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Business Energy Tax Credit Last DSIRE Review: 02/27/2008
Incentive Type: Corporate Tax Credit
Eligible Renewable/Other Technologies: Solar Water Heat, Solar Space
Heat, Solar Thermal Electric, Solar Thermal Process Heat, Photovoltaics,
Geothermal Electric, Fuel Cells, Solar Hybrid Lighting, Direct Use Geothermal,
Microturbines
Applicable Sectors: Commercial, Industrial
Amount: For equipment placed in service from January 1, 2006 until December
31, 2008, the credit is 30% for solar, solar hybrid lighting, and fuel
cells, and 10% for microturbines. The geothermal credit remains at 10%.
Maximum Incentive: $500 per 0.5 kW for fuel cells; $200 per kW for microturbines;
no maximum specified for other technologies
Eligible System Size: Microturbines less than 2 MW; fuel cells at least
0.5 kW
Authority 1: 26 USC § 48
Authority 2: IRS Form 3468
Summary:
The federal Energy Policy Act of 2005 (H.R. 6) expanded the federal
business energy tax credit for solar and geothermal energy property
to include fuel cells and microturbines installed in 2006 and 2007,
and to hybrid solar lighting systems installed on or after January 1,
2006. These provisions of the tax credit were later extended through
December 31, 2008, by Section 207 of the Tax Relief and Health Care
Act of 2006 (H.R. 6111). (A 10% federal energy tax credit was available
to businesses that invested in or purchased solar or geothermal energy
property in the United States prior to January 1, 2006.)
For eligible equipment installed from January 1, 2006, through December
31, 2008, the credit is set at 30% of expenditures for solar technologies,
fuel cells and solar hybrid lighting; microturbines are eligible for
a 10% credit during this two-year period. For equipment installed on
or after January 1, 2009, the tax credit for solar energy property and
solar hybrid lighting reverts to 10% and expires for fuel cells and
microturbines. The geothermal credit remains unchanged at 10%.
The credit for fuel cells is capped at $500 per 0.5 kilowatt (kW) of
capacity. The maximum microturbine credit is $200 per kW of capacity.
No maximum is specified for the other technologies.
Solar energy property includes equipment that uses solar energy to generate
electricity, to heat or cool (or provide hot water for use in) a structure,
or to provide solar process heat. Hybrid solar lighting systems are
those that use solar energy to illuminate the inside of a structure
using fiber-optic distributed sunlight. Geothermal energy property includes
equipment used to produce, distribute, or use energy derived from a
geothermal deposit. It does not include geothermal heat pumps. For electricity
produced by geothermal power, equipment qualifies only up to, but not
including, the electrical transmission stage. Energy property does not
include public utility property, passive solar systems, or pool heating
equipment.
To qualify, the original use of the equipment must begin with the taxpayer
or it must be constructed by the taxpayer. The equipment must also meet
any performance and quality standards in effect at the time the equipment
is acquired. The energy property must be operational in the year in
which the credit is first taken.
If the project is financed in whole or in part by subsidized energy
financing or by tax-exempt private activity bonds, the basis on which
the credit is calculated must be reduced. (The formula is described
in the tax credit instructions.) Subsidized energy financing means "financing
provided under a federal, state, or local program, a principal purpose
of which is to provide subsidized financing for projects designed to
conserve or produce energy." Therefore, a business must reduce
the basis for calculating the credit by the amount of any such incentives
received.
Contact:
Public Information - IRS
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web site: http://www.irs.gov