13 March 2013

The IRS released a ruling this week that opens the door to Indian tribes playing a much larger role in renewable power projects. It allows an Indian tribal government to be an owner or lessee of these projects. The rationale: an Indian tribal government is not a governmental unit or tax-exempt organisation for purposes of tax subsidies. The taxpayer in the ruling leased a power plant from an Indian tribe and planned to sell power to a third party. The tax-payer and the tribe agreed to let the taxpayer (the lessee) claim an investment tax credit. The option to let a lessee claim an investment credit is not available if the lessor could not have claimed the credit. The IRS ruled that the tribal government could have claimed the credit.

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