Hours before Congress adjured for holidays, they passed legislation that extended the Investment Tax Credit (ITC) for solar. Under the legislation, the 30 percent federal tax credit solar will be extended for another three years before being phased out. The ITC has been a critical component of solar’s recent growth and was scheduled to expire at the end of 2016.
The ITC deal in the omnibus appropriations bill will provide extensions for both section 48 (commercial) and 25D (residential). It keeps both credits at the current 30% level until the end of 2019 followed by a two-year phase out:
- 2015 — 30% (existing law)
- 2016 — 30% (existing law)
- 2017 — 30%
- 2018 — 30%
- 2019 — 30%
- 2020 — 26%
- 2021 — 22%
The 10% credit for Section 48 (commercial) projects remains in place after 2021, per existing tax law. Congress added a provision to the tax code that provides some additional flexibility and certainty for new solar projects to be able to claim the critical 30% federal tax credit. This provision, so-called “commence construction” language, provides an effective extension of the ITC, especially for larger solar projects that require significant lead time to finance, permit, construct, and connect to the electrical grid. Solar projects are now eligible to claim the federal tax credit if they commence construction before the expiration date, rather than the previously rigid requirement that projects be fully completed and in-service by the deadline.
Our excitement about the extension of the ITC is shared across the solar industry. As reported in Green Tech Media:
“There’s no way to overstate this — the extension of the solar ITC is the most important policy development for U.S. solar in almost a decade,” said MJ Shiao, GTM’s director of solar research.
According to GTM Research, the ITC extension will help spur nearly 100 cumulative gigawatts of solar installations by 2020, resulting in $130 billion in total investment. More than $40 billion of investment will be “directly attributable to the passage of the extension,” said Shiao.
Read more about the extension on the GreenTechMedia website.
Thank you to everyone who has been working to get this extension passed!