1. Deloitte FanTAXtic Regional
Competition
Syracuse University
Presented by:
Tonghui Xu, Jiahui (Helen) Lu, Yang Yang, Savannah Crocetti, Shoshana Tracy

2. Overview
1. Tax
classification &
treatment of
project costs
Classification of depreciable and amortizable property
ITC eligibility
Depreciable and amortizable basis
2. Evaluation of
Alternative 1
Alternative 1 overview
Calculation of IRR
Pros/cons of Alternative 1
3. Evaluation of
Alternative 2
Alternative 2 overview
Calculation of IRR
Pros/cons of Alternative 2
Recommendation for Peach Power
4. Q&A

3. Depreciable Properties
under MACRS
Tangible Assets
● Revenue Procedure 87-56 for
the asset classes of personal
properties
● Internal Revenue Code § 168 for
the asset class of
non-residential real property
Tax
classification
& treatment
IRR evaluation
Recommendat
ions for Peach
Power
Q & A
Depreciable Properties MACRS Life
Office building and storage
facilities
39-year
Landscaping 15-year
Modules, piles, trackers, etc. 5-year
Site preparation and grading
for substation and panel
areas
5-year
Transformers, inverters,
substation, and related costs
5-year
Equipment and property not
otherwise classified
7-year
Dead-end insulators 20-year
Transmission equipment(high
voltage)
15-year
Access road grading 15-year
Access road construction 15-year
Perimeter fencing 15-year
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A

4. Amortizable Items
Intangible items
Code section 197 & 195
• Formation cost
• Preopening expense
• Interconnection cost
• Power purchase agreement
• Loan financing
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A
Alternative 1 – PeachPower Alternative 2 – Joint Venture
Amortization
property
category
Total
expenditures
(basis)
Amortizati
on period
(if any)
Total
expenditures
(basis)
Amortization
period (if any)
Formation - - $ 300,000 15
Preopening
(Startup)
- - - -
Interconnectio
n costs
$ 1,100,000 20 $ 1,100,000 20
Power
purchase
agreement(PP
A)
$ 1,200,000 21 $ 1,200,000 21
Loan financing $ 2,500,000 20 $ 2,250,000 20
Total
amortizable
costs(basis)
$ 4,800,000 - $ 4,850,000 -

5. Formation Expense
• The cost of obtaining the LLC’s
operating agreement and
forming the LLC to be about
$300,000
Code Section 197
• Trade/business asset
• Limited useful life
• Reasonable to estimate
• Straight-line amortization for 15
years
Preopening Expense
Code Section 162
• Preopening Expenditure of
$600,000
• A continuous current business
• Not under Code Section 195
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A

6. Investment Tax Credit Eligibility
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A
Code Section 46
• Eligible for investment credit, such as energy
credit
Code Section 48
• ITC= 30% (energy percentage) * basis of
energy property
• Energy property: equipment which uses solar
energy to generate electricity, to heat or cool
a structure, or to provide solar process heat
Code Section 38
• Carry forward 20 years if we have no tax
liability to offset the credit
Depreciable Properties Eligible
for ITC
Not Eligible
for ITC
Office Building and storage
Facilities
✔
Landscaping ✔
Modules, piles, trackers, etc. ✔
Site preparation and grading for
substation and panel areas
✔
Transformers, inverters,
substation, and related costs
✔
Equipment and property not
otherwise classified
✔
Dead-end insulators ✔
Transmission equipment (high
voltage)
✔
Access road grading ✔
Access road construction ✔
Perimeter fencing ✔

7. Determination of IRR
• Discounted rate of return that makes the net present value (NPV) of all cash flows
from the 21-year period of the project equal to zero
• Pros & Cons
• Pros:
• Excellent guidance on a project's value and associated risk
• Cons:
• Multiple or no rates of return
• Changes in discount rates
• IRRs do not add up
• Annual Return = Cash Flow (after debt service)+ Utility Savings + Tax Savings
(Expenses) + ITC
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A

