No taxation without solar powered representation

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The fine art of solar-powered finance for business in the United States involves learning what the Investment Tax Credit and Accelerated Depreciation (.pdf) are, and then learning to dance with them. If you learn the dance, then you have a chance at getting up to 46% of your system’s costs back in the first year – before considering any state incentives or the value of electricity (which each add their own layers of complexity to the tax dynamics of a project’s cash flow).

In keeping with their mission focus of growing solar power, the Solar Energy Industries Association (SEIA) has released the 9.0 version of its Federal Tax Guide for Solar Energy (Executive Summary .pdf).

Partial Table of Contents, Federal Tax Guide for Solar Energy

Some of the 9.0 version updates/new sections/reflections/etc:

  • construction-start rules for solar projects
  • various private letter rulings to solar companies
  • final regulations on what parts of a solar project qualify as “real property” for REIT purposes
  • 100% depreciation bonus
  • new limits on interest deductions
  • changes in the tax treatment of prepaid power contracts
  • government grants
  • an analysis of how the new base erosion anti-abuse tax (BEAT) could affect tax credits
  • new rules for carry-backs and carry-forwards of unused tax benefits
  • solar securitizations
Partial Table of Contents, Federal Tax Guide for Solar Energy

This nature of federal tax support for solar power has led toward an industry specialized in creating tax equity partnerships between large financial firms and those who wish to capitalize on the long term cash flows generated by electricity sales. SEIA’s document is enough of a guideline to assist corporate customers in making the first broad steps toward comprehending whether their company’s tax situation could benefit from a solar power investment.

Partial Table of Contents, Federal Tax Guide for Solar Energy

In additional to an analysis of the business world is the Residential Energy Credit breakdown. While not nearly as complex as business analysis, there are nuances that residential installations carry.

As the primary driver of solar power investment in United States, the federal government’s support at 30% – via grants in the late 2000s and tax benefits these days – has been part of almost 50 GW of installations. Gaining insight into its application has been the competitive edge of Wall Street firms for a decade now, and as a solar power developer in his 9-5 job, this author feels their understanding of these topics has been the most important aspect of these firms’ sales success.