For better or worse, the U.S. has historically relied on federal tax incentives to foster renewable energy deployment. For solar energy, the 30% Investment Tax Credit and beneficial MACRs depreciation treatment have allowed solar projects to compete with the massively subsidized (and politically entrenched) forms of traditional electricity generation in the U.S., namely coal, natural gas and nuclear.
Whether U.S. businesses elect to own solar systems (and directly utilize the available tax incentives) – or choose to purchase the solar energy through a Power Purchase Agreement (PPA) or via a solar operating lease (and indirectly benefit from the tax incentives) – in all scenarios, the tax aspects are critical drivers of project-level economics.
So now, with the first major overhaul of the U.S. tax code in over 30 years, these changes to tax policy are having a significant impact on the feasibility of companies “going solar” in the U.S.
In addition to the abovementioned tax changes, there are several “second-order” tax provisions, including the new base erosion anti-abuse tax (“BEAT”) and certain limitations on the deductibility of interest expenses deductions, that may selectively impact specific solar project economics.
Overall, the net impact of the Tax Overhaul on U.S. commercial solar project economics will be substantially beneficial for most projects. Even so, the facts and circumstances for each individual solar project can differ dramatically, and as a result, we suggest that businesses select experienced solar power partners to help them navigate the complicated (but often rewarding) solar alternatives available to U.S. businesses today.
PowerFlex is a leading provider of solar photovoltaic solutions to the commercial marketplace. Although we are not Accredited Tax Consultants, we closely monitor the dynamic legislative environment to provide clients with guidance in order to best leverage financial incentives at the regional and state levels.Contact Us Today!