8. Taxable Income & Tax Expenses - NOLs
Year Taxable
Income
NOLs Utilization of
NOLs
Adjusted Taxable
Income
Net Income Tax
(40%)
2017 (Year 1) $(58,009,476) $58,009,476 - - -
2018 (Year 2) $(91,081,604) $91,081,604 - - -
2019 (Year 3) $(53,672,382) $53,672,382 - - -
2020 (Year 4) $(30,672,769) $30,672,769 - - -
2021 (Year 5) $(29,188,391) $29,188,391 - - -
2022 (Year 6) $(11,812,533) $11,812,533 - - -
Total 274,437,154 - - -
Code Section 172
• NOLs carried back 2 years and/or forward up to 20 years
This total NOLs
will carryover to
future years.
• Year 1-6: negative taxable income; net operating losses

9. Taxable Income & Tax Expenses – NOLs Utilization
Year Taxable
Income
NOLs Utilization of NOLs Adjusted Taxable
Income
Net Income Tax
(40%)
2017 – 2022 - - -
2023 (Year 7) 5,617,702 - (5,617,702) - -
2024 (Year 8) 7,357,181 - (7,357,181) - -
2025 (Year 9) 9,175,798 - (9,175,798) - -
2026 (Year 10) 10,750,044 - (10,750,044) - -
2027 (Year 11) 12,429,538 - (12,429,538) - -
2028 (Year 12) 14,226,050 - (14,226,050) - -
2029 (Year 13) 16,147,973 - (16,147,973) - -
2030 (Year 14) 18,209,054 - (18,209,054) - -
2031 (Year 15) 20,419,858 - (20,419,858) - -
2032 (Year 16) 22,946,880 - (22,946,880) - -
2033 (Year 17) 25,653,461 - (25,653,461) - -
2034 (Year 18) 28,406,731 - (28,406,731) - -
2035 (Year 19) 31,375,459 - (31,375,459) - -
2036 (Year 20) 34,580,121 - (34,580,121) - -
2037 (Year 21) 38,289,894 - (17,143,303) 21,148,590 8,036,464
• Year 7-20:no taxable
income
• NOLs utilized against
taxable income
• NOLs used up in Year
21
taxable income =
$21,148,590
tax liability =
$8,036,464

10. ITC - Utilization
Year ITC Carryforward
2017 (Year 1) $102,546,000
2018 (Year 2) $102,546,000
2019 (Year 3) $102,546,000
2020 (Year 4) $102,546,000
2021 (Year 5) $102,546,000
2022 (Year 6) $102,546,000
2023 (Year 7) $102,546,000
2024 (Year 8) $102,546,000
2025 (Year 9) $102,546,000
2026 (Year 10) $102,546,000
2027 (Year 11) $102,546,000
2028 (Year 12) $102,546,000
2029 (Year 13) $102,546,000
2030 (Year 14) $102,546,000
2031 (Year 15) $102,546,000
2032 (Year 16) $102,546,000
2033 (Year 17) $102,546,000
2034 (Year 18) $102,546,000
2035 (Year 19) $102,546,000
2036 (Year 20) $102,546,000
2037 (Year 21) $0
• ITC incurred in Year 1 = depreciable
basis * 30% (energy percentage) =
$102,546,000
Code Section 38
• Cannot not be utilized when there is no
tax liability; carryforward 20 years
• ITC expires after 20 years in year 21

11. Cash Flow
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A
Year Cash Flow after debt
2017 (Year 1) ($4,736,406)
2018 (Year 2) ($3,591,836)
2019 (Year 3) ($3,036,375)
2020 (Year 4) ($2,469,804)
2021 (Year 5) ($1,891,902)
2022 (Year 6) ($1,302,442)
2023 (Year 7) ($701,193)
2024 (Year 8) ($87,918)
2025 (Year 9) $537,621
2026 (Year 10) $1,175,672
2027 (Year 11) $1,826,483
2028 (Year 12) $2,490,311
2029 (Year 13) $3,167,416
2030 (Year 14) $3,858,062
2031 (Year 15) $4,562,521
2032 (Year 16) $5,281,070
2033 (Year 17) $6,013,989
2034 (Year 18) $6,761,567
2035 (Year 19) $7,524,097
2036 (Year 20) $8,301,877
2037 (Year 21) $38,460,119
• Net cash flow available for sale =
taxable income + depreciation +
amortization – debt service(principle)
• Negative net cash flows from Year 1 to
Year 7
• Positive net cash flows from Year 8 to
Year 21

