Bipartisan legislators announced companion bills to extend Section 48 and Section 25D Solar Investment Tax Credits (ITC). The Renewable Energy Extension Act will call for a 5-year extension of the tax credits, HR 3961 in the House and S 2289 in the Senate.
The bill first passed in 2005 by a Republican-led Congress and was signed into law by President George W. Bush. The ITC went on to create more than 200,000 jobs and stimulated $140 billion in private investment to grow solar deployment by more than 10,000%. To date, more than 2 million solar installations have been completed throughout the United States.
This week, Senator Catherine Cortez Masto (D-NV) and Representatives Mike Thompson (D-CA), Paul Cook (R-CA), and Brian Fitzpatrick (R-PA) authored the bills that would extend the tax credit at its full 30% value – legislation vital to the US solar industry. Without the passage of this legislation, as of January 1, 2020 the ITC will drop to 26% and continue decreasing thereafter.
There is a legal way way to “freeze” the 30% ITC into 2020 projects or beyond through a process called Safe Harbor. We have located a video and article by an expert in the subject.
Greentech Media writes that the legislation “faces a tough climb ahead of the 2020 presidential election,” and that “a prolongation of the ITC would fan the flames of investment in the solar market, forecast by Wood Mackenzie Power & Renewables to grow 25 percent this year to 13 gigawatts, driven by booming utility-scale installations.”
Barring the passage of HR3961 and S 2289, the ITC would begin ramp-down in 2019.
Bill proponents – supported by 1,000 companies across the US solar industry – claim that the ITC is the strongest policy on the books that supports clean energy development, job creation and will continue to meaningfully cut greenhouse gas emissions.
To date, the solar industry claims that direct environmental impact from growth in PV solar adoption throughout the United States has led to a reduction in solar emission equivalent to removing 16 million cars from the road.
How the ITC Works
Since 2005, the ITC, also known as the federal solar tax credit, allows homeowners to deduct 30% of the cost of installing a solar energy system including necessary roof work or replacement from federal taxes. The current ITC program allows the credit for residential and commercial systems without a cap.
Prior to passage of the ITC, homeowners could not claim tax credits unless their system was in full operation. The current iteration of the law allows homeowners to claim tax credit after the installation and construction of system is finished – as long as the system is fully operational by December 31, 2023.
Unless and until the senate and house companion bills are passed into legislation, to qualify for a 30% credit level work must start by December 31, 2019 with 5% of the cost of the job to have been expended by that date or that a significant amount of work on the job will have been commenced by the end of the year.
The 30% ITC drops to 10% if the new legislation does not pass for construction projects that begin after December 31, 2021 or are in service by the end of 2023.