Solar Industry Publishes John Marciano Article on Risks, Benefits of Energy Tax Credits

Solar Industry has published “Risks, Requirements And Benefits Of The New Tax Credits,” an article co-authored by tax partner John Marciano, on the potential impact of Internal Revenue Service (IRS) and Department of Energy (DOE) rules concerning what the authors refer to as a “cornerstone subsidy for developing alternative energy technologies in the U.S.”

This subsidy offers “up to $2.3 billion of tax credits to any company that spends money to build a new manufacturing facility or to re-tool, expand or rebuild an existing facility that will make renewable energy equipment.”

The article discusses topics such as the seven categories of manufactured equipment that can qualify a project for the new tax credit, and factors, such as job creation and greenhouse gas impact, which DOE will consider in granting an applicant a credit allocation.

The authors look at the way in which the projects will be allocated the tax credit:

“Because the IRS will consider only projects that the DOE recommends and ranks, the key step will be getting through the DOE process. The IRS will determine the amount of the credit that will be allocated to an applicant’s project at the time the IRS accepts the application for certification. The project with the highest DOE ranking will be allocated the full amount of the credit requested.”

In addition, they examine factors that could cause the credit to be disallowed.

They close with a look at who might most benefit from these new credits, stating:

“Tax credits are most valuable to companies that have large tax liabilities. Most individuals, limited liability companies (LLCs) or partnerships cannot use tax credits efficiently to reduce their tax liability because of special rules that do not allow investment-type tax credits to be used against tax liabilities on most types of income, such as wages, interest and dividends. Corporations are usually the best users of tax credits, because they have very few limitations on using tax credits.”