Care & Handling of the Solar Tax Credit

By now most know the Emergency Economic Stabilization Act of 2008 extended the solar investment tax credit (ITC) through 2016 and the $2000 cap for residential solar installations has been dropped allowing for the full 30% credit businesses get. The extension, as it turns out, might be the only good thing for Main Street in a major chunk of legislation aimed at fixing Wall Street. It's a very good thing, to be sure, but let's review the details.




The Database of State Incentives for Renewables & Efficiency (DSIRE, see Related Links) summarized the solar electric ITC extension in October thus:

"A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the U.S. used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the 'placed in service' date is the date of occupancy by the homeowner. Expenditures include labor costs for onsite preparation, assembly, or original system installation and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year... Consumers who receive other incentives are advised to consult with a tax professional regarding how to calculate this federal tax credit."

DSRIRE went on to say that in case of joint occupancy, the maximum qualifying amount allowed is $6,667 per occupant. Lifewise, the credit may be claimed proportionally by how much each individual paid. Finally, the law states the PV installation must be used as a residence but does not have to be the principal residence to qualify. Any unused tax credit from the first tax year may be carried over to the next tax year.

It is particularly important to consult a CPA or tax attorney if your state offers a solar rebate which is taken with the federal tax credit. Normally, the tax credit is taken on the balance after the rebate is deducted from the total installation cost. If however, one takes the tax credit against the whole installation cost along with the rebate, the rebate could be taxed as income. At present, the issue is better determined by a professional who also considers the solar customer's tax situation.

A four-page set of frequently asked questions about the solar tax credit was produced by the Solar Energy Industries Association, the national trade organization for the solar industry. It is available at: http://seia.org/galleries/pdf/ITC_Frequently_Asked_Questions_10_9_08.pdf

Notorious Bill Extends Solar Tax Credit

Just when it looked like the sun would set on the federal solar investment tax credit, it will live on to see another day--make that eight more years. The tax credit for wind was extended a year.

The House of Representatives passed the Emergency Economic Stabilization Act of 2008, Friday, October 3, by a vote of 263 to 171. Less than two hours later, President George W. Bush signed it into law. The Senate had already passed it on Wednesday. Of course, the full intent of the legislation was welfare for Wall Street but banks will afford to make business loans to rev up American capitalism on Main Street. Extending the solar/wind tax credits also makes the bill more palatable.

"I am pleased that the bill includes an extension of tax cuts for clean renewable energy that will create and save half a million good-paying paying jobs in America immediately," said House Speaker Nancy Pelosi of California.

The one-year production tax credit extension also applies to other energy sources such as geothermal; closed-loop biomass; hydropower; landfill gas; and trash combustion facilities. It also creates a tax credit for a new energy production category - marine renewable - which is energy derived from waves, tides, and currents.

Furthermore, the measure boosts the tax credit limitation for fuel cells from $500 to $1,500 per half kilowatt of capacity.

Renewable energy purists must shudder at another part of the bill. It also provides tax credits for advanced coal electricity projects with highest priority given to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions at a cost of $1.4 billion over 10 years. This writer believes the technology and time it takes to sequester CO2 at a coal-fired power plant would more efficiently be spent on truly renewable forms of energy generation, like solar, wind, geothermal, biomass conversion and marine methods. Like Halloween, Congress and the White House feel they must spread the goodies around.

"This bill is a major step in our long journey toward energy independence and ensures that solar energy will be a significant part of America's energy future," said Rhone Resch, president of the Solar Energy Industries Association, which lobbied long and hard for the tax credit extensions during the previous 18 months.

Resch said 60,000 Americans currently are employed by the solar energy industry.

"This long-term extension of the solar tax credits will create a domestic solar industry with hundreds of thousands of jobs while providing clean, affordable, carbon-free energy to millions of American families, businesses, and communities," said Resch.

The bill extends the solar investment tax credit for eight years the 30 percent tax credit for both residential and commercial solar installations. The $2,000 cap for residential solar electric installations is eliminated and so is the prohibition on utilities from benefiting from the credit. When the tax credits first were enacted by the Energy Policy Act of 2005, the solar industry experienced unprecedently growth. In fact, the amount of solar electric capacity installed in the United States during 2007 was double that installed in 2006.

"This bill puts the sun to work for every American," added Resch. "And by 2016, we expect solar energy to be the least expensive source of electricity for consumers."

Sunset for Solar Investment Tax Credit? An Update

The U.S. Senate has included the critical clean energy tax incentives--including an eight-year extension of the 30% investment tax credit and removal of the residential $2000 cap--in the bailout package. the Emergency Economic Stabilization Act of 2008. This would adds a significant job development enhancement to the package--according to a study by Navigant, roughly 1.2 million. Now the bailout would provide greenbacks for Wallstreet, but also green jobs for Mainstreet, where it's also critical. The bill will likely pass the Senate tonight, but prospects in the House are much more uncertain.

Since 2007 when the House majority re-instituted a pay-as-you-go or pay-go approach to expenditures and tax credits, Democrats targeted such credits for oil and gas be re-directed to solar and wind. The Senate and White House have balked for over a year on this version of HR 6049 (and various other bills intended to do the same).

The current extension attempt being included to the "Wall Street bailout" is still not fully funded in this new Senate version. This writer believes it should be passed anyway for the sake of keeping solar and wind vibrant, foster more jobs and continuing reduction of greenhouse gases in the process. Hopefully, as soon as next spring, the issue will be re-addressed by a more progressive House (and White House) that will more forthrightly reduce or eliminate oil and gas tax credits in favor of solar and wind tax incentives.