Tax equity financing transactions have become an increasingly popular way to provide a higher rate of return for outside investors and to help developers monetize an otherwise cost prohibitive project. In a recent Tax Court decision, Olsen v. Commissioner, T.C. Memo. 2021-41 (6 April 2021), the taxpayers invested in such a venture, but the result was a complete disallowance of all tax benefits because the investment was simply too good to be true and (according to the Department of Justice) a tax shelter. For individual taxpayers in particular, this case is an effective lesson on how not to structure investments in energy equipment transactions.
Peter Liu is an associate in Baker McKenzie's Global Tax Practice Group in Chicago. He advises clients on a variety of tax controversy matters. He previously interned in the Northern District of Illinois with Judge Chang. At Michigan Law, he worked as a student-attorney at the Low Income Taxpayers Clinic and served as an editor on the Michigan Journal of International Law.