaction ownership structure in accordance with Internal Revenue Code Section 50(d)(5), the Energy System Owner entity keeps most of the depreciation benefits while passing the energy tax credits to CCG Energy Partners Funds who is an Investor Member or Limited Partner of the Master Tenant/Lessee entity.
CCG Energy Partners Funds is allocated 99.99% of the profits and losses of the Master Tenant/Lessee Entity and thus 99.99% of the energy tax credits. This is necessary since recognition of the energy tax credit follows the allocation of profit and loss. Also, based upon the transaction structure and its capital contributions, the Fund usually receives an annual 3% priority return of capital. In addition, each transaction is structured with a put option which may be exercised after the end of the compliance period. Typically, the put option is priced at 15% to 18% of the Fund's total capital contributions plus any unpaid priority return.