Financial Incentives for Businesses to Expire at the End of 2011

Maine businesses may want to look into some finite but exceptional federal incentives and tax credits available for commercial properties who wish to install solar or wind systems.

In December 2010, the IRS’s provision for bonus depreciation for solar and wind energy systems was amended by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853).

Under these amendments, eligible property (solar and other renewable energy systems) placed in service after September 8, 2010 and before January 1, 2012 qualifies for 100% first-year bonus depreciation.

For 2012, bonus depreciation will still available, but the allowable 1st-year deduction reverts from 100% to 50% of the eligible basis and the remainder is expensed with a 5-year accelerated depreciation treatment.

The long & short of this act is that with the 1-year special depreciation tax treatment (stimulus) established for this year (until December 31, 2011), along with lower solar system’s installed costs, installing solar systems on commercial rooftops is much more financially attractive than it ever has been.

During the last few years PV equipment costs have dropped considerably, and this along with the special tax treatment, and a 1% small business loan (up to $35,000), makes the financials look much better.

This means that businesses that install solar systems this year not only receive the 30% federal tax credit or grant, and up to a $2000 state incentive, but they can fully depreciate their solar system's cost, thus lowering the net installed cost to about ~ 1/3 of the full cost. This can create a very excellent return on investment and reduced environmental footprint for businesses that use it.

As an added benefit, Maine's net metering policy is designed such that the electric energy produced by the renewable systems over 12 months is credited at 'retail value' and goes toward reducing the property’s 12-month electric bill.

Helotropic Technologies provides a financial analysis illustration of a hypothetical solar installation of a 20 kW photovoltaic system installed at a Maine business this fall for an installed cost of $100,000 ($5/W). The model utilizes all of the tax credits, depreciation incentives and a $35,000 loan at  1%  from Efficiency Maine Trust, financed with a 10 year term. 

Based on these assumptions the investment’s cash flow becomes positive in year 2, and was only about three thousand dollars ($3,000) negative after year one.  After 20 years of operation, the solar electric system should produce approximately $77,000 of operational savings.

Please check with your tax accountant as to whether this program can benefit your business or farm. 

This article was contributed by Michael Mayhew of Heliotropic Technologies. You may contact him by phone at 633-1061 or by email at coolsolarguy@yahoo.com for more information.