1. Cash Purchase:
The cost of buying and installing solar panels has dropped considerably in the last five years. There are other commercial solar benefits for businesses including the federal investment tax credit (ITC). This is the most significant financial benefit for anyone interested in installing solar on their business. Owners of newly installed systems, get a Federal Tax Credit of 26% of the cost of the system. (Some states also offer additional tax credits)
2. 100% ACCELERATED BONUS DEPRECIATION:
Under the federal tax code, renewable energy systems qualify for a 5-year Modified Accelerated Cost-Recovery System (MACRS) depreciation schedule.
The exact benefit of this depreciation is complicated and varies depending on your businesses’ tax rate, but typically it adds up to an additional 25% of a solar energy project’s cost being offset by reduced tax payments.
To further sweeten this incentive, The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023.
3. Performance Based Incentives: (PBI’s) including solar renewable energy certificates, are a way for solar owners in some markets to receive payment from their utility for the solar electricity that their system generates. These incentives can be significant and greatly enhance financial returns for system owners over the life of the system.
4. Capital or Operating Lease:
By trading the Federal Tax Credit and initial depreciation in return for subsidized 100% tax deductible lease payments and later depreciation (after exercising a purchase option), companies achieve a similar or lower after tax cost of ownership using a lease versus a loan. This is perfect for S Corps and LLC’s that cannot directly benefit from a Federal Tax Credit and companies seeking optimal value within capital budget constraints. Businesses can receive greater energy savings and more overall value than are available from cost reduction programs such as PPA’s.
Key Features and Benefits:
* Own a solar system after six or seven years at a discount from original invoice price.
* No upfront equipment cost.
* Lease payments subsidized by the monetized value of lessor’s tax benefits.
* Low monthly payments with no escalation conserves cash within the business.
* Companies keep all energy savings and state and local incentives.
* Companies keep all environmental benefits/Renewable energy credits (RECS).