Section 176G | Clawback of earlier qualifying flow-through tax benefits ^F1

(1)This section applies to an investor in a tax equity partnership arrangement if—^F1

(a)qualifying flow-through tax benefits are excluded under section 176D(1) from the investor’s covered tax balance for an accounting period, and^F1

(b)the investor has an excess return from the arrangement in a later accounting period (“the later period”).^F1

(2)For the purpose of determining the investor’s covered tax balance for the later period, the investor’s qualifying current tax expense for that period is to be adjusted (after the steps in section 174(1) have been taken) by subtracting the clawback amount.^F1

(3)“The clawback amount” is determined as follows—^F1

Step 1Determine the total amount of the qualifying flow-through tax benefits provided to the investor under the arrangement in accounting periods before the later period.

Step 2Subtract from the result of Step 1 the total of any amounts subtracted under subsection (2) from the investor’s qualifying current tax expense for accounting periods before the later period.

Step 3Compare the result of Step 2 with the amount of the investor’s excess return from the arrangement in the later period.Whichever is less is the clawback amount.

(4)For the purposes of this section an investor has an “excess return” from an arrangement in an accounting period (“the current period”) if the total relevant return exceeds the amount of capital investment provided by the investor to the arrangement at its commencement.The amount of the excess return is the amount of the excess.^F1F2

(5)In subsection (4) “the total relevant return” means the sum of—^F1F2

(a)the amounts of the qualifying flow-through tax benefits provided to the investor under the arrangement that have been excluded under section 176D(1) in the current period or any earlier accounting period,^F1F2

(b)the amounts of any distributions made to the investor under the arrangement in the current period or any earlier accounting period,^F1F2

(c)the amounts received by the investor for the sale of any part of its investment in the arrangement in the current period or any earlier accounting period, and^F1F2

(d)the amounts of any qualifying refundable tax credits and marketable transferable tax credits made available to be used by the investor under the arrangement in the current period or any earlier accounting period,^F1F2

less the amount of any excess return that the investor had from the arrangement in any earlier accounting period.