Stanley S. Fishbein, J.D., LL.M. (Tax),
Managing Director
LFC Capital, Inc.
www.lfccapital.com

A lease is a contract through which an owner of property (Lessor) conveys to another party
(Lessee) the right to use the property for a period of time (Term) in return for a consideration (typically a periodic payment).
A usage agreement.
Not borrowing money (No stated interest rate).
Real or personal property.


Capital Lease or Operating lease

Financial Accounting Standards Board
Statement No. 13 (FASB 13): Capital Lease if:
1. Automatic transfer of title to Lessee at end of lease term.
2. Lease contains a bargain purchase option.
3. Lease term greater than 75% of properties economic useful life.
4. Present value of minimum lease payments equal or greater than 90% of property’s FMV.
FASB and IASB Lease Accounting Proposal


Nontax Lease or Tax Lease (aka true lease)

Who bears the risk of ownership (loss of residual value at end of lease term) ?






100% project cost vs. loan to value limitation
No compensating balances
No restrictive financial covenants
Flexible payment structures, e.g. off season step downs
Preserves existing bank lines
Net benefit of leasing: More cash in hands of
Lessee improves balance sheet ratios and profitability when invested in the business.
Leasing: Will always be a powerful cash management tool!


Equipment vs. Building structural components
Equipment examples: generators, chillers, boilers, energy management systems, lighting.
Structural examples: windows, doors, roof, fascade, plumbing
Capital Leases.

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Question #21: Is an applicant who owns eligible energy property eligible to receive payment if the energy property is leased to a non-profit or otherwise ineligible entity?

Answer: Yes. If the owner of the energy property is the applicant and is otherwise eligible, the fact that the property is being leased to an ineligible entity does not impact the eligibility of the owner/applicant provided it is a true lease and not a disguised sale.

Non-Profit Entities
Private schools & colleges
Hospitals
501 (C) 3 Charities
Co-operative housing
Religious organizations
Museums
Government Entities
Public schools & universities
Courthouses
Public buildings
Municipal and county airports
Federal government
State and local government

Year:
System Cost
(300kW)
Electric
Savings
Thermal
Savings
Fuel
Expense
1
0
388,600
215,958
2
400,258
222,437
3
412,266
229,110
4
424,634
235,983
5
437,373
243,063
6
450,494
250,355
-256,968 -264,677 -272,617 -280,796 -289,220 -297,896
Net Savings
Lease
Payments
Net Cash
Flow
Cum Cash
Flow
347,590
-224,652 -224,652 -224,652 -224,652 -224,652 -186,457
122,938 133,366 144,106 155,169 166,564 216,495
122,938
358,018
256,304
368,758
400,410
379,821
555,579
391,216
722,143
402,952
938,638

CHP System Cost: $1,165,150 100%
Nonprofit (501C3, municipality, etc.)
60 @ $18,721 $ 1,123,260 Run Rate: <1.48%>
12 @ 15,538 $ 186,456 IRR: 4.15%
Total Payments $ 1,309,716
Interest $ 144,566
10% Federal energy grant
Obtained by lessor Shared with lessee via rent reduction.

Stanley S. Fishbein, J.D., LL.M. (Tax)
Managing Director
LFC Capital, Inc.
303 E. Wacker Drive, Ste 250
Chicago, IL 60601
Tel: (800-942-6341
Cell: (646) 418-6056 sfishbein@lfccapital.com
www.lfccapital.com