Solar Incentives for Massachusetts Business
Solar Incentives for Massachusetts Businesses Help Propel the Solar Industry Forward
- The current solar incentives for businesses make the prospect of installing a solar power system a very wise business decision as governments strive to promote clean energy and environmental awareness.
- Congress introduced two provisions in the new tax plan that are very favorable for commercial solar installations: a reduction in the corporate tax rate and the expansion of depreciation allowances.
The final provision in the Tax Bill, Bonus Depreciation, will be important to most companies considering installing and owning renewable energy projects. While the Act extended the 50 percent bonus depreciation, the Bill will increase it to a 100 percent first-year deduction on the adjusted basis of qualified property placed in service after September 27, 2017 through December 31, 2022. Starting on January 1, 2023, the bonus will be phased-down in annual 20 percent increments until reduced to zero after 2026. An important point to note: the impact of the time-value-of-money benefit resulting from the 100 percent first-year depreciation deduction will be tempered somewhat by the reduction in the corporate tax rate from 35 percent to 21 percent.
Our team will help you identify and utilize all available federal, state and local rebates, grants and tax incentives.
Renewable energy and solar projects often qualify for a number of government incentives. Potential subsidies include: rebates, tax credits, grants, Solar Massachusetts Renewable Target (SMART) production based program incentives & 100% Bonus Depreciation.
Solar incentive programs can be hard to navigate and application processes leave little room for error. As an additional benefit to you, Clean Energy Design will identify the available funds your solar power system is qualified for, and our rebate specialists will process, manage, and track your applications.
* Clean Energy Design LLC presents financial incentives as accurately as possible. Financial incentives for solar systems are constantly changing at the state and federal level. Receipt of incentives depends on the customers eligibility and final approval for the program, availability of funding and the customers specific tax situation. All financial incentives are presented as estimates and all references to taxes, tax credits, incentives or rebates are presented for general information and are not intended as tax advice. Please consult your tax advisor for professional tax advice.
State Incentives:
Solar Massachusetts Renewable Target “SMART” Incentive
The state is now qualifying new projects for the SMART incentive program.
This new tariff policy has been developed to incentivise an additional 1.6 GW of solar PV in the state.
The DOER believes that a tariff-based incentive program would be best mechanism to continue supporting solar at the lowest cost to ratepayers. The new policy is based on a declining block grant incentive system, to be paid out on the basis of energy delivered.
Under the final tariff design there will be different rates for projects of different scales up to 5 MW per site. Incentives will be provided for 10 or 20 years, with varied values depending on ownership, system size and location. The tariff will consist of 8 blocks, with tariff values decreasing 5% in each subsequent block. A certain portion of each block will most likely be set aside for smaller projects as well.
The recovery of costs would be made through a fixed charge to all customers in the network. But unlike many standard offer or feed-in tariff policies the incentive will be paid “net of energy value”, which would allow the program to work in conjunction with net metered systems. There is an additional incentive of $.05 per kWh if plant owners decide to opt out of the net metering program.
For more detailed information on this incentive please visit MA-Smart Solar.
Federal Incentives:
Section 179
Expensing qualified property in the tax year the assets are placed in service up to $1 M.
Section 179 of the Internal Revenue Code (IRC) is a permanent tax provision. It gives firms in all lines of business and all sizes the option, within certain limits, of expensing the cost of new and
used qualified property in the tax year when the assets are placed in service. Business taxpayers that cannot (or choose not to) claim the allowance may recover capital costs over longer periods and at slower rates by claiming the appropriate depreciation deductions under the Modified
Accelerated Cost Recovery System (MACRS) or Alternative Depreciation System (ADS).
Maximum Expensing Allowance
The maximum Section 179 expensing allowance is set at $1 million for qualified assets bought
and placed in service in 2018 and thereafter.
Section 168
5 Year MACRS Accelerated Depreciation
For solar property placed in service after 1986, the current Modified Accelerated Cost-Recovery System (MACRS) property class is five years.
Expanded Bonus Depreciation
The new 2018 tax regulations are a huge boost to businesses for commercial solar installations!! Commercial entities that go solar expect to reduce the energy they purchase from their utility, accordingly lowering bills. Lowering these bills makes the commercial entity more profitable, which increases their tax liability.
With the new tax bill, Congress increased the bonus depreciation to 100 percent which enables them to take a 100 percent first-year deduction on the adjusted basis of qualified property!
Below is an example of the difference in the project value with the new 2018 tax code.
Project Value Bonus Depreciation Comparison Samuel Adeyemo/ COO Aurora Solar
Now is the time to revisit solar! With the new tax laws in place you may see as much as a 27 percent increase in project value or more, which is a great incentive for commercial businesses as they plan for the rest of 2018 and 2019.
Federal Investment Tax Credit (ITC)
For several renewable technologies, including solar and small wind energy systems, there is a tax credit currently equal to 30% of the capital expenditure, with no maximum credit. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat.
The ITC is based on the amount of investment in solar property. Both the residential and commercial ITC are equal to 30 percent of the basis that is invested in eligible property which have commence construction through 2019. The ITC then steps down to 26 percent in 2020 and 22 percent in 2021. After 2023, the residential credit will drop to zero while the commercial and utility credit will drop to a permanent 10 percent.