Solar Discovery

California is one of the world's leading solar energy users. This is due in large part to the state's progressive solar tax rebates and incentives. California's incentive programs have spurred massive growth in the solar industry there, which now claims roughly 85% of all solar installations in the United States. The state also has several solar power plants in line for construction. Here is a list of state rebates and incentives available to residential customers in

CALIFORNIA REBATES
California Solar Initiative (CSI)
One of the more ambitious incentive programs in the nation, allocating $3.2 billion over 10 years. Eligible solar systems include solar space heating, solar thermal electric, and photovoltaics. There are two ways to take advantage of the rebates:

• Expected Performance Based Buy-Down (EPBB). The EPBB Incentive is for systems with less than a 50kW capacity. The up-front, one-time rebate began at $2.50/W-AC (adjusted based on expected performance) but declines by $0.30 increments. There are ten incremental drops dependent on the number of solar systems installed. In other words, the closer California get to its goal of 3000MW, the lower the rebates will be.
• Performance Based Incentives (PBI). PBI Incentives are for systems of 50 kW or larger. Under this program, rebates are paid on a monthly basis with the rebate depending on that month's performance. Note that smaller systems (<50kw) this site to find current incentive levels.

In January of 2008, the CSI handbook was edited to allow rebates for non-PV solar technologies, which produce or displace electricity, such as those mentioned above (Thermal, Space heating/cooling). However, solar hot water heaters, which can also displace electricity, were excluded. The California Public Utilities Commission (CPUC) is currently running a pilot program (see below) in the San Diego area which will likely become the basis for later incentives for solar hot water systems.

Two Important Notes:
The California Solar Initiative is administered by the CPUC, therefore eligible homes must be existing, grid-tied homes. New homes fall under the jurisdiction of the California Energy Commission (CEC) and the New Solar Homes Partnership (NSHP-see below).

Equipment used must be installed by a licensed contractor and meet eligibility requirements, including being grid-connected and warranty specifications. Look here for a complete list of equipment requirements.

New Solar Homes Partnership (NSHP)
The NSHP is a set of tax rebates ($400 million over 10 years) geared toward California's builders and new construction. It covers Photovoltaics only and targets single-family, multi-family, and low-income residential construction. Incentive amounts vary based on the type of housing and expected system performance. NSHP homes must be at least 15% more energy efficient than current building standards although builders are encouraged to reach 35% above average efficiency.

• System size:
• Minimum: 1 kW AC
• Maximum: 100% of the home's expected electricity needs.
• Systems must be grid-connected and either self-installed or installed by a contractor licensed in California.

For other system requirements, see this site or the NSHP guidebook.
There are no direct state rebates for homeowners under the NSHP although savings are passed on through affordable housing and minimal energy costs. Federal rebates may be available to homeowners.

Pilot Solar Hot Water Program
This rebate program is taking place in the San Diego area for customers of the San Diego Gas & Electric company.
The maximum incentive for residential customers is $1500 and is based on expected performance.

• The system must be retrofit for an existing consumer.
• Specific licenses are required for installers.
• Note: Self-installers need not be licensed but must attend a one-day training workshop.
• Pool/Spa heating systems are NOT covered under the rebate program.
• Rebates are paid to contractors to be passed on to the consumer. Rebates are directly paid to owners of self-installed systems.
  

INCENTIVES
California State Feed-In Tariff
Adopted in 2006, this feed-in tariff includes both solar thermal electric and photovoltaics.
Prices are based on the CPUC market price and adjusted by time of use with higher rates being paid out during hours of peak demand (8am-6pm).

• Customers may enter 10, 15, or 20 year contracts.
• Maximum system size is 1.5 mW.
  Important Note: Any customer who participates in the feed-in tariff is unable to participate in any other state incentive.

These are just the State of California's tax rebates and incentives. For more information on state, local, and utility incentive programs for homeowners in California, visit the Database of State Incentives for Renewables & Efficiency (DSIRE).

On October 3, 2008 H.R.1424, the Emergency Economic Stabilization Act of 2008 was passed. Division B of this bill includes the Energy Improvement and Extension Act of 2008. This landmark legislation extends critical Federal Investment Tax Credits for solar customers and other renewable energy projects. This bill contains $18 billion in incentives for clean and renewable energy technologies, as well as for energy efficiency improvements.

