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Our expertise and understanding of state and federal tax incentives, regulations, and utility certificates help inform our customers for efficient processing of necessary paperwork.

Hawaii State Renewable Energy Tax Credit (35%)

The Hawaii Energy Tax Credit allows corporations to claim an income tax credit of 35% of the cost of equipment and installation of a photovoltaic system. The credit for commercial property is capped at $500,000. It is important to note that the costs that exceed the amount necessary for the maximum energy tax credit may be used for the Capital Goods Excise tax credit. Tax advisors can reference Hawaii Revised Statutes: §235-12.5 and the tax information release number 2007-02 (pdf link).

Federal Renewable Energy Tax Credit (30%)

The IRS allows commercial and agricultural businesses a tax credit equal to 30% of the actual cost of the products and installation for solar power systems. If any of the 30% credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable years. To be eligible for this credit, the system must be "placed in service" on or after January 1, 2009. The credit is scheduled to expire at the end of 2016. Tax advisors can reference the following IRS documents: H.R. 1424:Div. B, Energy Improvement and Extension Act of 2008; Internal Revenue Code: 26 USC § 48 (pdf link).

OR

Federal Renewable Energy Grant (30%)

The American Recovery and Reinvestment Act of 2009 (H.R. 1) allows taxpayers eligible for the federal business energy investment tax credit (ITC) to take this credit or to receive a grant from the U.S. Department of Treasury instead of taking the ITC for new installations. Grants are available for systems placed in service on or after January 1, 2009. The new law also allows taxpayers eligible for the renewable electricity production tax credit (PTC) to receive a grant from the U.S. Department of Treasury instead of taking the PTC for new installations. Taxpayers may not use more than one of these incentives. If an entity receives a grant and has previously received the ITC or the PTC, the credit will be recaptured through an increase in taxes during the year in which the grant is awarded by the amount of the credit taken in previous years. Receiving a credit in the past does not reduce the amount of the grant. The grant is not included in the gross income of the taxpayer. Tax advisors can reference the following IRS documents: H.R. 1: Div. B, Sec. 1104 & 1603, The American Recovery and Reinvestment Act of 2009.

Federal Modified Accelerated Cost-Recovery System (MACRS) + Bonus Depreciation

Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. Solar electric technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property.

The federal Economic Stimulus Act of 2008, enacted in February 2008, included a 50% bonus depreciation (26 USC § 168(k)) 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 property meets these requirements, the owner is entitled to deduct 50% of the adjusted basis of the property in 2008 and 2009. The remaining 50% of the adjusted basis of the property is depreciated over the ordinary depreciation schedule. The bonus depreciation rules do not override the depreciation limit applicable to projects qualifying for the federal business energy tax credit. Before calculating depreciation for such a project, including any bonus depreciation, the adjusted basis of the project must be reduced by one-half of the amount of the energy credit for which the project qualifies.

For more information on the federal MACRS, see IRS Publication 946 (pdf link), IRS Form 4562: Depreciation and Amortization (pdf link), and Instructions for Form 4562 (pdf link).

Disclaimer: The descriptions of tax incentives on this site should not be considered tax advice. Tax incentive information described on this site is available at www.dsireusa.org. Universolar recommends consulting with your tax advisor to determine how these credits should be calculated for your unique financial situation.