Both businesses (federal tax-paying) and non-profit organizations (entities exempt from paying federal tax) can receive federal solar tax credits or incentives for installing solar photovoltaics.
From Energy.gov:
For-profit businesses are eligible for these types of tax credit:
- The investment tax credit (ITC) is a tax credit that reduces the federal income tax liability for a percentage of the cost of a solar system that is installed during the tax year.
or - The production tax credit (PTC) is a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a system’s operation. It reduces the federal income tax liability and is adjusted annually for inflation.
Entities that don't pay taxes (non-profits, local governments) are eligible for these types of incentives:
- Direct pay option: Tax-exempt organizations (i.e. non-profits), states, municipalities, the Tennessee Valley Authority, Indian Tribal governments, any Alaskan Native Corporation, and any rural electric cooperative can receive a refund from the IRS for tax credits on projects placed in service after 2022. Projects starting construction in 2024 and 1 MW or above must meet domestic content requirements or may only receive a refund of 90% of the tax credit. This percentage lowers to 85% for projects starting construction in 2025 and 0% for projects starting construction after 2025. A penalty of 20% may apply where excess payments are requested and made by the IRS. Individuals and for-profit corporations eligible for the ITC and PTC may only use them against federal taxes owed in a given year and therefore the credits are not refundable (though they may be rolled forward).
or - Transfer of credit: Eligible taxpayers who are not eligible for direct payment, may sell all, or a portion, of the tax credits for a given year to an unrelated[26] eligible taxpayer. Payments for the credit must be made in cash and are not considered gross income, for federal purposes (i.e. no federal taxes are owed on receiving the payment and no deduction is available to the tax credit buyer for making the payment). A penalty of 20% may apply where excess credits are claimed.[27]
For full details, please visit "Federal Solar Tax Credits for Businesses" at Energy.gov.
For more information on Inflation Reduction Act incentives, please visit CEDI's overview.
Resources from Energy.gov
