Tax Alert: Businesses Can Reap the Benefits of Solar Energy
7/09/2010
Many people are familiar with the term “going green” and probably associate it with reusable grocery bags, driving a hybrid car, and recycling. In a business context, “going green” has expanded from the concept of the paperless office to the energy-efficient building. While an investment in a green initiative such as solar panels may seem costly to many companies, there are government incentives and financing available that help make an investment in solar panels affordable, as well as other non-financial benefits.
The Federal incentives include:
- Federal cash grants or credits equal to 30 percent of the cost of the solar power system. The ability to take advantage of the Federal cash grant is only available if the solar panel installation is started before December 31, 2010.
- Five-year accelerated depreciation via modified accelerated cost recovery system (MACRS) for 85 percent of the total cost of the solar project. (The depreciable base is reduced by 50 percent of the grant or credit).
At the state level, many states, including California, Connecticut, and New Jersey, have programs that require utilities to generate a portion of their energy from renewable sources. Since the utilities cannot meet this standard, the states allow the utilities to purchase the renewable energy they are required to generate from the private sector. For example, New Jersey accomplished this in the form of solar renewable energy certificates (SRECs). The SRECs can provide a business with a significant revenue stream for a 15-year period.
Other benefits of solar energy:
- A company can offset costly peak rates and hedge against rising costs of electricity and inflation by using solar energy and reduce its dependence on foreign oil. Solar renewable energy costs do not increase with inflation or the rising price of oil.
- Solar panels help transform non-performing space into an asset that generates energy and thus increases real property value, with little maintenance involved.
- By making an investment in solar panels, a company can improve its reputation, marketing potential, and product distinction as well as appeal to green-minded customers.
- Solar panels provide a predictable and reliable source of energy which is silent and emission-free, thus making a small impact on the environment.
For more information and to determine if an investment in solar panels is a good fit for your business, please contact Phil Drudy, CPA, partner, via email or 973-403-6950, Joe Tighe, CPA, partner, via email or at 973-618-6243, or Marshall Varano, partner, via email or 858-300-3424. |
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July 2010
Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.