Non-taxable Entities

Are there any incentives for nonprofit organizations to install clean energy devices—solar or heat pumps?

Yes. Several types of energy-property subsidy are provided under Internal Revenue Service (IRS) tax code 48 for businesses that can also be claimed by nonprofit organizations. This includes solar energy, wind power, and fuel cells, among others. Heat pumps are subsidized for homeowners in IRS tax code 25C, but code section 48 for businesses only covers heat pumps that transfer heat to/from the ground.

Is there a sense of what the application process for the ITC for nontaxable entities will look like, and timing for when we might know?

The Department of the Treasury may issue guidance on this topic, but no timeline has been established. The ITC direct-pay option for nontaxable entities is treated in section 6417 of the IRS tax code as a tax payment made on behalf of the taxpayer, even for taxpayers that are exempt from income tax. It may be necessary for the nontaxable entity to file a tax return to claim that payment as a refund.

Do School Districts qualify for the 30% ITC?

School districts that are either a political subdivision of a state or established as a non-profit entity would qualify under IRS 6417 for direct payment of the business investment tax credit (IRS 48).

Can the federal government (e.g. military bases) utilize the direct pay or transfer options?

IRS 6417 allows direct pay for States or political subdivisions thereof but does not mention the federal government.

Regarding IRA/ITC direct pay option, can federal agencies take advantage of the direct pay benefit since most are nonprofits and they are non-tax paying entities?

IRS 6417, which enables direct pay, mentions States and jurisdictions thereof, but does not mention the federal government.

Can non-tax entities pass the savings along to the installer or designer like E-Pact?

Non-tax entities can pass their savings to any unrelated taxable entity.

Specific Examples

What all is covered by the Investment Tax Credit (ITC)? For new technologies like solar windows, would this include the glass that makes up the window?

Assuming that “solar window” refers to photovoltaic (PV) panels that allow enough light through to also serve as windows, these would be covered by the same ITC provisions that apply to conventional PV panels. IRS 25D for individuals specifically states that solar panels that also serve as a roof are eligible for that ITC. However, only the construction cost associated with the portion of the structure that is used for generating electricity is eligible. The IRS has ruled that when solar panels are attached to a roof, the cost of the roof (or its repair) is not eligible. Similar rules apply under IRS tax code 48 for businesses.

Which categories of projects qualify for the ability to sell tax credits through the simplified process?

IRS 6418 describes the transfer of tax credits under IRS 45, 45X, 48, 48C, and 48E.

Can the Direct Payment or monetization choice be used for solar projects at Federal facilities?

The GSA is developing proactive standards to encourage deployment of domestic-sourced solar power at federal facilities. A request for public comment on that topic is open until November 18.

I have a public school solar and storage project that began in 2022 and will complete in 2023. can it qualify for these ITCs?

ITC eligibility is determined by when the energy property is placed into service, not when it starts.

It’s my understanding that to qualify for the additional manufacturing incentive the definition is coming out of Transportation Buy America 49 CFR Part 661.  Can you give examples of what would qualify as 40% Buy America requirements. For example, if the technologies are manufactured outside the US but 40% assembly parts are made in the US, does this qualify meeting the requirements. Other examples will be useful.

The domestic content provision applies to installation of PV systems, not the manufacturing of PV components. The IRS has not yet worked out the details of how domestic content in a PV system will be calculated. For example, if they decide that a module is “assembled” rather than “manufactured” then the origin of the module components must be considered. And it’s unclear whether tariffs paid to the U.S. government on imported solar components count as domestic content, or foreign content.

Bonuses

What is the size qualifier for 10% increase in credit for “larger” domestic installations?

For both the +10% bonus available for meeting the domestic content requirements and the +10% bonus for locating within an “energy community” as it is defined in IRA, installations over 1 MWac must meet the labor requirements. For the +10-20% low-income bonus, a project can be up to 5 MWac. These supplements are not available to individual homeowners.

