Th
e B
asic
s o
f S
ola
r C
red
its
an
d G
ran
ts©
June, 2009
Fo
rre
st
Da
vid
Mild
er
617-3
45-1
055
fmild
er@
nix
onpeabody.c
om
©F
orr
est M
ilde
r, 2
00
9
Intr
od
ucti
on
to
So
lar
Tax C
red
its
�S
ola
r cre
dit is a
30
% in
ve
stm
en
t ta
x c
red
it (
or
ITC
).
It’s
ca
lled
an
“E
ne
rgy T
ax C
red
it”
in S
ectio
n 4
8 o
f T
ax C
od
e. (
We
’ll u
se
“IT
C”)
�C
red
it is b
ase
d o
n c
ost o
f fa
cili
ty
�S
ale
of e
lectr
icity
is n
ot re
qu
ire
d
�U
su
ally
ta
ke
n a
ll in
on
e y
ea
r
�E
.g., $
1m
of so
lar
pa
ne
ls y
ield
s $
30
0K
of
tax c
red
its
©F
orr
est M
ilde
r, 2
00
9
Pro
ble
ms w
ith
Cre
dit
s
•S
ola
r C
red
its a
re c
laim
ed
on
a ta
x r
etu
rn
•N
ee
d to
ow
e ta
xes in
ord
er
to u
se
th
e c
red
its
•O
fte
n n
ee
d a
n in
ve
sto
r to
“p
ay fo
r”th
e c
red
its;
this
als
o r
eq
uires a
pa
rtn
ers
hip
/LL
C a
gre
em
en
t;
ofte
n a
5+
ye
ar
rela
tion
sh
ip
•C
red
its a
re s
old
at a
dis
cou
nt (e
.g., a
n in
vesto
r in
vests
$25
0K
in
exch
an
ge
fo
r $
30
0K
of cre
dits
•P
ossib
ility
of A
ud
it
©F
orr
est M
ilde
r, 2
00
9
Go
vern
men
t’s 1
603 G
ran
t P
rog
ram
•T
he 1
603 G
rant P
rogra
m w
as a
dded b
y the 2
009 A
ct.
•T
axpayer
can e
lect a 3
0%
govern
ment gra
nt
inste
ad o
f a 3
0%
IT
C.
•P
roje
ct m
ust be p
laced in s
erv
ice in 2
009 o
r 2010, O
R b
egun in
2009 o
r 2010 a
nd p
laced in s
erv
ice b
efo
re J
anuary
1, 2017 (
when
the 3
0%
cre
dit is s
chedule
d to r
etu
rn to 1
0%
).
•G
overn
ment gra
nt is
30%
of th
e c
ost of elig
ible
cost. E
ffectively
,
cre
dits a
re b
ein
g s
old
for
a full
dolla
r. T
here
are
no “
caps”
on the
aw
ard
to a
ny p
roje
ct, the tota
l fo
r any s
tate
, or
the tota
l fo
r all
sta
tes.
©F
orr
est M
ilde
r, 2
00
9
Wh
at
the IR
S m
ay r
eq
uir
e f
or
1603 G
ran
ts
These a
re fro
m N
otice 2
009-5
2:
•N
am
e, addre
ss, ta
xpa
yer
identification n
um
ber,
and tele
phone
num
ber
of
the
taxp
aye
r;
•A
deta
iled techn
ical description o
f th
e facili
ty, in
clu
din
g g
enera
ting c
apacity;
•A
deta
iled techn
ical description o
f th
e e
nerg
y pro
pert
y pla
ced in s
erv
ice d
uring
the ta
xable
ye
ar
as a
n inte
gra
l p
art
of th
e facili
ty, in
clu
din
g a
sta
tem
ent
that
the
pro
pert
y is
an
inte
gra
l part
of su
ch facili
ty;
•T
he d
ate
tha
t th
e e
nerg
y pro
pert
y w
as p
laced in s
erv
ice;
•A
n a
ccounting
of th
e ta
xpa
yer’s b
asis
in the e
ne
rgy
pro
pert
y;
•A
depre
cia
tion s
chedule
reflecting the ta
xpa
yer’s r
em
ain
ing b
asis
in the e
nerg
y pro
pert
y after
the IT
C is c
laim
ed;
•A
sta
tem
ent th
at th
e ta
xpa
yer
has n
ot cla
imed a
nd w
ill n
ot cla
imta
x cre
dits for
pro
pert
y fo
r w
hic
h the
ta
xpa
yer
is c
laim
ing the
a 1
603
Gra
nt; a
nd
•A
decla
ration, u
nder
pen
altie
s o
f perjury
, th
at th
e ta
xpa
yer
is s
ubm
itting, to
the
best o
f its k
no
wle
dge a
nd b
elie
f, tru
e, corr
ect, a
nd c
om
ple
te info
rmation.
