50% Bonus Depreciation Lives On
Great news, the fiscal cliff deal that is currently in place will have a significant positive impact on the solar industry. Primarily, the bill extends the 50% accelerated bonus depreciation to qualifying solar projects that are placed in service before January 1, 2014.
In addition to state incentives and the federal energy Investment Tax Credit (ITC), which allows purchasers of commercial solar to take a tax credit equal to 30% of the cost of the system, those who purchase and install such systems have the ability to utilize renewed 50% first-year bonus depreciation allowances through the Federal Modified Accelerated Cost-Recovery System (MACRS).
The Federal Economic Stimulus Act of 2008, enacted in February 2008, included a 50% first-year bonus depreciation provision for eligible renewable-energy systems acquired and placed in service in 2008. The allowance for bonus depreciation has since been extended and modified several times since the original enactment, most recently in January 2013 by the American Taxpayer Relief Act of 2012 which passed just in time on 12/31/12. This legislation extended the placed in service deadline for 50% first-year bonus depreciation by one year, from December 31, 2012 to December 31, 2013. Currently, in order to qualify for bonus depreciation, a project must satisfy these criteria:
The property must have a recovery period of 20 years or less under normal federal tax depreciation rules;
The original use of the property must commence with the taxpayer claiming the deduction;
The property generally must have been acquired during the period from 2008 - 2013; and
The property must have been placed in service during the period from 2008 - 2013.
There are a few specific effects that the American Taxpayer Relief Act of 2012 will have on the solar industry, most notably in regards to the extension of accelerated bonus depreciation. Moreover, the deal may still affect the supply of tax equity available for solar projects. The bill is likely just a temporary solution but it provides another 12 months to help stimulate the solar industry.
For more information contact a CivicSolar Account Manager at 800-409-2257.