Page 39 - Bernardon_Educate_SOQ 09.2023

ENERGY TAX CREDITS

Federal Incentives

Under the 2022 Inflation Reduction Act, the tax credit for solar energy systems has been extended and increased. The Act provides a
30% tax credit for systems installed between 2022 and 2032, up from the prior 26% credit for systems installed in 2022. The credit
will decrease to 26% for systems installed in 2033 (prior: 22% credit for systems installed in 2023) and 22% for systems installed in
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2034. The credit will be discontinued in 2035 unless renewed again by Congress (credit was scheduled to be discontinued in 2024) .
This means that businesses that invest in solar energy systems during this period can receive a significant tax credit, making
the cost of installation more affordable. It is important to note that the credit is only available for systems that are installed and
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operational during the tax year in which the credit is claimed .
Credit Amount
• 6% of the cost of the Energy Property (“Base Rate”)
• Can scale up to 30% of cost (“Bonus Rate”) if project pays prevailing wages and meets apprenticeship requirements for the
duration of the project’s construction.
• Requirements are dictated by the Treasury and IRS in coordination with the Department of Labor
• Except for microturbines: 2% “Base Rate” and 10% “Bonus Rate”
• Credit amount can be increased by 2%/10% if project meets “domestic content requirements” (i.e., materials are made in
the USA)

Included Technologies

• Solar electric property expenditures (solar panels)
• Solar water heating property expenditures (solar water heaters)
• Fuel cell property expenditures
• Small wind energy property expenditures (wind turbines)
• Geothermal heat pump property expenditures
• Energy Storage Systems, both paired with generation and installed as a stand-alone system
• Qualified biogas properties
• Microgrid controllers
• EV Charging Stations
Contractor labor costs for on-site preparation, assembly, or original installation, including permitting fees, inspection
costs, and developer fees are also included. Balance-of-system equipment, including wiring and mounting equipment
are a part of the tax basis.

Bonus credits are available if projects are in energy communities or meet domestic content requirements. Some
projects may qualify for additional bonus credits if located in a low-income area. Tax credit goes to owner of the asset.

*Some of these technologies may qualify for depreciation.

Sources:
1. https://www.irs.gov/inflation-reduction-act-of-2022
2. https://www.energy.gov/energysaver
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