12. PeachPower’s Internal Rate of Return under Alternative 1
Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A
Year Cash Flow after debt
service
Utility Savings Tax Savings (Expense) ITC Annual Return for
PeachPower
Initial Contribution (103,700,000)
2017 (Year 1) (4,736,406) 1,765,140 0 0 (2,971,266)
2018 (Year 2) (3,591,836) 1,800,443 0 0 (1,791,393)
2019 (Year 3) (3,036,375) 1,836,452 0 0 (1,199,923)
2020 (Year 4) (2,469,804) 1,873,181 0 0 (596,623)
2021 (Year 5) (1,891,902) 1,910,644 0 0 18,742
2022 (Year 6) (1,302,442) 1,948,857 0 0 646,415
2023 (Year 7) (701,193) 1,987,834 0 0 1,286,642
2024 (Year 8) (87,918) 2,027,591 0 0 1,939,673
2025 (Year 9) 537,621 2,068,143 0 0 2,605,764
2026 (Year 10) 1,175,672 2,109,506 0 0 3,285,178
• Annual Return for Peach Power = Cash Flow (after debt service)+ Utility Savings + Tax Savings + ITC
• Annual Return for PeachPower

13. Tax
classification
& treatment
Evaluation of
Alternative 1
Evaluation of
Alternative 2
Q & A
Year Cash Flow after debt service Utility Savings Tax Savings
(Expense)
ITC Annual Return for
PeachPower
2027 (Year 11) 1,826,483 2,151,696 - - 3,978,179
2028 (Year 12) 2,490,311 2,194,730 - - 4,685,041
2029 (Year 13) 3,167,416 2,238,624 - - 5,406,040
2030 (Year 14) 3,858,062 2,283,397 - - 6,141,459
2031 (Year 15) 4,562,521 2,329,065 - - 6,891,586
2032 (Year 16) 5,281,070 2,275,646 - - 7,656,716
2033 (Year 17) 6,013,989 2,423,159 - - 8,437,148
2034 (Year 18) 6,761,567 2,471,622 - - 9,233,189
2035 (Year 19) 7,524,097 2,521,055 - - 10,045,151
2036 (Year 20) 8,301,877 2,571,476 - - 10,873,352
2036 (Year 21) 38,460,119 2,622,905 (8,036,464) - 33,046,560
Internal Rate of Return 0.3099%
PeachPower’s Internal Rate of Return under Alternative 1
Used out all the
NOL carried
forward

14. Sun Bank's Internal Rate of Return
Year Loan Payment and Loan Origination Fees Received Tax Expense on Loan Origination Fees and Interest Income Annual Return for Sun Bank
Initial contribution $ (247,500,000) $ (1,000,000) $ (248,500,000)
Year 1 2017 29,364,906 (10,000,000) 19,364,906
Year 2 2018 29,364,906 (9,825,404) 19,539,502
Year 3 2019 29,364,906 (9,633,348) 19,731,558
Year 4 2020 29,364,906 (9,422,086) 19,942,820
Year 5 2021 29,364,906 (9,189,699) 20,175,207
Year 6 2022 29,364,906 (8,934,072) 20,430,834
Year 7 2023 29,364,906 (8,652,883) 20,712,023
Year 8 2024 29,364,906 (8,343,576) 21,021,331
Year 9 2025 29,364,906 (8,003,337) 21,361,569
Year 10 2026 29,364,906 (7,629,074) 21,735,832
Year 11 2027 29,364,906 (7,217,385) 22,147,521
Year 12 2028 29,364,906 (6,764,528) 22,600,378
Year 13 2029 29,364,906 (6,266,384) 23,098,522
Year 14 2030 29,364,906 (5,718,426) 23,646,480
Year 15 2031 29,364,906 (5,115,673) 24,249,233
Year 16 2032 29,364,906 (4,452,644) 24,912,262
Year 17 2033 29,364,906 (3,723,312) 25,641,594
Year 18 2034 29,364,906 (2,921,047) 26,443,859
Year 19 2035 29,364,906 (2,038,555) 27,326,351
Year 20 2036 29,364,906 (1,067,815) 28,297,091
IRR 6.0694%
Sun Bank’s Internal Rate of Return under Alternative 1
Meet the target IRR: 6%

