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Tax & Rebates

Sample Commercial Solar Project Transaction

  • Lets take a $5 Million Commercial Solar Project designed to eliminate as much daytime power requirement as installation space allows
  • $5 million solar energy facility placed into service in 2011
  • Initially the 30% cash grant amount will be $1.5 million
  • The depreciable basis would be $4.25 million, which is $5 million-[50% * $1.5 million], or 85% of $5 million
  • The 100% bonus depreciation in 2011 would be $4.25 million
  • The taxpayer may use these tax benefits or, for larger solar farm projects, monetize both of them through a tax equity investor
  • For a corporate taxpayer with a 35% federal tax rate, assuming income to offset, the federal tax savings in 2011 from the bonus depreciation would be approximately $1.5 million
  • Of the $5 million that needs to be financed, about $3.2 million or 64% is recoverable in 2011
  • California does not allow a taxpayer to claim bonus depreciation for state tax purposes. See your tax advisor for other state rules
  • Property Tax exempt increases property value without taxation and is a standout in commercial realestate market with a 30 year hedge against energy inflation
  • Real time monitoring with flat screen in lobby for client interaction and system monitoring
  • WREGIS compliant

    Bonus Depreciation for 2011

  • The 2010 Tax Act allows 100% bonus depreciation for new qualified property acquired and placed in service after September 8, 2010 and prior to January 1, 2012
  • A corporation or taxpayer that places a solar farm or commercial solar system in service between September 8, 2010 and January 1, 2012can claim an immediate deduction against income of 85% of the cost of the property
  • The entire capitalized cost of a solar generation facility or commercial solar panels in 2011 may be written off in one year instead of over a 5-year period (must be new equipment)
  • The law also provides for a 50% bonus depreciation in 2012
  • Bonus depreciation can create a NOL (net operating loss), which may be carried back to the two prior tax years and provide an immediate tax refund or carried forward for twenty years
  • Both the 30% cash grant and bonus depreciation are available in 2011 although the cash grant is limited to energy generation projects

    Extension of Section 1603 Cash Grant in Lieu of Investment Tax Credit Program

  • Section 1603 program was established (American Recovery and Reinvestment Tax Act of 2009) to cover a 30% cash incentive for the implementation of renewable energy projects
  • The 2010 Tax Act created a one year extension for the cash grant
  • The renewable energy project must go into service by the end of 2011
  • Over $5.8 billion in payments have been made so far under the program !!
  • Now is your time to act before the cash grant option expires
  • Although the information in this proposal is intended to be current as of April 2011, Commercial Solar Design makes no warranty or guarantee of any kind that it is correct, complete or wholly-up-to-date. Please note that this document is intended to provide only general guidance. You should not rely upon or construe the information herein without first seeking the counsel from a financial specialist. You are strongly urged to obtain specific advice from a tax specialist, as the U.S. tax code is complex. Interpretations of tax law are frequently established based on the merits of individual cases that come before the IRS, as opposed to preconceived rules.