Tax equity transactions have been a mainstay of financing renewable energy projects. While the general idea—using the tax benefits from renewable energy projects as a way to generate financing for their construction—is not very complicated, tax-equity participants are subject to a number of tax risks. These include the investment structure not being respected, the projects not qualifying for the projected tax benefits (including adjustments to the qualified basis) or the loss of tax benefits through recapture. Tax Insurance is a tool to manage these risks and was identified by the IRS in Rev. Proc. 2014-12 as a preferred vehicle for doing so over guarantees by transaction parties.

We speak with Daniel Schoenberg, Senior Managing Director at Aon Transaction Solutions to learn exactly what is tax credit insurance and how it is used in the renewable space.