15. Pros/Cons of Alternative 1
• Pros:
• PeachPower is the sole owner of the Solarity
• Lower risk for Sun Bank compared with althernative 2
(partnership flip)
• Achieve IRR target for Sun Bank
• Cons:
• PeachPower will be wasting the investment tax credit (ITC)
• Negative taxable income and net cash flow for more than 6 years
for PeachPower because of heavy debt
• A lower IRR for PeachPower

16. Evaluation of Alternative 2
Partnership
Flip with
ITC
IRR of
PeachPower
& Sun Bank
Capital
Basis
of Sun
Bank
Pros/cons of
Alternative 2

17. Overview of Alternative 2
• PP(38%) & SB (40%)  S, cost $300,000 to form the entity
$160 million capital  SB’s contribution of LLC interest
$250 million  SB
$90 million loan  standard commercial bank loan
• S obtains
$103.75 million  PP
• S’s activities are conducted through two-member LLC  S default treated as
partnership
10% interest rate with
10-year amortization;
Loan original fee of
2.5% (2.25 million)
PP – PeachPower, Inc
S – Solarity, LLC
SB – Sun Bank
SSF – Solarity Solar Field
SMLLC – single-member LLC
ITC – Investment tax credit
DRE – disregarded entity

18. Partnership Flip
Participant Role Scenario
Tax Investor:
Sun Bank
Possess sufficient taxable income to monetize tax
benefits (both tax and accelerated MACRS tax
depreciation)
SB has substantial income from its other
operations
Funds a percentage of total project costs SB will contribute $160 million capital
Target IRR earned through allocation of 99% of tax
credits and taxable losses/income and distribution cash
During Year 1 to Year 5, income, gains, losses,
deductions, and credits will be allocated 99% to SB
Typically exits the project after the flip when the
Developer/Sponsor exercises FMV purchase option
In Y7, PP will purchase the LLC interest from SB at
its fair market value of $26 million
Developer:
PeachPower
ROI earned through cash flows Y1 - Y6, 85% of cash flows will be allocated to PP
minimum 1% allocation of tax benefits and long-term
ownership
Y1 - Y5, income, gains, losses, deductions, and
credits will be allocated 1% to PP
FMV purchase option on Tax investor’s residual interest In Y7, PP will purchase the LLC interest from SB at
its fair market value of $26 million

19. Key Points of Partnership Flip
Year Allocation Cash flow
Year 1 – Year
5
99%  SB 15%  SB
85%  PP1%  PP
Year 6 5%  SB
95%  PP
“Cut-off”
Year 7 • PP buys LLC interest from SB at FMV $26
million
• PP will payoff remaining loan balance and
close the partnership
Year 8 PP operates S (a DRE) as an SMLLC for 21 years
PP – PeachPower, Inc
S – Solarity, LLC
SB – Sun Bank
SSF – Solarity Solar Field
SMLLC – single-member LLC
ITC – Investment tax credit
DRE – disregarded entity
As partnership
dissolved, loan
payment can
be written off
Terminate partnership
for tax purpose under
Rev.Proc.99-6
Section 1.741 – 1(b)
provides that section 741
applies to the transferor
partner in a two-person
partnership when one
partner sells a partnership
interest to the other partner

