Tax Equity Flip ModelFree Financial Model Download
Build a tax equity partnership model that allocates Investment Tax Credits, Production Tax Credits, MACRS depreciation, and cash flows between sponsor and tax equity investor with non-circular IRR-based flip mechanics.
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About this model
Model a tax equity partnership structure for a 100 MW utility-scale solar project: the tax equity investor harvests 99% of Investment Tax Credits (ITC) and MACRS depreciation pre-flip, then shifts to a 5% allocation post-flip once achieving a target IRR (typically 7%). The model projects 25-year cash flows, tracks MACRS depreciation over 6 periods (20%+32%+19.2% rates), manages Net Operating Loss (NOL) carry-forwards, and calculates cash distributions by partner.
Key outputs include ITC capture ($30M on a $100M eligible basis), MACRS deductions ($85M depreciable basis after ITC basis reduction), and debt service coverage ratios (DSCR) showing minimum 1.50x during the 18-year loan tenor. The cash waterfall applies operations (PPA + REC revenue less O&M) to debt service and then to partners based on pre/post-flip allocations. The flip mechanics use a non-circular formula that checks the prior-year cumulative distribution, avoiding the circular references common in earlier versions.
Returns analysis shows tax equity IRR (7.1%), project unlevered IRR (8.5%), and LCOE ($25/MWh at 7% discount rate). This structure is dominant in US renewable energy financing and allows sponsors to monetize tax benefits with insufficient tax appetite.
Recolor to your brand.
Formatted to IB standards.
Named theme colors repaint the whole workbook in one click, on top of an investment-banking structure with blue inputs, black formulas, and green cross-sheet links.
- Brand-ready
- Institutional grade
- Fully auditable
What's included
- Investment Tax Credit (ITC) and Production Tax Credit (PTC) capture schedule
- MACRS depreciation with ITC basis reduction
- Cash flow waterfall pre-flip and post-flip with return thresholds
- IRR and cash-on-cash return by investor tranche
- Flip triggers (IRR hurdle, cash return multiple) and mechanics
Built for renewable tax equity
Use this model when ITC/PTC capture, MACRS, and IRR-flip mechanics define the partnership economics.
Non-circular flip logic
A useful tax equity model resolves the flip without circular references — it checks the prior-year cumulative distribution rather than a same-period self-reference.
Multi-partner IRR analysis
This calculates IRR for tax equity, sponsor, and project unlevered side-by-side so deal economics are transparent for both parties.
Frequently asked
What is a tax equity flip model?+
It is a model that allocates tax credits, depreciation, and cash flow between sponsor and tax equity investor under an IRR-based flip structure used widely in US renewables.
What credits are available for renewable energy?+
Investment Tax Credit (30% for solar, wind, battery), Production Tax Credit (wind and others), and 5-year MACRS accelerated depreciation are the main benefits.
How does the flip back to sponsor work?+
The model tracks the tax equity investor’s IRR period by period. Once the hurdle (typically 6–8%) is met, ownership flips back and remaining benefits flow to the sponsor.
What is ITC basis reduction?+
When the ITC is claimed, the depreciable basis is reduced by half of the credit amount, which the model handles automatically in the MACRS schedule.
Is this useful for institutional underwriting?+
Yes. The structure is dominant in US renewables and the model produces the IRR, DSCR, and LCOE outputs institutional investors and lenders expect.
Alex Tapio
Founder of Finamodel • Professional Financial Modeller • Ex-Deloitte
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