Additional Tax Incentives for Businesses with Solar
The Inflation Reduction Act (IRA) of 2022 marks a significant shift in U.S. energy policy, particularly in its support for clean energy projects. This landmark legislation extended the 30% Investment Investment Credit through 2032 and introduced various bonus tax incentives, including the 10% Energy Community Bonus and 10% Domestic Content Bonus. These additional credits are designed to spark clean energy investments in specific regions, benefiting businesses while promoting local economic revitalization and environmental sustainability. Businesses in Jackson County could begin to see up to 50% tax credit for their solar installations!
How Does the Solar Investment Tax Credit Work?
The Investment Tax Credit (ITC) is a tax credit that reduces the federal income tax liability for a percentage of the cost of the solar system that is installed during that tax year. The Base ITC is currently a 30 percent federal tax credit claimed against the tax liability of the business. In the case of the Section 48 credit, the business that installs, develops and/or finances the project claims the credit. A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company would otherwise pay the federal government.
According to the Solar Industry Energy Association, the residential and commercial solar ITC has helped the U.S. solar industry grow by a factor of more than 200x since it was implemented in 2006, with an average annual growth of 33% over the last decade alone. Eligibility for the Section 48 ITC is based on a “commence construction” standard, which means the tax credit is available for the year in which projects are started. Note that the commencement of construction does not apply to residential solar.
What is the Energy Community Bonus Tax Credit?
The energy community tax credit bonus is available for communities located in certain regions determined by the United States Treasury (IRS). Jackson County, Oregon, is one of the few communities in Oregon that qualify for this additional bonus. The US Department of Energy has an online interactive map for the Energy Community Tax Credit.
The Energy Community Bonus is an additional tax credit offered to businesses that undertake renewable energy projects in specific regions designated as “energy communities.” The bonus aims to promote economic revitalization in regions affected by the decline of traditional energy sectors by incentivizing investment in renewable energy infrastructure.
The Energy Community Bonus increases the tax credit rate for qualified projects by an additional 10 percentage points. This means businesses that normally qualify for the 30% Investment Tax Credit can now receive an additional 10% tax credit if their project is located within one of these designated communities.
What is the Domestic Content Bonus Tax Credit?
The Domestic Content Bonus is an additional tax credit offered to businesses that certify their energy project or energy storage technology was built with a certain percentage of steel, iron, or manufactured products that were mined, produced, or manufactured in the United States.
Cities Located Within Jackson County:
What Does This Mean for Our Existing Customers?
If you are an existing customer who installed in 2023 or 2024 and are located in Jackson County, you may be eligible for the 10% Energy Community Bonus Tax Credit. Talk to your tax advisor about claiming the additional incentive.
Interested in a New Commercial Project?
Want to reduce your overall energy costs? There are a variety of incentives for commercial customers. These incentives include up to 50% of project costs through the Investment Tax Credit, up to $15,000 from the Energy Trust of Oregon for Pacific Power customers, and state and federal depreciation.