See the entire bill, including Division B: Energy Improvement and Extension Act of 2008. As part of this legislation, the solar investment tax credit (ITC) has been extended for 8 years through December 31, 2016.

Here are the key provisions of the ITC:

1. The 30% federal investment tax credit for both residential and commercial solar installations is extended for 8 years through December 31, 2016.
2. Eliminates the $2,000 cap on the tax credit for the purchase and installations of solar electric on residential properties.
3. Addition of small wind energy and geothermal heat pump projects as qualifying installations for tax credits
4. Utilities may now benefit from the credit as eligible tax credit recipients.
5. Extends through 2009 the authority to issue clean renewable energy bonds.
   

Residential Tax Credit. Tax incentives include tax credits and depreciation. The Federal Investment Tax Credit for Residential is 30 percent of net system cost, capped at $2,000 (prior to 12/31/08 and no cap afterwards). It is a one-time credit, but may be carried forward (and possibly back) if not completely useable in the system installation tax year. Also, the IRS hasn't produced the form required for claiming this credit for individual filers.

Commercial Tax Credit. The Federal Investment Tax Credit for Commercial and Business owned systems is 30 percent of net system cost with no cap. The IRS current federal Form 3468 is available at www.irs.gov/formspubs. In the past, this credit could be carried forward fifteen or back three years. It's not clear if this has changed.

MACRS Business Incentive. Business owned systems may also be eligible for MACRS 5-year Accelerated Depreciation using IRS federal form 4562. For more info on commercial tax benefits and for updates on the CSI & IRS rules and forms, see the online version of the article at: www.ongrid.net/papers/PaybackOnSolarSERG.pdf.

Additional Information Sources. A source for information on all state and federal incentive programs around the country is available at the DSIRE project: www.dsireusa.org. In addition, the Solar Energy Industries Association (www.seia.org) has put together a "Guide to Federal Tax Incentives for Solar Energy," available for free at www.seia.org/manualdownload.php.

Value of Tax Incentives. Residential customers in higher income tax brackets see comparatively more value because residential electricity expenses are paid with after-tax dollars-they aren't tax deductible.

Incentive Tax Treatment. Tax treatment of the incentives depends on the type of customer, and possibly the type of incentive. For additional information on tax treatment, see the online version of the article at: www.ongrid.net/papers/PaybackOnSolarSERG.pdf. Of course, municipal and non-profit entities do not have to worry about these tax issues, as they are generally tax-exempt. More detailed information on solar finance and tax considerations is available from the Northern California Solar Energy Association's Solar Energy Resource Guide, at http://norcalsolar.org. Also see the Tax Incentives Assistance Project (www.energytaxincentives.org/tiap-solar-energy-systems.html) for more information on solar and energy efficiency tax credits.

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Please Note: We do not endorse the sites behind these links. We offer them for your additional research. Following these links will open a new browser window.

Note: The preceding information regarding taxes, tax credits and depreciation is meant to make the reader aware of these benefits, risks and potential expenses, and help avoid claims by aggressive salespeople. It is not tax advice, and the author is not a qualified tax professional. Please seek professional advice from a qualified tax advisor to check the applicability and eligibility before claiming any tax benefits or exemptions.

This is the sixth installment about the provisions found in the recently passed Stimulus Bill. Included is information about Solar Water Treatment Plants, Department of Interior Funding and Solar for the Military.


Solar Water Treatment Plants (Enhanced funding for existing State programs)
Summary
Provides $6 billion for the State and Tribal Assistance Grants account ($4 billion for the Clean Water State Revolving Funds and $2 billion for the Drinking Water State Revolving Funds). To ensure that the funds are used immediately to create jobs, the money must be committed to projects under contract or construction within 12 months of the date of enactment. The bill requires that not less than 20 percent of each Revolving Fund be available for projects to address green infrastructure, water and/or energy efficiency, or other environmentally innovative technologies. The bill allows States to use less than 20 percent for these types of projects only if the States lack sufficient applications.

