Modified Accelerated Cost-Recovery System (MACRS).
This accelerated depreciation schedule covers a variety of renewable energy technologies that have five year MACRS schedules (solar PV and solar thermal, fuel cells and micro turbines, geothermal electric, direct use geothermal and geothermal heat pumps, small wind, and combined heat and power), and some biomass properties that have seven year MACRS schedules.
For details on MACRS review the Publication 946, IRS Form 4562: Depreciation and Amortization, and Instructions for Form 4562.
The federal Economic Stimulus Act of 2008, enacted in February 2008, included a 50% bonus depreciation provision for eligible renewable-energy systems acquired and placed in service in 2008. This provision was extended (retroactively to the entire 2009-tax year) under the same terms by The American Recovery and Reinvestment Act of 2009 enacted in February 2009.
To qualify for bonus depreciation, a project must satisfy these criteria:
- The property must have a recovery period of 20 years or less under normal federal tax depreciation rules;
- The original use of the property must commence with the taxpayer claiming the deduction;
- The property generally must have been acquired during 2008 or 2009; and
- The property must have been placed in service during 2008 or 2009 (or, in certain limited cases, in 2010). If the property meets these requirements, the owner is entitled to deduct 50% of the adjusted cost basis in the first year (2008 or 2009) and the remaining 50% along the ordinary depreciation schedule.
Refer to the IRS guidance document for bonus depreciation for details.
Energy Efficient Commercial Building Tax Deduction
Owners of new and existing buildings can receive $0.30 - %1.80 per square foot for energy efficiency upgrades to the Lights, HVAC system, building envelop, and the hot water system.
Corporate Energy Investment Tax Credit (ITC)
The corporate energy investment tax credit has been extended until 2016 for solar, fuel cells, and small wind: 30%, geothermal, micro turbines, and combined heat and power: 10%. Maximum incentive amounts apply depending on the technology.
Small wind and solar projects are not subject to an incentive cap.
Company is eligible for this tax credit may elect to take a grant from the U.S. Treasury Dept equal to the tax credit instead.
Renewable Energy Production Tax Credit (PTC)
Commercial and Industrial entities can receive a tax credit for the production of renewable electricity. The size of the credit depends on the technology: 2.1 cents per kWh for wind, geothermal, closed-loop biomass, 1.0 cents per kWh for other eligible technologies. The tax credit applies for the first 10 years of operation.