The time for solar has come for Real Estate Investment Trusts (REITs)
The Inflation Reduction Act (IRA) and the $369bn allocated to energy security and climate change have provided a long-awaited boon for Real Estate Investment Trusts (REITs) that wish to invest in commercial solar and storage for their properties.
So what’s changed?
Historical Limitations for REITS
Changes and Implications for REITS
The Income Test
A REIT is limited in how much income it can earn from non-real estate sources (only 5% of its gross income can come from non-real estate sources and passive income), so the savings and tax credits from solar would usually fall out of reach.
The Asset Test
At least 75% of a REIT's total assets must consist of real estate, cash and cash items and government securities. Similarly to the income test, this has often meant there's not much appetite left for clean energy investment.
ITC Limitation
A REIT's access to the 30% Investment Tax Credit is complex. It can own securities up to 20% of the value of its total assets in subsidiaries, which could consume the ITC, but it is often prohibitively complicated.
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The Income test NOW
A REIT now has the option to transfer or sell the 30% Investment Tax Credit for cash with the income not required to be counted as gross income. Therefore consuming the ITC now doesn’t negatively impact the Income Test.
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The Asset Test now
Depending on the solar facility’s characteristics and expected use, some or all of the assets comprising the solar facility may now qualify as real property for purposes of the Asset Test. Commercial solar can now therefore be associated as an extension of an existing asset.
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ITC Limitation now
A REIT can now transfer or sell the ITC, allowing it to avoid further complicating organizational structures and to consume the 30% "discount" without the value being recorded as gross income.
For more information and detail on this subject, please feel free to contact us on 323-393-0375 or speak to your CPA.
OUR PROCESS IS SIMPLE, AND LESS EXPENSIVE.
Partnering with Sunistics means you’ll get a comprehensive analysis of your energy usage to determine the most efficient steps toward sustainability for your business.
This is how we get things moving when you contact us:
STEP 1:
Online Assessment
We start with an online assessment, usually because most people just want a general idea of what is possible. We can do this quickly and you can tell us whether you have preferences about rooftop solar, carports, energy storage or resilience options. Or anything else you would like to discuss!
STEP 2:
Analyze bills & Usage data
Once we know what’s feasible, we’ll analyze 35,000 data points allowing us make a detailed plan of what your business needs, based on its consumption habits. This is the stage where you have what you need to start making decisions about the path forward - otherwise known as your Sustainability Roadmap.
STEP 3:
In-Person Site Evaluation
The final step is to visit your facility to get precise measurements and ensure there are no hidden issues that would change the plans. And if all is as expected, we’ll be in a position to move forward. It’s over to you!.
OUR PROJECTS
Customer Success Stories
Our customers
From large commercial entities to SMBs, and nonprofits and faith-based organizations, we’ve worked with a range of customers in San Diego to bring sustainability, energy resilience and solar to their operations.
REits the new growth market for commercial solar
Why will REITs follow the path of millions of business owners with commercial solar?
Energy Resilience
Power shutoffs from the utility are increasingly common and business disruption is getting worse. Solar and storage enable business continuity when the inevitable happens.
Rising Electric Costs
High and rising electric costs in California are nothing new, but electricity bills have risen by 30% since the beginning of the pandemic.
Tax credits
The Investment Tax Credit (ITC) means 30% of the cost of a project can be written off on the tax return or sold off in exchange for a cash sum.
🌍 Chino, CA
💡 671KW System Size
🌱 19M lbs of CO2 Emissions Reduced
⏱ 3 Year ROI