©F
orr
est M
ilde
r, 2
00
9
Pro
ble
ms w
ith
1603 G
ran
ts
•Taxpayer
must apply
to IR
S, w
hic
h is r
equired to s
end a
check for
30%
of costs
within
60 d
ays a
fter
PIS
or
date
of th
e
applic
ation, w
hic
hever
is late
r. S
o there
’s s
till
a n
eed for
bridge fin
ancin
g
•Cannot have tax e
xem
pt part
ners
in the o
wners
hip
entity
•Gra
nt doesn’t
cover
depre
cia
tion, w
hic
h c
an b
e v
alu
able
enough to s
till
want an investo
r
•There
are
no form
s o
r re
gula
tions s
o far,
so n
o o
ne k
now
s
what th
e p
recis
e r
ule
s a
re. B
ut consid
er
Notice 2
009-5
2
•The 1
603 G
rant pro
gra
m p
hases o
ut after
2011
©F
orr
est M
ilde
r, 2
00
9
Overv
iew
of
Qu
alify
ing
Pro
pert
y
�E
ne
rgy T
ax C
redits o
r G
ran
ts a
re g
en
era
lly
30
% o
f “f
acili
ty”
co
st
(e.g
., t
ran
sm
issio
n lin
es
an
d s
ubsta
tio
ns a
re n
ot
elig
ible
fo
r th
e IT
C)
�C
an
inclu
de
D
eve
lopm
en
t F
ee
s
©F
orr
est M
ilde
r, 2
00
9
Tech
nic
al R
eq
uir
em
en
ts
�F
acili
ty m
ust
ge
ne
rate
ele
ctr
icity,
he
atin
g,
co
olin
g,
ho
t w
ate
r, o
r fib
er-
op
tic lig
htin
g.
(H
ea
tin
g s
wim
min
g p
oo
ls is in
elig
ible
)
�G
en
era
lly o
nly
ava
ilab
le f
or
ne
w p
rop
ert
y
(th
ere
’s a
n 8
0%
te
st)
�N
ee
d f
or
an
en
gin
ee
r’s c
ert
ific
ate
, p
erm
its,
etc
.
�N
ee
d f
or
de
taile
d d
escrip
tio
n o
f w
ha
t th
e
pro
ject
co
nsis
ts o
f (n
ot
just
a “
bla
ck b
ox”)
, b
eca
use
no
t e
ve
ryth
ing
qu
alif
ies f
or
cre
dits
©F
orr
est M
ilde
r, 2
00
9
Oth
er
thin
gs t
o k
no
w a
bo
ut
Cre
dit
s &
Gra
nts
(1)
•P
rop
ert
y’s
ba
sis
is r
ed
uce
d b
y 1
5%
, so
85
% o
f co
st
is
de
pre
cia
ble
.
•M
ostly 5
-ye
ar
MA
CR
S d
ep
recia
tio
n,
bu
t 5
0%
bo
nu
s
de
pre
cia
tio
n in
fir
st
ye
ar
(mu
st
be
PIS
in
20
09
).
•C
red
it/G
ran
t is
su
bje
ct
to “
reca
ptu
re”
for
5 y
ea
rs if
the
pro
ject
go
es o
ut
of
se
rvic
e,
or
be
co
me
s “
tax-e
xe
mp
t u
se
pro
pe
rty”
•P
art
ne
rsh
ips w
ith
exe
mp
t o
r g
ove
rnm
en
t p
art
ne
rs r
eq
uir
e a
lo
t o
f ca
re.
Th
is c
an
be
a p
rob
lem
fo
r cre
dits a
nd
do
esn
’t w
ork
w
ith
gra
nts
at
all.
©F
orr
est M
ilde
r, 2
00
9
Oth
er
thin
gs t
o k
no
w a
bo
ut
Cre
dit
s &
Gra
nts
(2)
•B
on
ds a
nd
“su
bsid
ize
d e
ne
rgy f
ina
ncin
g”
no
lo
ng
er
red
uce
fe
de
ral cre
dits o
n a
pro
ra
ta b
asis
(2
00
9 A
ct)
•S
tate
pro
gra
ms u
su
ally
do
n’t r
ed
uce
so
lar
cre
dit,
but
a s
tate
gra
nt
is p
rob
ab
ly t
axa
ble
.