20. Legitimate partnership
• Rev. Proc. 2007 – 65 outlines a safer harbor that applies to
partnerships for qualified wind energy facilities and Section 45
production tax credits
• CCA 201524024 indicates Rev. Proc. 2007-65 does not apply to
partners or partnerships with Code section 48 energy credits. Further,
LLC does not satisfy all of the safe harbor requirements of Rev. Proc.
2007 - 65
Consider the likelihood
that A2 transaction
would be considered a
financing transaction
rather than a legitimate
partnership

21. Capital Basis for Sun Bank
Basis Adjustment Rules
Basis is increased by:
• Contributions and increases in share of partnership debt
• Taxable income and gains
• Tax-exempt income and gains
• Certain depletion adjustments
Basis is decreased by:
• Distributions and decreases in share of partnership debt
• Separately stated deductions
• Nondeductible items not chargeable to the capital account
• Certain depletions adjustments
Beginning Balance
Less: Beginning Liability Allocation
Plus: Ending Liability Allocation
Plus: Income Allocation
Less: Utilization of Suspended Loss
______________________________
Subtotal Before Cash Distribution
Less: Cash Distribution
______________________________
Subtotal
Less: Gain Recognized
______________________________
Basis Before Loss Allocations
Plus: Loss Allocation
______________________________
Ending Tax Basis
In Year 6, Sun Bank’s
subtotal is -17,195,941,
since basis can never be
negative, Sun Bank has to
recognize gain

22. IRRs of the three options (25% efficiency)
Original Cash Flow
Changes
LLC Interest
Changes
Contributed Capital
Changes
($140 million)
Contributed Capital
Changes
($150 million)
PeachPower 14.5878% 11.2510% 12.6525% 12.0606% 13.2303%
Sun Bank 14.3846% 18.0406% 15.9982% 18.5033% 16.3208%

23. Pros/cons of Alternative 2 (25% efficiency)
Cons Pros

24. IRRs of the three options (30% efficiency)
Original Cash Flow
Changes
LLC Interest
Changes
Contributed Capital
Changes
($140 million)
Contributed Capital
Changes
($150 million)
PeachPower 14.5878% 14.2221% 17.3183% 16.0307% 17.4926%
Sun Bank 14.3846% 19.1373% 15.5270% 18.1660% 16.0709%
Risk of calculated
purchase/sale
price rather than
FMV – inconsistent
with partnership
flip requirements

25. Recommendation for PeachPower
• Choose Alternative 2 to utilize ITC credits
• Achieve IRR target (8%) under Alternative 2
(about 14%)
• Mitigate risk for 5 years
• PP has the highest IRR under original
assumption if 25% efficiency
• PP has the highest IRR if SB contributed
capital is $150 million and 30% efficiency
Take Alternative 2!

26. Recommendation for PeachPower & Sun Bank
Take Alternative 2, SB’s contributed capital $150 million!
25% efficiency Original Cash Flow
Changes
LLC Interest
Changes
Contributed
Capital Changes
($140 million)
Contributed Capital
Changes
($150 million)
PeachPower 14.5878% 11.2510% 12.6525% 12.0606% 13.2303%
Sun Bank 14.3846% 18.0406% 15.9982% 18.5033% 16.3208%
30% efficiency Original Cash Flow
Changes
LLC Interest
Changes
Contributed
Capital Changes
($140 million)
Contributed Capital
Changes
($150 million)
PeachPower 14.5878% 14.2221% 17.3183% 16.0307% 17.4926%
Sun Bank 14.3846% 19.1373% 15.5270% 18.1660% 16.0709%

27. Original Delayed Placed in Service Dates
• No environmental assessment
required
• Solar field is constructed in 2017
• Environmental assessment
before the TVA can sign the PPA
with PeachPower
• Solar field is constructed and
place in service in 2018 or 2019
or even 2020
Delayed Placed in Service Dates

28. • Less taxable income due to the delay in service in both
alternative 1 & 2
• Time value of money:
• If spend more, worth it
• If earn more, not worth it
• ITC will not be eligible until 2018
• IRR
• PeachPower’s IRR
• Sun Bank’s IRR
Delayed Placed in Service Dates

29. Thank you!