A new rule from the Office of the Comptroller of the Currency (OCC), effective April 1, 2021, codifies and expands prior OCC interpretations dealing with the use of national bank lending powers to engage in tax equity financings. Tax equity financings refer to transactions in which a national bank provides equity financing to fund projects that generate tax credits or other tax benefits, and the use of an equity-based structure allows the transfer of those credits and other tax benefits to the bank. The OCC stated that the legal permissibility of a tax equity finance transaction “is agnostic as to end-user segment and underlying asset.” As such, the rule will apply to, among other investments, transactions involving tax credits pursuant to Internal Revenue Code Sections 45 (production tax credit for renewable energy), 45Q (carbon capture and sequestration), 47 (historic preservation), and 48 (investment tax credit for renewable energy), and other types of tax benefits may also apply. The rule can also apply to Section 42 (low-income housing), although these investments are more likely to be made under the authority of the OCC’s community development regulations.
The final rule expressly supports national bank tax equity investments involving utility-scale renewable power-generation facilities, as well as solar financings involving residential installations and solar financings involving non-utility commercial offtakers. A full analysis from Nixon Peabody is available here.