Is that an additional 10% of the project cost, or an increase in the 30% tax credit by 10% (+3%)?

When applied to the ITC (IRS tax code 48), it is 10 percentage points of the project cost (or 2 percentage points for projects over 1 MW which begin construction 60 days or after the secretary publishes guidance and which do not meet the labor requirements). When applied to the Production Tax Credit (PTC) (IRS tax code 45), it is 10% of the tax credit (or 2% for projects over 1 MW which begin construction 60 days or after the secretary publishes guidance and which do not meet the labor requirements).

Is volunteer labor for a non-profit installation exempt from the labor requirements?

The prevailing wage requirements in the IRA only require that employees, including employees of subcontractors, receive the prevailing wage. Since volunteers are not employees, they would presumably not be subject to that requirement.  

Does the low-income bonus apply to housing authorities funded, in part, by the federal government?

It can but it is not the only prerequisite.   

Is it your interpretation that the low-income bonus goes away after a couple of years?

The low-income bonuses are available for the duration of the ITC/Clean Electricity ITC, however any unused capacity under the 1.8 GWac annual cap may only carry over for three years. There is also a 4-year deadline for a facility to be placed in service after an allocation of bonus credit is made.

Any tax benefits to installers or engineers involved in these projects?

All solar employees benefit from increased deployment at increased prices. Installers specifically benefit from prevailing wage and apprenticeship requirements to obtain the 10% ITC bonus for large projects.

Are there any new programs to increase solar for commercial/businesses in low-income areas?

Section 13103 of the IRA bill provides increased tax credit for solar and wind facilities in connection with low-income communities. Bonus ITC or PTC credits are also provided to eligible systems in “energy communities” which can include areas with higher-than-average unemployment rates.

Agriculture & Rural Communities

What are incentives for farming/agriculture industries to convert to solar (irrigation and other energy needs)?

The incentives for business entities also apply to farming and agricultural industries. While not discussed during this presentation, there is also funding (in the form of grants and loans) made available in IRA for rural electrification and renewable energy which may be relevant to the farming/ag community.

Can you comment on SETO's support of research and DOE project finance for agriculturally compatible projects to build support for solar development in rural communities?

The recently released FARMS funding opportunity announcement will provide support for R&D related to deployment of PV in conjunction with agriculture.

Where can I find information for solar conversion incentives for the farming industry?

Solar power on farms is eligible for the ITC incentives that apply either to personally owned property or business-owned property, as applicable.

Are grants available in the IRA that are for solar sited with agriculture?

There is no mention of agriculture in conjunction with energy projects in IRA.

Manufacturing & the Market

Is glass included in the MPTC?

Glass is not eligible for IRS 45X MPTC, but a glass plant that specifically makes solar glass for modules could get IRS 48C ITC.

Are perovskites included in the MPTC?

Perovskite modules would be eligible for the IRS Advanced Manufacturing Production Tax Credit (45X MPTC), just like cadmium telluride (CdTe).

Are the manufacturing credits cumulative? e.g., a panel manufacturer gets wafer+cell+module credit.

They are not cumulative, but a vertically integrated company that performs multiple steps would be eligible for each step they perform. Thin-film manufacturers, for example, may claim both the cell and module credit.

How can small companies with better, newer technologies make use of IRA?

The IRA does not differentiate technologies based on quality or novelty, however the selection criteria for Section 48C manufacturing credits includes “greatest technology innovation.”

How do I get funding to construct a new polysilicon plant in the United States?

IRS 48C can provide 30% of the cost of constructing such a plant. In addition, DOE’s Loan Programs Office may be able to supplement that with a low-cost loan. Additionally, the 45X production credit for polysilicon (which cannot be combined with a 48C credit) should encourage private investment due to its increased economic attractiveness.

I want to build a new factory for solar cells and wafers on tribal lands. How do I apply for tax credits for that?