©F
orr
est M
ilde
r, 2
00
9
Tax E
xem
pt
Use R
ule
s
•C
an
no
t le
ase
fa
cili
ty to
Ta
x E
xe
mp
t U
se
r
•M
ust U
se
a P
ow
er
Pu
rch
ase
Ag
ree
me
nt
•T
ax C
od
e h
as a
“sa
fe h
arb
or”
for
esta
blis
hin
g P
PA
s,
as w
ell
as a
mu
lti-fa
cto
r te
st
•W
ill th
is a
lso
en
co
ura
ge
gra
nts
?
©F
orr
est M
ilde
r, 2
00
9
Wit
h T
ax C
red
its, N
eed
fo
r an
“O
wn
er”
•N
o “
sa
les”
of
cre
dits.
Th
ey a
re g
en
era
lly c
laim
ed
by t
he
ow
ne
r o
f th
e f
acili
ty w
hic
h m
ake
s a
n
“in
ve
stm
en
t”in
a p
art
ne
rsh
ip o
r L
LC
.
�L
en
gth
y d
ocu
me
nts
de
tail
the
re
latio
nsh
ip
(e.g
., L
P o
r L
LC
ag
ree
me
nt
an
d/o
r P
PA
)
�M
ust
ad
dre
ss:
�in
ve
stm
en
t tim
ing
,
�a
lloca
tin
g c
red
its,
dis
trib
utin
g c
ash
�w
ith
dra
wa
l o
f th
e in
ve
sto
r
�p
ossib
ly s
ale
s o
f e
lectr
icity (
e.g
., a
PP
A)
©F
orr
est M
ilde
r, 2
00
9
Allo
cati
on
s
•IR
S h
as e
labora
te (
inscru
table
?)
rule
s f
or
allo
cating the c
redits
am
ong t
he p
art
ies
•IT
Cs f
ollo
w the “
pro
fits
”of
the
ow
ner
•W
ide r
ange o
f ra
tios p
ossib
le,
not
just
99-1
(could
be the
sam
e a
s t
he L
IHT
C p
art
ners
hip
)
•“S
ubsta
ntial econom
ic e
ffect”
,
etc
.
Part
ners
hip
Dev
eloper
Inves
tor
1%
99%
©F
orr
est M
ilde
r, 2
00
9Pla
ced
In
Serv
ice (
“P
IS”)
�W
hen
to
sta
rt c
laim
ing
cre
dits –
it’s
no
tb
ased
on
wh
en
th
e in
ve
sto
r co
me
s in
(w
hic
h m
igh
t b
e too
la
te)
�If in
ve
sto
r ge
ts in
la
te, IT
C m
ay b
e lo
st (p
ossib
le 3
-mon
th
lea
se
exception
; see
Section
50(d
)(4
))
�In
gene
ral, P
IS m
ust be
be
fore
2017
to
ma
xim
ize
cre
dits.
(Th
e r
ate
retu
rns to
10%
fo
r P
IS a
fte
r 2
016
)
©F
orr
est M
ilde
r, 2
00
9
Wh
en
is
a F
ac
ilit
y P
lac
ed
in
Se
rvic
e?
•U
su
ally
wh
en
co
mp
lete
d,
with
lice
nses/p
erm
its a
nd
aft
er
pre
-op
era
tio
na
l te
stin
g
•“D
aily
op
era
tio
n”
ca
n m
att
er
•A
cq
uir
ed
pro
pe
rty m
ust
be
de
live
red
an
d r
ea
dy t
o
use
; m
ere
pu
rch
ase
is n
ot
en
ou
gh
•If
ele
ctr
icity is s
old
to
th
e “
gri
d”,
th
en
th
e f
acili
ty
mu
st
als
o b
e c
on
ne
cte
d t
o t
he
gri
d t
o b
e P
IS.
©F
orr
est M
ilde
r, 2
00
9
Tech
nic
al R
ule
s f
or
Cre
dit
s
•A
lmost
all
investo
rs a
re c
orp
ora
tions b
eca
use o
f “A
t R
isk”
and “
Passiv
e L
oss”
Rule
s.
Anoth
er
be
nefit
of
gra
nts
•A
MT
is e
limin
ate
d,
eff
ective f
or
years
beg
innin
g a
fter
Octo
ber
3, 200
8.
•In
vesto
r m
ust
have a
“pro
fit m
otive”