How to Take Advantage of This Funding
These projects will be announced based on an open-bid RFP. Please check with your municipal or state government for solar project opportunities through this program



Department of Interior Funding (Agency specific appropriations)
Summary
Appropriates $125 million to BLM for the management of lands and resources and suggests funds be used for renewable energy rights-of-way and related permitting projects. Allocation of these funds and expediting and enhancing the processing of renewable energy projects right-of-ways and related permit applications is anticipated.

How to Take Advantage of This Funding
These projects will be announced based on an open-bid RFP. RFPs will be listed on a website and search engines can be set up to help to track new business opportunities and RFPs as they come out.



Solar for the Military (Agency specific appropriations)
Summary
Appropriates $300 million for DOD research, development, testing and evaluation of projects to improve energy generation, transmission, and energy efficiency. Appropriates an additional $100 million for Navy and Marine Corps facilities, and further specifies that funds are for energy efficiency and alternative energy projects.

How to Take Advantage of This Funding
These projects will be announced based on an open-bid RFP.

This is the sixth installment about the provisions found in the recently passed Stimulus Bill. Included is information about Solar for Schools and Green Collar Jobs.

Solar for Schools (Enhanced funding for existing State programs)
Summary
Appropriates $53.6 billion to a state fiscal stabilization fund. Specifies that states shall use 18.2% of this money ($9.75 billion) for public safety and other government services, including the renovation of facilities and schools to meet green building standards. Solar energy projects qualify and schools can use money to install renewable energy generation and heating systems, including PV.

How to Take Advantage of This Funding
Please check with your municipal government or local school district for solar project opportunities through this program.

Green Collar Jobs (Enhanced funding for existing State programs)
Summary
Appropriates $500 million to fund job training programs in energy efficiency and renewable energy. Also appropriates $250 million for rehabilitation and construction projects on Job Corps Centers, including energy efficiency and renewable energy projects. Job Corps has 122 centers in 48 states; new centers are slated to open in the two remaining states, New Hampshire and Wyoming. Map of locations.

The solar industry in certain states is likely to be affected by an increase in regulations to use certified installers and electricians as local unions have begun to put pressure on governments for more stringent requirements and job classifications.

How to Take Advantage of This Funding
Agency guidance will be provided by the Department of Labor within 60-90 days. Check the DOL website periodically for updates.

Green Jobs Training: http://www.cnn.com/2009/LIVING/03/02/green.jobs.training/index.html?iref=newssearch

This is the fourth installment about the provisions found in the recently passed Stimulus Bill. Included is information about Solar on Federal Property, Clean Renewable Energy Bonds and Qualified Energy Conservation Bonds.

Solar on Federal Property (federal guidance pending)
Summary
Appropriates $5.5 billion to be deposited into the Federal Buildings Fund for expenditures to construct, repair and make alterations on federal buildings to increase energy efficiency, including installing solar energy equipment. $4.5 billion shall be available for measures necessary to convert General Services Administration (GSA) facilities to high-performance green buildings. Appropriates $1 billion for non-recurring maintenance on Veterans Affairs facilities, including energy projects.



How to Take Advantage of This Funding
GSA must submit a plan to Congress within 45 days, detailing, by project, how funding will be used. GSA is currently reviewing hundreds of projects currently in the agency’s backlog. Projects will be evaluated based on how fast GSA can create jobs and how much added energy efficiency and sustainability can be gained from projects ready for construction awards within two years. The GSA will be considering hiring contractors for various projects with likely priority given to female and minority owned businesses. Once details are determined, they will be posted online. Secretary of Veterans Affairs must submit a plan to Congress with 30 days detailing how funding will be used. Any State may apply directly to the Department of Veterans Affairs for grants for construction of state-owned veterans home facilities. Pre-application is due by April 15 for all projects. State assurance of matching funds is due by August 15 to receive priority status.



Clean Renewable Energy Bonds (CREBs) (Enhanced funding for existing State programs)
Summary
Provides an additional $1.6 billion for new clean renewable energy bonds to finance facilities that generate electricity from renewable energy sources including solar facilities.



