Solar Investment Tax Credit Extended
On Friday December 18, 2015, President Obama signed the Consolidated Appropriations Act of 2016 which, among other things, extends the Solar Investment Tax Credit (“ITC”). The details of the ITC extension are as follows:
- The current level of 30% of Qualified Project Costs remains for projects that commence construction on or before December 31, 2019.
- The credit is reduced to 26% of Qualified Project Costs for projects that commence construction in calendar year 2020.
- The credit is reduced to 22% of Qualified Project Costs for projects that commence construction in calendar year 2021.
- The credit is reduced to 10% of Qualified Project Costs for non-residential and third party owned residential projects that commence construction in calendar year 2022 and beyond.
- The ITC expires for host owned residential projects that have not commenced construction on or before December 31, 2021.
- Projects that commence construction by the applicable deadline will qualify for the ITC provided construction is complete on or before December 31, 2023.
The impending reduction of the ITC was the single biggest impediment to the continued and steady growth of the U.S. solar industry. Although significant reductions in installation costs and advances in technology have put the U.S. solar industry well on its way to the day when little or no governmental incentives will be necessary, the extension of the ITC will give the industry a workable and definitive timeline in which to continue on that path. The extension will give the U.S. solar industry a timely boost that will enable it to play a significant and necessary role in the implementation of the recently adopted Federal Clean Power Plan and the Paris Climate Change Agreement.