Balance Solar’s projects generate Federal Investment Tax Credits, which can be purchased by accredited investors. Please reach out to Balance Solar to find out more information about our Subscription Agreement.
BALANCE SOLAR, LLC, an Illinois limited liability company (the “Company”), is offering membership interests (the “Interests”), as set forth in the Amended and Restated Operating Agreement of the Company DATED AS OF AUGUST 20, 2019 (the “Operating Agreement”).
The Interest is being offered and sold in reliance upon exemptions from registration under various state laws and exemptions from registration contained within Sections 3(a)(11) and 4(2) of the 1933 Act, and Rules 147 and 506 of the Securities and Exchange Commission promulgated under the 1933 Act. The Interest may be purchased only by “accredited investors” as defined in Rule 501(a) of Regulation D. In order to induce the Company to accept this Subscription, Subscriber hereby represents and warrants to the Company that Subscriber is a similar business trust, or a partnership or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
DISCLAIMER: RISK FACTORS
Initially capitalized terms used in this Exhibit which are not otherwise defined by this Exhibit are used with the same meaning ascribed to those terms in the Subscription Agreement or in the Amended and Restated Operating Agreement of the Company (the “Operating Agreement”) referred to in the Subscription Agreement. The purchase of an Interest is a speculative investment and involves a high degree of risk. An investment in the Company is suitable only for persons who have no need of liquidity and who are willing and able to bear the risk of this investment for an indefinite period of time. In addition, it is likely that the only material benefit from an investment in the Company will be the Tax Credits, and for this reason an investment in the Company is suitable only for individuals who have substantial U.S. Federal income tax liability in an amount consistent with the Tax Credits intended to be allocated to the Interest. Prospective Subscribers should consider the risks associated with an investment in the Company, including, but not limited to, the following:
The Investor Members should not invest in the Company if it cannot use the Tax Credits that are projected to be allocated to the Investor Members with respect to the Interest to offset its liability for Federal income taxes.
The Company’s business will consist solely of ownership of interests in the Project Owner. While the Company’s ownership interests are expected to entitle the Company to the Tax Credits attributable to the Project for the years as set forth in the Operating Agreement and the Subscription Agreement, the operation of the Project may generate only a small amount of cash flow available for distribution to the Members after payment of debt service related to the Project. While upon liquidation of the Company and/or the Project Owner, the Members are expected to be entitled to receive a distribution from the Company equal to their respective positive capital account balances in the Company, there can be no assurance as to when any such liquidation may occur (and in any event it is not expected that any such liquidation will occur before the end of the 5-year Compliance Period that is applicable to the Project) or whether there will be any proceeds available to distribute to the Investor Members or as a result of the Company’s disposition of an interest in the Project Owner or the Project Owner’s sale of the Project. Thus, other than the allocation of a portion of the Tax Credits and tax losses, the Investor Members should not expect to receive other significant economic benefits from ownership of the Interest. Prospective subscribers in this offering should carefully consider their projected Federal income tax liabilities and their need for offsetting Tax Credits before making an investment in the Company.
The tax benefits of the Tax Credits which may be received by the Investor Members may be recaptured, which will result in taxes, interest, and penalties payable by the Investor Members.
The Project must be operated in a manner that complies with requirements applicable to properties claiming the Tax Credit during a 5-year compliance period that begins with the first year for which Tax Credits are claimed. If the Project does not satisfy those requirements, all or a portion of the Tax Credits previously claimed with respect to the property will be “recaptured,” resulting in increased federal tax liability and interest and penalties for the Investor Members who previously claimed the Tax Credits that are recaptured. Since the delivery of the Tax Credits is dependent on the continual operation of the Project in accordance with the prescribed rules over the Compliance Period, it is imperative that the Project performs in an economically viable manner that enables the Project Owner to satisfy debt service and to maintain the Project. In this regard, the Company and the Project Owner will be subject to all of the risks normally associated with the development and operation of photovoltaic facilities. Such risks include, among others, risk of construction cost overruns, risk of bankruptcy of contractors and subcontractors, risk of liens being filed and risk of fire or other casualty, and the risk of having insufficient funds to operate the properties. No assurance can be given that any additional capital or financing could be obtained by the Company or the Project Owner, or if obtained, what the terms thereof would be.
