On January 1st, 2020, the Business Investment Tax Credit (ITC) will step down from the current 30% to 26%. The residential solar tax credit will also be stepping down to 26%.

Previously, the ITC was planned to end a few years ago but was renewed a year before it was set to expire by both parties in Congress. This was a smart decision as renewable energy policies that simply expire instead of stepping down can really impact the industry overnight. We saw the success of this in the California Solar Initiative which created benchmarks that needed to be hit before the incentive stepped down.

Following a regular calendar year allows for tax accountants to easily understand how the rebate works. With the CSI rebates, we were racing to submit projects before the cap was hit and the incentive was dropped another level. Before the internet, this meant many solar companies had an employee with a motorcycle to beat traffic and submit projects. With the ITC, accountants can safe harbor the ITC if a project is delayed. Commercial solar projects can spend months in building departments and be delayed for a variety of reasons. For example, we're working on a project right now that was delayed because of the government shutdown and we couldn't get comments from the FAA. It's important to start a project early to avoid these delays, but keep your tax accountant up to date on your project and they can provide you with peace of mind on safe harboring the project.

Will the ITC be Extended?

After a joint congress extended the ITC, it seemed like it was safe from any political shenanigans. Recently though, there have been headlines that President Trump wants to cancel the ITC.  On the flip side, there have also been headlines that the Green New Deal would extend the ITC. Would either get passed congress is a question for a magic eight ball. The ITC was extended during the Great Recession, and has proven to be one of the most successful job creation programs with growth surpassing most industries. We think it's unlikely Congress would repeal the ITC for this reason.  The best advice we can give is to the go solar now and safe harbor the tax credit for your business.  

Life after ITC?

Nonprofit organizations that cannot monetize the ITC are a bell weather for solar economics.  Many enter third party ownership agreements that allow others to use part of the tax credit, but more and more nonprofits are able to self-finance solar with good returns.  The DOE SunShot Initiative has been successful in bringing down the prices to a point where we don't need the incentives. We already see utility scale solar at $1/W and it is only a matter of time before rooftop solar gets down there.