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Tax Advantages

Federal Tax Credits

The Investment Tax Credit (ITC) is a reduction in the overall tax liability for individuals or businesses that make investments in a variety of pre-determined areas. For solar-electric and solar water heating residential property expenditures, the credit is 30 percent of the cost, with a maximum cap of $2000 (26 USC 25D). For commercial installations the credit is 30 percent of the installed cost with no monetary cap (26 USC 48).

This tax credit is set to expire on Dec. 31, 2008. The U.S. Congress generally agrees that it is desirable for the ITC to be extended, however, and efforts are being made to extend this credit to ensure the growth of this emerging technology.

 

State Tax Credits

North Carolina - In 1999 North Carolina's various renewable-energy tax credits were revised and unified into a statute that addresses nearly all renewables. The revised statute provides for a tax credit of 35% of the cost of renewable energy property constructed, purchased or leased by a taxpayer and placed into service in North Carolina during the taxable year. These tax credits took effect January 1, 2000. In September 2005, the credits were extended for another five years.  
 
The credit is subject to various ceilings depending on sector and the type of renewable-energy system. The following credit limits for various technologies and sectors apply:

  • A maximum of $3,500 per dwelling unit for residential active space heating, combined active space and domestic water-heating systems, and passive space heating;  
  • A maximum of $1,400 per dwelling unit for residential solar water-heating systems, including solar pool-heating systems;  
  • A maximum of $10,500 per installation for photovoltaic (solar-electric), wind or other renewable-energy systems for residential use;  
  • A maximum of $2,500,000 per installation for all solar, wind, hydro and biomass applications on commercial and industrial facilities, including photovoltaic (PV), daylighting, solar water-heating and space-heating technologies.
Renewable-energy equipment expenditures eligible for the tax credit include the cost of the equipment and associated design; construction costs; and installation costs less any discounts, rebates, advertising, installation-assistance credits, name-referral allowances or other similar reductions.  
 
Under North Carolina's tax code, the allowable credit may not exceed 50% of a taxpayer's liability for the year, reduced by the sum of all other credits. Single-family homeowners who purchase and install a qualifying renewable-energy system must take the maximum credit amount allowable for the tax year in which the system is installed. If the credit is not used entirely during the first year, the remaining amount may be carried over for the next five years.  
 
For all other taxpayers, the credit is taken in five equal installments beginning with the year in which the property is placed in service. If the credit is not used entirely during these five years, the remaining amount may be carried over for the next five years. The credit can be taken against franchise tax, income tax or, if the taxpayer is an insurance company, against the gross premiums tax.  
 
SB 3 of 2007 amended North Carolina's renewable energy tax credit statute to allow a taxpayer who donates money to a tax-exempt nonprofit to help fund a renewable energy project to claim a tax credit. The donor can claim a share of the credit -- proportional to the project costs donated — that the nonprofit could claim if the organization were subject to tax. HB 2436 of 2008 applied this same mechanism to donations made to units of state and local governments.  
 
Click the links below to access relevant 2007 tax forms and instructions from the N.C. Department of Revenue.
 

 

 

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Electrical Contractors, Inc
1708 Sparta Ct. | PO Box 1972 | Gastonia, NC 28053-1972 | 704-867-1647

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