The applicable tax credits can be deducted from your company’s income tax return. If the factory is owned by an Indian tribal government, it is eligible for direct payment of the credit even if the tribe is not subject to income tax.

Many of the projects anticipate significant end market growth, but there have not been capacity expansion announcements of polysilicon, ingot/wafer, and imports from China are challenged with the Uyghur Forced Labor Prevention Act (UFLPA). It appears upstream manufacturing is a seriously concerning constraint and takes the longest to come online. What are you doing to ensure polysilicon, ingot, and wafer come online ASAP?

IRA introduces IRS 45X, which provides substantial incentives for the private sector to invest in polysilicon, ingot, and wafer production.

Besides the American-Made Prize Challenges, are there any other early-stage funding opportunities available for Startups?

SBIR is particularly well-suited for early-stage startups attempting to commercialize promising new technologies.

Is there a list of U.S. manufacturing components that are available to purchase from?

SETO published an interactive map on its website showing the major domestic manufacturers of solar power components.

What insurance coverages would be important to these types of projects as they get started and then established?

Property insurance including liability coverage is normally obtained for manufacturing facilities and solar power installations. The cost is in the range 0.2 to 0.6% of covered value per year.

To commercialize products to sell in the U.S. market, compliance testing is a critical requirement. Are there any tax credits for startups to offset these costs?

There are no specific tax credits for compliance testing.

Does the 45X MPTC include the production of solar glass?

45X provides a payment for every module produced, and every module has solar glass in it, but IRS 45X does not directly subsidize the production of solar glass.

Can we get the 45x Manufacturing Production Credit with 40%-55% supplied by “NOT Made in the United States,” but 40%-55% supplied by “manufactured in the United States” materials?

Domestic content percentages do not apply to IRS 45X. Rather, the component for which a credit is claimed must be produced in the United States. So, for example, a solar panel assembled in the United States entirely from imported components would be eligible for the module credit.

With all the investments being made in the manufacturing of solar technologies, when can I expect to see the cost of residential solar systems decrease in my state (Arkansas)?

The IRA extends current subsidies into the future and encourages the solar supply chain to relocate from Asia to the United States. IRA is not likely to reduce the cost of residential solar installations beyond the increased tax credits which can provide net savings to customers. Most of the high cost of residential solar installations is the result of inefficient supply chains, paperwork, and marketing expenses. SETO is supporting projects aimed at reducing these costs.

Will other thinfilm PV be included other than CdTe, e.g. CIGS, for the manufacturing tax credits?

All thin-film PV technologies are treated the same under IRA.

As I understand it, 48C ITC allows 30% credit for manufacturing solar roofing tiles and our customers are entitled to a 30% ITC on the roofing tile they have installed?

IRS 48C provides a 30% subsidy to the company for the cost of building a factory that makes solar roof tiles. That’s 30% off the cost of the factory, not the cost of the roof tiles. When those solar roof tiles are sold to a customer, they can claim 30% off the cost of the roof tiles. Yes, both apply. However, by taking the IRS 48C credit, the company making the solar roof tiles would not be eligible to claim the IRS 45X MPTC credit for the roof tiles produced.

What is the anticipated effect on prices of modules of the incentives?

The ITC incentives that promote domestic content will likely increase the price of domestically manufactured modules, but the MPTC subsidies for domestic production will likely compensate. Additionally, the incentives are likely to spur the expansion of domestic production, which could cause greater competition, and cost improvement from learning-by-doing, which should have a net reduction in the cost of PV modules. There are also incentives for the solar supply chain which has the potential to reduce the costs of PV module manufacturing.

Recycling & Storage

Is there any consideration for recycling or recyclers?

IRS 48C does cover facilities for either the production or recycling of property designed to produce energy from the sun.

Is there anything in the IRA to develop a PV module recycling program in the United States?

IRS 48C, as amended by IRA, provides a 30% subsidy for the establishment of facilities for the recycling of any clean energy technology.

Is there any consideration for solar energy storage?

