Investment Tax Credits are generally subject to a five-year recapture period under federal tax law. If certain triggering events occur during that period, a portion or all of the credit may be subject to recapture.

ITC recapture insurance is designed to protect the tax credit purchaser from covered recapture risk by transferring the associated financial exposure to highly rated insurance carriers. For covered events, the policy may provide reimbursement of recaptured ITC amounts, along with associated IRS penalties and interest, subject to the terms and conditions of the policy.

For Hotel SPV A, the insurance review goes beyond the availability of coverage. The project structure, tax positions and assumptions, supporting documentation, and designated independent professionals have undergone pre-closing insurance review, resulting in the issuance of a Memorandum of Insurability.

This means capital providers and tax credit purchasers are not being asked to rely solely on sponsor representations. The structure is supported by independent tax analysis, third-party appraisal, and insurance underwriting review—with the ITC insurance wrapper designed to place covered tax credit exposure with top-tier global insurance carriers, including Lloyd’s of London and The Hartford.

The result: enhanced certainty of credit value, institutional-grade risk transfer, and greater confidence throughout the five-year recapture period.