Solar Arrays & Other Clean Generation
Municipalities can take advantage of a new policy called IRS Elective Pay to develop town-owned energy generation facilities. Now, for the first time, tax-exempt entities such as municipalities can be paid directly for the full value of certain federal tax credits. There are multiple tax credits available for funding energy generation projects. The production credits pay towns based on the amount of electricity produced, while the investment credits pay based on the cost of constructing the facility. The investment credits also offer bonuses if certain criteria are met.
- Electricity Production Federal Tax Credits 45 & 45Y – credit value is based on the amount of electricity produced in kWh. The base rate is 0.55 cents/kWh or 2.75 cents/kWh if prevailing wage and apprenticeship (PWA) requirements are met. Projects with an installed capacity of less than 1 MW are exempt from the PWA requirement and receive the 2.75 cents/kWh rate.
- Electricity Investment Federal Tax Credits 48 & 48E – 6% of project costs or 30% of project costs if prevailing wage and apprenticeship (PWA) requirements are met. Projects with an installed capacity of less than 1 MW are exempt from the PWA requirement and receive the 30% credit.
- Low-Income Community Bonus Credits – Projects designed to benefit low-income communities can receive bonus credits of 10 – 20 % on top of the base 48/48E credit. The bonus credits are subject to an annual funding cap and thus must be applied for ahead of time. The full DOE applicant guide can be viewed here.
- Project located in a low-income community: 10% bonus credit. See this DOE mapping tool to view qualified areas.
- Low-income residential building project: 20% bonus credit for projects that are part of federally-subsidized residential buildings.
- Low-income economic benefit project: 20% bonus credit for projects where at least 50% of the financial benefits go to low-income households (income below 200% of the poverty line or 80% of area median income).
- Low-Income Community Bonus Credits – Projects designed to benefit low-income communities can receive bonus credits of 10 – 20 % on top of the base 48/48E credit. The bonus credits are subject to an annual funding cap and thus must be applied for ahead of time. The full DOE applicant guide can be viewed here.
Updated August 2024.