Been considering the sustainability, stewardship and savings of solar energy for your business, but not sure it fits your bottom line? The United States’ tax incentives for renewables in 2023 might make a difference for you, or at least be something for you and your accountant to consider.
For instance, here are some of the possibilities, made possible or more generous because of the Inflation Reduction Act:
- The Investment Tax Credit (ITC) allows your eligible solar and/or storage project that is under one megawatt in size to reduce your federal income tax by at least 30% of the project cost. If your project is a megawatt or more, you may have additional IRS requirements to qualify for the tax credit.
- Your solar project may qualify for an additional tax reduction of 10% for any of these specifics: Domestic Content, Energy Community, Low-Income.
- The 10% Domestic Content Bonus is described by the Department of Energy as:
“To qualify for the domestic content bonus, all steel or iron used must be produced in the United States and a “required percentage” of the total costs of manufactured products (including components) of the facility need to be mined, produced or manufactured in the United States.” That required percentage starts at 40% for projects starting construction before 2025, then increases over time.
The 10% Energy Community Bonus is outlined as one of these:
- A brownfield site
- “An area that, after 2009, had a 0.17% or more direct employment or 25% or more local tax revenues related to the extraction, processing, transport or storage of coal, oil or natural gas, and has an unemployment rate at or above the national average for the previous year…”
- A census tract where a coal mine closed after 1999 or where a coal plant retired after 2009
The Low-Income Credit could be:
- 10% bonus for a project in an area defined by the New Markets Tax Credit
- 10% bonus for a project on Indian land
- 20% bonus for a project that equitably benefits all residents of a facility defined as either a “qualified low-income economic benefit project” or a “qualified low-income residential building project”
In addition to tax incentives, the federal government offers rural, small-business grants through its Rural Energy for America Program. The latest round of grants due in late June are for as much as 50% of a solar project.
This is not a substitute for tax-for-business advice. As always, check with your accountant, look for applicable IRS guidance and make your own decision about what fits your business needs.
Anne Brock is marketing coordinator for SolarAlliance.com She can be reached at: 865-221-8349 or [email protected]