Yes, energy storage is now included in both the residential ITC (25D) and the business ITC (48).

Timeline

Can you describe an example timeline for when 45X runs out? For example, if I start a cell line in production in 2025, will I get 5 years of direct pay PLUS 5 years of tax credit (waning in years 8, 9, 10)? Or is there a 10-year clock on 45X starting in 2023?

The timeline of the credits is fixed by calendar years, not years of company production. The timeline of direct pay is determined by both the years of company production and fixed calendar years.

Do you have a sense of the longevity of this set of incentives? For example, are the tax incentives subject to early discontinuation by a subsequent administration?

The IRA was enacted by Congress as law that must be implemented by any administration. IRA could, in principle, be repealed by Congress in a future session. However, as written, the tax incentives discussed in this presentation last until at least the early 2030s.

Is the Energy Department working with Treasury to issue the guidance on the prevailing wage and apprenticeship utilization requirements? If so, when can the public expect the release of that guidance?

DOE has offered to provide technical assistance to Treasury, but Treasury has not issued a timeline for issuing guidance.

Do you foresee DOE in combination with Treasury creating a real time LI/EC tracking tool?

Treasury would need to ask DOE to develop such a tool. It’s too early to predict if that may happen.

Is Treasury is obligated to provide guidance within 180 days of the IRA being passed?

With regard to solar provisions, the 180-day requirement appears in the IRA only in conjunction with the low-income bonus and the 48C ITC.

Community Solar

Can you say more about the new community solar utility allowance?

In July 2022, the U.S. Department of Housing and Urban Development (HUD) issued guidance (PDF) that enables residents of HUD-assisted housing to access cost-saving community solar subscriptions without inducing a rent increase or utility allowance adjustment. The guidance is limited to certain community solar models. For states with different program models, HUD can issue state specific guidance upon request. This is an important step in ensuring that the 4.5 million families who live in affordable housing can benefit from low-cost, renewable energy. See: /communitysolar/community-solar-and-low-income-utility-allowances

Are there credits for landlords? Multifamily buildings?

Buildings owned by businesses are eligible for ITC subsidies under IRS 48.

Other

Is solar always assumed to be with electricity as an output, versus solar thermal (creating hot water)? Are there separate stats and programs that focus on solar thermal?

Most of the IRA provisions apply to electricity, but IRS 25C and 48 include provisions for solar heating.

Is 48C also refundable?

IRS 6417 lists IRS 48C among the tax provisions eligible for refundability for tax-exempt entities.

Is there any funding such as block grants available to states or state agencies

The IRA legislation provides block grants to states under the HOMES program to improve the energy efficiency of residential buildings, which could include installation of solar panels. However, HOMES grant funds cannot be used in parallel with other federal incentives, such as the 30% ITC.

When will DOE support R&D of Si PV at the cell and wafer level?

SETO currently supports Si materials research and Si PV cell R&D. See the Solar Projects Map on the SETO website for details.

Does the government funding also include for innovators who are still in the process of patenting and SRCC testing/certification costs/processes?

IRA supports clean-energy manufacturing facilities, the products produced in those facilities, and the electricity generated by those products. It does not support R&D. Relevant R&D support was provided in the Infrastructure and Investment Jobs Act passed last November.

Does the PTC apply to the amount of electricity generated or only to what is sold back to the grid?

IRS 45 (PTC) only applies to electricity that is generated and sold to an unrelated person. That unrelated person could be the grid, or it could be a factory located next-door, but PTC does not pay for self-consumption.

Are there any prizes geared towards nonprofits?

SETO’s prize awards are open to entrepreneurial individuals or teams based in the United States without regard for tax status.

Is there a resource on the business ITC similar to the homeowner ITC resource?

Please visit our webpage: Federal Solar Tax Credits for Business

Is the United States funding R&D into concentrator PV?

No. The benefit of concentration has decreased as solar cells become less expensive, to the point that concentrator PV no longer has a realistic path to commercial competitiveness.