The Investment Tax Credit (ITC) Section 48 allows project owners or investors to be eligible for Federal business energy investment tax credits for installing designated renewable energy generation equipment placed in service during the period 2006 through 2024.
We understand the opportunities and complexities that arise with tax credits and incentives. Our comprehensive renewable energy industry knowledge has helped numerous renewable energy developers and investors optimize tax credit incentives available for qualified projects. Thorough assessments on qualifying projects allows for in-depth guidance on ITC opportunities. The ITC provides a credit consisting of the “energy percentage” times the basis of energy property placed in service during the taxable year. Qualifying renewable energy projects are able to take advantage of investment-based credits up to 30 percent of eligible costs. Determining the basis in the property is among the keys to accurately calculating the value of the ITC.
Baker Tilly solutions for project development and filing the ITC:
- Establish eligible basis for ITC and determination of potential value
- Support determination of ownership structure to facilitate monetization of the credit
- Model project cash flow and tax benefits for investors
- Help characterize the system components and schedule of values from vendors prior to execution of contracts (support during selection of technology provider and design build firm also available)
- Meet with technology provider and/or the design builder to begin cost segregation
- Review eligibility of current and historical soft costs and development fees in overall project budget
- Assist with the inclusion of the ITC as part of the federal filing process
With the vast resources that come with being one of the largest CPA firms in the United States, Baker Tilly has the experience to provide in-depth knowledge around ITC in an effort to maximize returns and minimize risk.
Investment Tax Credit questions to ask:
- Will your project begin construction in time to use ITC?
- How will ITC affect existing or potential investors in your project?
- How do other grants received affect the ITC amount?
Generally, personal property where the original use begins with the taxpayer can qualify for these credits. Up to 20 percent used parts are permitted. In most cases electricity must be produced, but there are exceptions in regards to certain geothermal and solar. Under section 48, there is no requirement that electricity be sold to an unrelated party. Electricity can be produced for the taxpayer’s use and is not required to be sold back to the grid. The chart below shows many of the projects that may qualify for credits. Property must either begin construction or be placed in service before the termination dates shown below.
|Resource type||Begin construction deadline||Tax credit amount|
|Wind||Dec. 31, 2016||30%|
|Dec. 31, 2017||24%|
|Dec. 31, 2018||18%|
|Dec. 31, 2019||12%|
|Biomass||Dec. 31, 2016||30%|
|Anaerobic digestion||Dec. 31, 2016||30%|
|Landfill-to-gas||Dec. 31, 2016||30%|
|Hydropower||Dec. 31, 2016||30%|
|Geothermal||Dec. 31, 2016||30%|
|Resource type||Begin construction deadline||Placed in service deadline||Tax credit amount|
|Solar||Dec. 31, 2019||Dec. 31, 2023||30%|
|Dec. 31, 2020||Dec. 31, 2023||26%|
|Dec. 31, 2021||Dec. 31, 2023||22%|
|Dec. 31, 2022||after Dec. 31, 2023||10%|
|Resource type||Placed in service deadline||Tax credit amount|
|Fuel cells||Dec. 31, 2016||30%|
|Combined heat and power||Dec. 31, 2016||10%|
|Geothermal heat pumps||Dec. 31, 2016||10%|
|Microturbines||Dec. 31, 2016||10%|