Two solar energy tax credit programs can help businesses in Virginia, North Carolina, and elsewhere save money. If you are a company, non-profit, local government, or tribal government considering solar power, listen up.
The Investment Tax Credit (ITC) is a reduction in federal income taxes based on the cost of a solar system installed during that tax year. This credit allows you to reduce your federal tax. Essentially, you’re getting a tax discount for going solar.
You can also get a Production Tax Credit (PTC), which is a tax credit for the electricity generated by your solar system. This credit gives you a tax benefit for each kilowatt hour produced in the first ten years. The government continues to reward you for adding clean power to the grid.
You can’t combine both credits for the same solar system. Think of it as choosing between a One-Time Discount (ITC) and a Long-Term Savings Plan (PTC). If you’re smart, you can mix and match different credits for different parts of your solar project.
How Can Tax-Exempt Organizations Benefit?
Non-profits or local governments that don’t pay taxes can still benefit from the program by receiving direct payments or passing on the credits to others.
Direct Pay
The IRS will give cash refunds to tax-exempt entities like schools, non-profits, and tribal groups. If you are part of a business partnership, this is not allowed, but some arrangements, such as sharing ownership, may be acceptable.
For organizations to receive this direct payment, also known as direct pay, they must register with the IRS each year before tax season and obtain a unique number for each project. The IRS will provide more information about signing up online in the coming months, including tips for those without internet access.
Transfer of Credit
You can sell your solar tax credit to someone who will use it. It’s either all or nothing; you cannot sell just the bonus portion of the tax credit. If you have many credits on one property, you can sell them to different buyers in the same year.
Sign up with the IRS before you begin making any deals. This must be done before the tax return deadline, and you will need a registration number for each solar project. In 2023, the IRS will launch an online system to help with this. They’ll also provide tips for those who don’t have internet access. Both the seller and the buyer must include this registration number on their tax returns. You can sell to more than one person using the same registration number.
This post was written by Daniel Massaad, owner and expert solar technician at Energy Solutions Direct! ESD is the top choice for solar company Tampa FL! Our licensed and certified contractors are masters of their craft; with years of experience servicing the great Tampa Bay area and beyond, the choice is simple. ESD excels at offering you the best in solar value!