How to Take Advantage of This Funding
This is intended for governmental agencies since they cannot take advantage of the ITC. In a CREB financing, the holder of the debt instrument receives a federal tax credit in lieu of interest paid by the issuer. Thus, CREBs provide an issuer with the ability to borrow at a 0% interest rate. Small projects are given first priority. Dept of Treasury sets tax credit rate on a daily basis. Tax credits are made on a quarterly basis. Please coordinate with your municipal government on CREB projects. More information can be found at the CREBs website.



Qualified Energy Conservation Bonds (Enhanced funding for existing State programs)
Summary
Authorizes an additional $2.4 billion, up from $800 million, in bonds to finance State, municipal and tribal government programs to reduce greenhouse gas emissions. These bonds can be used by government agencies to reduce energy consumption in publicly-owned buildings by at least 20 percent, implement green community programs, or develop electricity from renewable energy resources. Demonstration projects that reduce peak electrical use also qualify. Public education campaigns to promote energy efficiency can also be funded.



How to Take Advantage of This Funding
Please check with your municipal government for solar project opportunities through this program

This is the third installment about the provisions found in the recently passed Stimulus Bill. Included is information about State Funding.

State Funding (Enhanced funding for existing State programs)
Summary
Appropriates $16.8 billion to DOE’s Office of Energy Efficiency and Renewable Energy, which will be distributed to the States. Provides $3.1 billion for State Energy Programs. This funding will most likely become available first and so this should be a priority for contractors and developers. How the funding is spent is at the discretion of the state energy offices and the Governor. Certain states will also be subject to legislative approval. The majority of the funding will be used for energy efficiency and renewable energy.

For example, New Jersey will most likely use most of the funding for residential and commercial solar installations. Other states will choose to use the majority for energy efficiency, however, complimentary efficiency and solar retrofitting opportunities are well suited.

The total amount also includes $3.2 billion for Conservation Block Grants. First-year funding for these Grants can be used to develop a “proposed energy and conservation strategy” that each local government must submit to Department of Energy without one year of receiving initial allocation. DOE must approve or disapprove it within 120 days.

Additional funding is contingent on plan approval. DOE funding also includes $5.0 billion for Weatherization Programs and $2.0 billion for batteries and storage.

How to Take Advantage of This Funding
In order to take advantage of the State Energy Program funding you should contact your existing solar program manager or the state energy office for more information. DOE guidelines for these programs were released March 12, and we suggest you contact the energy offices now to be prepared for the application process and to get any preliminary details. To be eligible for projects under the Conservation Block Grants program, coordinate with your local government. See Appendix A at the end of this document for funding that will go to each state.

Click on the links below for additional information on each state program:
California

Colorado

Other States

More California Links
Questions about Stimulus Funding
League of California Cities
California State Association of Counties

Federal links
Department of Energy
DOE Energy Efficiency and Renewable Energy



State Energy Program Funding
The following details funding that will go to each state.
State Funding
Alabama ..................... $55,570,000
Alaska ......................... $28,232,000
Arizona ....................... $55,447,000
Arkansas ..................... $39,416,000
California ..................... $226,093,000
Colorado ...................... $49,222,000
Connecticut ................. $38,542,000
Delaware ..................... $24,231,000
District of Columbia ... $22,022,000
Florida ......................... $126,089,000
Georgia ....................... $82,495,000
Hawaii ......................... $25,930,000
Idaho ........................... $28,572,000
Illinois .......................... $101,321,000
Indiana ......................... $68,621,000
Iowa ............................. $40,546,000
Kansas ......................... $38,284,000
Kentucky ..................... $52,533,000
Louisiana ..................... $71,694,000
Maine ........................... $27,305,000
Maryland ..................... $51,772,000
Massachusetts ............ $54,911,000
Michigan ...................... $82,035,000
Minnesota .................... $54,172,000
Mississippi ................... $40,418,000
Missouri ....................... $57,393,000
Montana ....................... $25,855,000
Nebraska ..................... $30,910,000
Nevada ......................... $34,714,000
New Hampshire .......... $25,827,000
New Jersey ................. $73,643,000
New Mexico ................. $31,821,000
New York ..................... $123,110,000
North Carolina ............. $75,989,000
North Dakota ............... $24,585,000
Ohio ............................... $96,083,000
Oklahoma ...................... $46,704,000
Oregon ........................... $42,182,000
Pennsylvania ................. $99,684,000
Rhode Island .................. $23,960,000
South Carolina ............... $50,550,000
South Dakota ................. $23,709,000
Tennessee ...................... $62,482,000
Texas .............................. $218,782,000
Utah ................................ $35,362,000
Vermont ......................... $21,999,000
Virginia ........................... $70,001,000
Washington .................... $60,944,000
West Virginia ................. $32,746,000
Wisconsin ....................... $55,488,000
Wyoming ........................ $24,941,000
American Samoa ........... $18,550,000
Guam .............................. $19,098,000
Northern Marianas ....... $18,651,000
Puerto Rico ..................... $37,086,000
Virgin Islands ................. $20,678,000
Total $3,069,000,000

