The Investment Tax Credit (ITC) Section 48 allows project owners or investors to be eligible for Federal business energy investment tax credits for installing designated renewable energy generation equipment placed in service during the period 2006 through 2024. Most recently amended by the Bipartisan Budget Act in March of 2018, this evolving program continues to be a source of significant value to both renewable energy project developers, and forward-thinking commercial and industrial energy consumers.

We understand the opportunities and complexities that arise with tax credits and incentives. Our comprehensive renewable energy industry knowledge has helped numerous renewable energy developers and investors optimize tax credit incentives available for qualified projects. Thorough assessments on qualifying projects allows for in-depth guidance on ITC opportunities.

The ITC provides a credit consisting of a portion of the ‘eligible basis’ of a qualifying asset placed in service during the taxable year. These projects are able to take advantage of investment-based credits up to 30 percent of eligible costs. Determining the eligible basis of your property is among the keys to accurately calculating the value of the ITC, and of maximizing the realized credit while ensuring compliance with the rules. However, these credits are typically subject to expiration, and meeting certain “begun construction” and/or “placed in service” requirements before the regulatory deadline is often a key consideration to lock in your credit value.

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Baker Tilly solutions for project development and filing the ITC:

  • Establish eligible basis for ITC and determination of potential value
  • Support determination of ownership structure to facilitate monetization of the credit
  • Model project cash flow and tax benefits for investors
  • Help characterize the system components and schedule of values from vendors prior to execution of contracts (support during selection of technology provider and design build firm also available)
  • Evaluate how eligible technologies can fit into broader business goals
  • Meet with technology provider and/or the design builder to begin cost segregation
  • Review eligibility of current and historical soft costs and development fees in overall project budget
  • Assist with the inclusion of the ITC as part of the federal filing process

With the vast resources that come with being one of the largest CPA firms in the United States, Baker Tilly has the experience to provide in-depth knowledge around ITC in an effort to maximize returns and minimize risk.  

Investment Tax Credit questions to ask:

  • Will your project begin construction in time to use ITC?
  • How will ITC affect existing or potential investors in your project?
  • How do other grants received affect the ITC amount?
  • Can I claim soft and indirect costs as part of my eligible basis?

Eligible properties

Generally, personal property where the original use begins with the taxpayer can qualify for these credits. Up to 20 percent used parts are permitted. In most cases electricity must be produced, but there are exceptions in regards to certain geothermal and solar. Under section 48, there is no requirement that electricity be sold to an unrelated party. Electricity can be produced for the taxpayer’s use (for example, for ‘net metering’ situations) and is not required to be sold back to the grid. The chart below shows many of the projects that may qualify for credits. Property must either begin construction or be placed in service before the termination dates shown below.

Solar

Resource typeBegin construction deadlinePlaced in service deadlineTax credit amount
SolarDec. 31, 2019Dec. 31, 202330%
 Dec. 31, 2020Dec. 31, 202326%
 Dec. 31, 2021Dec. 31, 202322%
 Future yearsafter Dec. 31, 202310%

Wind

Large wind projects have the option of electing either the Investment Tax Credit, based on the eligible basis of the project capital expenditure, or the Production Tax Credit, which is a per kWh tax credit generated over the first 10 years of production. The most beneficial credit should be determined by evaluating the specifics of each project.

Also, a separate (more favorable) schedule is available for small wind turbines, with a capacity less than 100kW.

Resource typeBegin construction deadlineTax credit amount
WindDec. 31, 201630%
 Dec. 31, 201724%
 Dec. 31, 201818%
 Dec. 31, 201912%
 Future years

N/A

Resource typeBegin construction deadlineTax credit amount
Small wind < 100kWDec. 31, 201930%
 Dec. 31, 202026%
 Dec. 31, 202122%
 Dec. 31, 202222%
 Future years0%

Production Tax Credit for wind projects

Resource typeBegin construction deadlinePlaced in service deadlineTax credit amount
Combined heat and power systems12/31/2021N/A10%
Fuel cells and Hybrid Solar LightingDec. 31, 2019Dec. 31, 202330%
 Dec. 31, 2020Dec. 31, 202326%
 Dec. 31, 2021Dec. 31, 202322%
 Future yearsDec. 31, 20230%
Geothermal heat pumpsDec. 31, 2021N/A10%
Geothermal electric No current deadlineNo current deadline10%
MicrotrubinesDec. 31, 2021N/A10%

Contact our Investment Tax Credit (ITC) team today >