If any portion of the Tax Credits are recaptured, the Credit Delivery Shortfall Amount, if any, required to be paid by the Company may not fully compensate the Investor Members for its expenses resulting from the recapture.
In addition, if the Tax Credits allocated to the Investor Members are recaptured for any reason, then the Company is required by the Operating Agreement to make a special distribution to the Investor Members in an amount equal to the Credit Delivery Shortfall Amount. Nevertheless, the Company may not have on hand funds to make the distribution.
The Company’s investments will not be diversified.
The Company’s only investment will be in the Project Owner whose only investments is in the Project. Accordingly, an investment in the Company is subject to the risks generally associated with a lack of diversification as to property type, geography, and industry.
There is no public market for your investment and there are significant restrictions on transferability.
The Operating Agreement contains substantial restrictions on the transfer of the Interest. In addition, once the Tax Credits are allocated to a taxpayer, only that taxpayer may use the Tax Credits. Therefore, the Investor Members should not purchase the Interest with a view towards distribution or resale of the Interest.
The success of the Company may depend on key personnel, the loss of which could adversely affect the Company.
The success of the Company may be dependent in part on the efforts and abilities of the Managing Member’s (or its Affiliates’) management team. If the Managing Member or its Affiliates were to lose the services of their key personnel, the management and operation of any Project could be materially and adversely affected.
The principals will continue to engage in other activities.
The principals of the Company, including its affiliates and management, also serve as officers of other companies and organizations, and engage in numerous other business activities. They do not intend to devote their full time to the business of the Company. The failure of these persons to devote sufficient time to the business of the Company and the Project could adversely affect the performance of the Company.
The offering price has been arbitrarily determined.
The offering price of the Interest offered hereby has been arbitrarily established and bears no relationship to the Company’s or the Project Owner’s assets, earnings, book value, or any other objective standards of worth. Such offering price does not necessarily represent the most favorable ratio of investment to Tax Credits available in the marketplace.The Investor Members will have limited control over the decisions or actions of either the Company or the Project Owner and will be dependent upon the Company and the Project Owner and other factors outside of the Investor Member’s control in order for the benefit of the Tax Credits to be made available to the Investor Members.All decisions to be made by the Company will be within the sole discretion of the Company’s Managing Member except as provided in the Operating Agreement. Investors in the Company have no right to participate in the management of the Company or to approve any actions proposed to be taken by the Company other than as specifically provided in the Operating Agreement and Subscription Agreement.
No regulatory review by a governmental agency of the Offering will occur.
The Interest is being offered pursuant to an exemption from federal registration and registration exemptions in certain states. No governmental regulatory agency has reviewed or passed upon this offering. Therefore, the Investor Members must assess the adequacy of disclosure and the fairness of the terms of the offering on its own or in conjunction with their personal advisors.
Conflicts between the interests of the management of the Company’s Managing Member and the investors in the Interest may not be resolved in favor of the Investors.No tax representations are being given to the Investor Members.
No information is being furnished and no representations have been made by the Company regarding the tax benefits or liabilities, if any, to be derived from an investment in the Company, including without limitation, whether the Investor Members will be able to take advantage of the tax benefits to be derived from an allocation of Tax Credits. The Investor Members should consult its own counsel and financial advisors as to legal, business, tax, and related matters concerning this investment.
The rights and remedies of investors against the Company and its affiliates are severely restricted by the terms of the Operating Agreement.
The Operating Agreement provides that, to the fullest extent permitted by the Act and any other applicable law, the Company shall indemnify and hold harmless the Managing Member and its Affiliates and may, in the Managing Member’s discretion, indemnify and hold harmless any agent of the Company or any other Person from and against any losses, claims, damages, liabilities, or expenses (including, without limitation, attorney’s fees) to which such Person may become subject in connection with any matter arising out of or in connection with the Company except for matters involving intentional misconduct or knowing violation of law, any transaction where the Person received a personal benefit in violation or breach of any provision of the Operating Agreement, or an act constituting Cause. Accordingly, the remedies of investors in the Company for claims that such investors may have against the Company are severely restricted and limited.
Future interpretations of the tax credit program may adversely affect the ability of the Investor Members to enjoy the benefits of the Tax Credits.
The possibility exists that the Service and/or Federal or U.S. Tax Courts may interpret statutory, regulatory, and other provisions in a manner which may adversely affect the ability of the Investor Members to enjoy the tax benefits sought to be made available to the Investor Members.