Tips for Retailers on

ITC Breakdown—What’s Changed and How Does it Impacts Businesses

The Internal Revenue Code provides an ITC for investments in commercial solar. This is to be used as a dollar-for-dollar reduction to U.S. federal income tax.

To qualify for the ITC, the commercial solar energy system must be located in the U.S. and be the following: • Tangible, depreciable, or amortizable property (for federal income tax purposes) • Under the 80/20 rule, energy property may be considered new even if it contains used components as long as that portion does not exceed 20% of the total value

• Claimed on IRS form 3468

The ITC for most on-site projects will increase from 26% to 30%. This is a 10year extension of the ITC, returning to the original value of 30% and carrying it through 2032. There is also the potential to go beyond that for commercial businesses:

• 10% bonus ITC for using domestic products/components or utilizing a brownfield

• 20% for low-income areas

• ITC has always been based on date system becomes operational, therefore most likely retroactive to JAN 01, 2022 • The carryback for the ITC (for companies that don’t have sufficient tax liability to offset the tax year their system was placed in service), went from 1 year to 3, and can be carried forward 22 years for commercial businesses.

• Commercial projects over 1 MW will have the same benefits, however 60 days after the IRS guidelines come out (they have not yet, and it may take several months), they will be subject to prevailing wage and apprenticeship requirements in order to receive the 30% ITC. Requirements will be waived for any project that has commenced prior to release of guidelines. It is estimated that these requirements

could raise costs by 10% or more, therefore acting now is wise. • Keep in mind that after site visit, proposal, approval etc., interconnection could take months, therefore it could be close to a year before the project commences. Again, acting now is wise. Nonprofits and local/state government entities can get the ITC refunded to them (as they normally cannot utilize tax incentives—they do not pay taxes). Details and parameters around this will continue to unfold.

Key Takeaway:

It is wise not to sacrifice the gains of the ITC for solar projects by waiting. Additionally, as time passes, the inflationary impacts on the solar industry, as well as supply chain issues and rising electricity costs, make now an ideal time to not only consider, but to act on solar.

The best place to start is by speaking to a trusted advisor. Our team of experts are well-positioned to guide you on your current and future energy needs. Get started with a no cost, no obligation energy assessment today by connecting with us online here, at info@appienergy.com or by calling (800) 520-6685.

GO SEEK & FIND

In each issue of Connect, we’ll be “hiding” a new small graphic. When you find it, email us at ConnectSeekAndFind@AmericanHort.org, and tell us where you found it. For this issue, respond by December 1. Congratulations to last month’s winner! Heather Zindash The Soulful Gardener, Gaithersburg, Maryland