Investment Tax Credit (ITC) (IRC Section 48)

Program Name: Investment Tax Credit (ITC) (IRC Section 48)
Program Sponsor: IRS
Program Type:          Tax Incentive
Technology:               Solar, Geothermal, Wind, Fuel Cells, CHP
Eligibility:  Businesses

Description

The ITC is a tax credit that can be claimed on federal corporate income taxes equal to a certain percent of the cost of eligible renewable energy property. The tax credit rate depends on the type of property or technology for which the credit is being claimed, as well as the applicable construction and in-service date of the technology.

Eligibility

The equipment must be new, meaning the original use of the equipment must begin with the tax payer, or the system must be constructed by the tax payer, and must meet any applicable performance or quality standards in effect at the time when the equipment is acquired.

How the Program Works

The ITC is calculated by multiplying the applicable tax percentage by the amount invested in the eligible property. The tax credit percentage is determined by the “commence construction” date of the project and is claimed according to the “placed in service” date. Meaning, the applicable percentage that may be claimed is dependent on the date construction for the energy property was commenced, but the tax credit cannot be claimed until the year in which the property becomes operational.

The applicable credit rates based on technology and construction commencement are as follows:

Technology 12/31/18 12/31/19  12/31/20  12/31/21  12/31/22  Future Years 
PV, Solar Water Heating, Solar Space Heating/Cooling, Solar Process Heat 30% 30% 26% 26% 22% 10%
Hybrid Solar Lighting, Fuel Cells, Small Wind 30% 30% 26% 22% 26% 22%
Geothermal Heat Pumps, Microtubines, Combine Heat and Power Systems 10% 10% 10% 10% 10% 10%
Geothermal Electric 10% 10% 10% 10% 10% 10%
Large On-Shore Wind 18% 12% N/A N/A N/A N/A

A taxpayer generally can establish the commencement of construction either by incurring 5% of the total eligible costs of the project, or by commencing actual physical construction of the project prior to the applicable deadline.

Please see the applicable IRS guidance for more information.

How to Apply

To claim the ITC, a taxpayer must complete and attach IRS Form 3468 to their tax return. Instructions for completing the form are also available.

Contact Information

Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040.