The Investment Tax Credit (ITC)
On October 3, 2008, the House of Representatives passed H.R. 1424, the Emergency Economic Stabilization Act of 2008 by a vote of 263-171. Soon after, President Bush signed the bill into law. The U.S. Senate passed its own version of the bill on Oct. 1, 2008. In the bill are a number of provisions supporting energy efficiency and renewable energy, including all of the solar incentives advocated by SEIA.
This package includes an 8-year extension of the commercial and residential solar investment tax credit, completely eliminates the monetary cap for residential solar electric installations, and allows utilities and alternative minimum tax (AMT) filers to take the credit. In 2009, under the American Recovery and Reinvestment Act, the $2,000 credit cap on solar hot water installations was eliminated.
The Investment Tax Credit (ITC) is effective through December 31, 2016.
See SEIA's Press Release for more details:
http://seia.org/cs/news_detail?pressrelease.id=217.
The ITC is a reduction in the overall tax liability for individuals or businesses that make investments in solar energy generation technology. Nations across the globe are competing to corner the market on solar energy technologies, and to capitalize on the job growth potential and economic gain associated with this promising industry. The ITC provides the necessary financial support and catalyzing market forces to ensure the growth of solar industry in the United States.
For two years, the solar energy industry sought an 8-year extension of the commercial ITC under Internal Revenue Code Section 48 as well as an 8-year extension of the 30 percent residential ITC under Section 25D as well as total elimination of the existing $2,000 limit. SEIA also sought to permit corporate and individual taxpayers to claim the ITC against the AMT and the elimination of the public utility exception to the ITC.
Clean energy tax policies play a vital role in creating new high-wage American jobs, spurring economic growth, promoting consumer purchases of energy efficient products, lowering energy bills for consumers and businesses, and of course reducing global warming pollution. The incentives also help the U.S. catch up with other countries on the development and deployment of clean energy technologies.
The Crucial Nature of the long-term Extension
The 8-year extension of the ITC provides the market "demand-signal" that is needed for the industry to build new manufacturing capacity, expand the installer work force and construct new utility-scale solar power plants. In fact, in the two years after enactment of the ITC in the 2005 energy bill, the U.S. solar market grew by 45 percent. Now with an 8-year extension of the ITC, the solar industry is projected to gain 440,000 permanent jobs and $325 billion in investment by 2016.
History
The Energy Tax Act of 1978 established a 15 percent tax credit for solar energy. This credit continued uninterrupted for 8 years until the Tax Reform Act of 1986 provided for a phased reduction. On January 1, 1987 the credit fell to 12 percent. On January 1, 1988 the credit further reduced to 10 percent. The credit remained at this level until 2005.
The Energy Policy Act of 2005 (EPAct 05) created a new commercial and residential ITC for fuel cells and solar energy systems that applied from January 1, 2006 through December 31, 2007. The credit was extended for one additional year in December 2006 by the Tax Relief and Health Care Act of 2006. In 2007, global investment in clean energy topped $100 billion, with solar energy as the leading clean energy technology for venture capital and private equity investment.
For current legislation please see our Bills page.
