C-PACE offers flexibility in balance sheet treatment
C-PACE financing payments can be treated as an annual expense instead of long-term debt because the loan is secured by a property tax lien and assessed annually — like sewer district assessments and property taxes.
Since C-PACE is a property tax assessment, many owners treat it as an operating expense with only the current year’s tax assessment appearing as a current liability on the balance sheet. In this instance, the C-PACE loan amount is not added to the balance sheet as long-term debt. While GAAP standards do not address C-PACE specifically, there is now substantial precedence for its off-balance sheet treatment. Ultimately, the property owner can choose whether to treat a C-PACE loan as off-balance sheet or on-balance sheet.
Additionally, a C-PACE lien stays with the property, not the owner. In the event of the property being sold, the C-PACE assessment can transfer as part of the negotiation with the new property owner.
Because payments for C-PACE are property assessment payments, they can be expensed entirely. This is unlike traditional commercial debt, which only the interest portion of a debt payment can be expensed. This usually results in a significant tax benefit under a C-PACE financing structure.
We specialize in developing C-PACE energy efficient building retrofit projects tailored to the specific financial needs of our clients. Contact us today to better understand the potential advantages of using C-PACE.