...by Warren Kirshenbaum
The Emergency Economic Stabilization Act of 2008 is legislation which contains a number of tax incentives designed to encourage businesses to make investments in solar energy, including extensions of the business solar investment tax credit (ITC). The following is a brief summary of the provisions directly and indirectly benefiting the solar industry.
Provisions Directly Benefitting the Solar Industry:
The Business Solar Investment Tax Credit bill extends the 30% Income Tax Credit for solar energy properties for eight years through December 31, 2016. The bill allows the Tax Credit to be used to offset both regular and alternative minimum taxes and permits public utilities to directly invest in solar facilities and claim the Income Tax Credit. The five-year accelerated depreciation allowance for solar property is permanent and unaffected by the passage of the eight-year extension of the solar ITC.
Provisions Indirectly Benefiting the Solar Industry:
Extension of Energy-Efficient Buildings Deduction. Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for property installed in commercial buildings as part of:
• Interior lighting systems,
• Heating, cooling, ventilation, and hot water systems,
• The building envelope.
Expenditures must be certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison to certain established standards. The bill extends the energy efficient commercial buildings deduction through December 31, 2013. (This is section 179D in the Internal Revenue Code).
Qualified Energy Conservation Bonds. The bill creates a new category of tax credit bonds, "Qualified Energy Conservation Bonds" to finance State and local government initiatives designed to reduce greenhouse emissions. QECBs can be issued to finance capital expenditures incurred for:
• Reducing energy consumption by at least 20%;
• Implementing green community programs;
• Rural development involving the production of electricity from renewable resources.
The bonds can also be used to finance research facilities and provide research grants for, among other things, technologies to reduce peak use of electricity. There is a national limitation of $800 million, allocated to States, local and tribal governments.