By Cynthia Clark, Manager of Utilities & Incentives
There will no doubt be winners and losers in the aftermath of the fiscal cliff avoidance deal. The details are still being parsed, but so far Solar is looking like a winner.
Any 1603 treasury grants issued in fiscal year 2013 (well, at least until March 1, 2013 for now) will not be subject to “sequestration” discount of 7.6% now that the so-called mandatory, across-the-board spending cuts have been averted. Even better, the 50% accelerated bonus depreciation for qualifying renewable energy property put into service during a given year has been extended for another year.
Most solar energy equipment currently qualifies as a five-year property under the federal Modified Accelerated Cost-Recovery System (MACRS). As such, any qualifying solar equipment that is purchased and placed in service before January 1, 2014 will be eligible for a “bonus” first-year 50% depreciation deduction. This means at least half of the capitalized cost basis of the tangible property can be claimed as a tax deduction in the same year it is placed in service (i.e. 2013).
In Alta Energy’s experience, bonus depreciation can contribute meaningfully to project economics and may even push one with marginal returns in to a green-light territory. Don’t wait to take advantage of this tax benefit. Now is the time to think seriously about potential projects as they will need to be evaluated, designed, permitted, installed, and operating – all before the ball drops on midnight of December 31, 2013.