Tom Konrad was back writing about Solar REITs on his Forbes blog Monday. For reference, Tom posted the story on Solar REITs that I was quoted extensively in a few months back. I am happy to note that I am featured here as well, commenting on the idea that existing and forthcoming private letter rulings from the IRS addressing investment in solar under the REIT structure might not lead to mass investment in the sector.
Tom paints me as a bit of a pessimist, which is historically odd given that I have suggested that the IRS could, "with a stroke of the pen" make mass changes happen, but is not odd in the context of my recent thinking on the topic. That is, I am slightly skeptical about the ability (or maybe appetite is more appropriate) of the IRS to issue the broad-based types of private letter rulings which would give many taxpayers the comfort to file taxes as REITs.
I do hope I am wrong, not least because I have a personal interest in seeing the S-REIT structure take off. However, given historical precedent, it seems most likely that change facilitated by the IRS will be incremental, slightly slow, and not game-changing, at least in the very short term. For anyone who understood the past few paragraphs and is interested in more on this topic, visit my many posts, including this one, or Tom's original post, here.
On a related side note, The New York Times published an article over the weekend about the many companies in many other sectors that have started to utilize the REIT structure. While this could be viewed as a positive for solar - the more comparisons which can be drawn to existing IRS-allowed asset types, the more compelling the case for solar being REIT safe is - Ross Smotrich, an analyst who was interviewed also pointed out that many companies not paying C-level taxes might have the unintended consequence of putting more of a spotlight on the sector.
My gut tells me that this won't have an impact on those using the REIT structure in their businesses currently, and that managers will face the bridge of narrowing the definition of what is REIT eligible when they get to it. Why bother when there are short-term cost savings! However, it is food for thought for those who see a future for Solar REITs.
Tip of the cap to R.S.