If your commercial property qualifies under section 48 of the internal revenue code, you could be eligible for a 30% investment tax credit for making an investment in solar energy for your buildings. This is a tax credit created with the Energy Policy Act of 2005 and eventually extended through December 31, 2016.
The tax credit was developed to support and increase deployment of solar energy in the U.S. and has increased annual solar growth over 1,600% since 2006. In that time the cost for equipment has dropped and the solar energy industry has developed new and better ways to build their products.
Can your business gain tax breaks with solar buildings? It can if you approach the project and the tax compliance correctly.
Tax Credit Structure
This is an investment tax credit, not an earned income or other tax credit. The credit only applies to your investment basis in a solar project. Make sure you partner with your tax expert when developing your project and preparing for this credit.
A tax credit of 30% can be applied to the basis of eligible property placed in service between 2006 and 2016. The basis is the portion of investment you have in the eligible property; it usually includes the cost of the property and may include a portion of other costs such as engineering and permitting.
According to the SEIA (Solar Energy Industries Association) grants, utility rebates, RECs, and other incentives will not impact your eligibility for the tax credit if the company pays tax on the incentive.
DSIRE - Database of State Incentives for Renewables and Efficiency
This database contains a state by state listing of solar and other financial incentives. For example, for the State of Texas this database provides links to municipal and other incentive programs across the state from property tax incentives to utility rebate programs. It is endorsed by the U.S. Department of Energy and the Interstate Renewable Energy Council.
This database is also a resource for building energy codes, metering, and more.
Section 48 Eligibility
Cornell University Law School states a property using solar energy is eligible under Section 48 in several ways, including:
- Generating electricity to heat, or cool, or to provide hot water within the structure.
- Illuminating a building interior using fiber-optic distributed sunlight.
- Construction or acquisition by the tax payer.
Again, to be completely certain of your eligibility, consult a knowledgeable tax expert familiar with the solar energy tax credit.
Your building may be eligible for a 30% investment tax credit from the federal government for deploying solar energy to generate power. This is a tax credit that became available in 2006. However, it only lasts until December 31, 2016 so you have less than 2 years of eligibility left unless it is extended again.
This tax credit is also provided to long term lessees of eligible property. If you have leased a building that complies with Section 48 you may be able to apply for a tax break as well.