IRS Solar Tax Credit

The Internal Revenue Service (IRS) issued new guidelines that provide solar developers with new tax breaks, providing a boost to the solar industry, namely a 30{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} investment tax credit.

The new IRS guidance states that solar developers who by the end of 2019 either start “physical work of significant nature” or invest at least 5{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} of the total expected installation cost of a project, will qualify for the 30{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} investment tax credit (ITC). The other needed qualifier is that the solar power generators are up and running before January 1, 2024. 

What is “physical work of significant nature”?

Let’s break it down. There’s two types of physical work: off-site and on-site.

Off-site physical
work of a significant nature may include the manufacture of:

• components

• mounting

• support structures such as racks and rails

• inverters

• transformers (used
in electrical generation that step up the voltage to less than 69 kilovolts) 

• other
power conditioning equipment

On-site physical work of a significant nature may

• installation of racks or other structures to affix photovoltaic (PV) panels,
collectors, or solar cells to a site

• installation of collectors, concentrators, tracking systems,
bundles of optical fibers, or fixtures within a structure

• physical activities that are undertaken at a project site after a valid discovery
such as the installation of piping, turbines, generators, flash tanks, or heat exchangers

• installation of components of a fuel cell stack assembly such as
electrodes, gas diffusion layers, membranes, gasketing, or plates

• installation of a gas turbine engine, combustor, recuperator,
regenerator, generator, alternator, or other plant components

• installation of a heat engine, generator, heat recovery components, or electrical

• installation of a foundation, tower, wiring, or grounding systems

• installation of ground heat exchangers, heat pump units, or air
delivery systems (ductwork)

Physical work of a significant nature does not include
preliminary activities, such as:

• planning or designing

• securing financing

• exploring

• searching

• conducting mapping and modeling to assess a resource

• obtaining permits and licenses

• conducting geophysical, gravity, magnetic, seismic and resistivity surveys

• conducting environmental and engineering studies

• performing activities to develop a geothermal deposit prior to valid discovery

• clearing a site

• conducting test drilling to determine soil condition (including to test the
strength of a foundation)

• excavating to change the contour of the land (as distinguished from
excavation for a foundation)

• removing existing foundations, turbines, and towers, solar panels, or any
components that will no longer be part of the energy property (including those on or
attached to building structures)


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