While the ultimate decision about how to treat PACE should be made by your accountant, there is precedent for treating PACE as off-balance-sheet financing. PACE is not traditional mortgage debt, but instead is a semi-annual special assessment obligation taken on by a property owner. Like with real estate taxes, it is non-accelerating, and  in the case of delinquency or default, only missed payments and penalties (future payments due not become due). In addition, PACE is tied to the property, not the borrower, and in most cases the payment obligation simply transfers to a new owner upon sale of the property.