This is the second installment about the provisions found in the recently passed Stimulus Bill. Included is information about Grants and the Loan Guarantee Program.

Grants (federal guidance pending)
Summary
Creates a new program through the Department of Treasury that provides grants equal to 30 percent of the cost of solar property placed in service during 2009 and 2010, in lieu of the section 48 investment tax credit.

The 30% will be calculated on the same "tax basis" that would have been used to calculate any investment tax credit. The section 48 credit applies to commercial and utility-scale projects only, not residential projects.

Property that is not placed in service prior to December 31, 2010 qualifies for the grant program as long as construction begins prior to December 31, 2010 and is placed in service by January 1, 2017.

Congress stated that it intends the grants to "mimic the operation" of the investment tax credit. Therefore unless the Treasury says otherwise, developers can assume that the same rules will apply to grants that would have applied to the investment credit. So the grants will be paid to the same person who would have claimed an investment tax credit on the project.

For example, if the project is owned by a partnership, the partnership is the entity entitled to the grant. Anyone receiving a grant will have to file quarterly reports with the Treasury on how the money was used and estimate the number of jobs created or retained. The grants do not have to be reported as income by the recipients.

How to Take Advantage of This Funding
Applications will be provided by the Treasury Department within the next 30-60 days. Applications must be filed by October 1, 2011. A developer can apply for a cash grant at any time, but the Treasury has up to 60 days after the application is submitted or the project is placed in service to pay the grant, whichever is later. To date, no administrator within Treasury has been assigned to this, however, Sharp is working with SEIA and others to propose a structure and process to implement these grants quickly.

Loan Guarantee Program (federal guidance pending)
Summary
Establishes a temporary Department of Energy (DOE) loan guarantee program for renewable energy projects, renewable energy manufacturing facilities and electric power transmission projects. Appropriates $6 billion to pay the credit subsidy costs, which should support $60 billion worth of loan guarantees.

Eligible renewable projects are those that generate electricity or thermal energy and facilities that manufacture related components. Projects must commence construction by September 30, 2011. Davis-Bacon wage requirements (prevailing federal wage) apply to any project receiving a loan guarantee.

How to Take Advantage of This Funding
The DOE will announce a solicitation for loan guarantee applications after they submit guidelines in approximately 30 days. The application process will closely resemble the current DOE Loan Guarantee Program process.

The Secretary of Energy stated this week that they are streamlining the program and they plan to start approving loan guarantee applications by late April/early May. It usually takes them about 1 year to create a program, so getting the program up and running in 60 days is very fast. They will use an expedited application approval process, so it will probably take 2-4 weeks to approve after the application is received.

Since the Energy Secretary would like to start approving applications in April/May, they would need to have an application available in about a month. We believe this timeline is realistic since the loan guarantee infrastructure is already in place.

Tax Provisions


Repeals Penalty for Subsidized Energy Financing

Allows businesses and individuals to qualify for the full amount of the solar tax credit, even if projects receive subsidized energy financing (e.g. below market loans, tax preferred bonds, state grants etc.). This amendment shall apply to periods after Dec. 31, 2008.



Extends Bonus Depreciation

Last year, Congress temporarily increased the amount (50% of the cost of capital investment) that businesses could write-off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The bill would extend these temporary increases for capital expenditures incurred in 2009. Accordingly, until the end of 2010, business taxpayers are allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed $500,000 (indexed for inflation).



5-Year Carryback of Net Operating Losses

For tax years 2008 and 2009, extends the maximum carryback period for net operating losses from two years to five years. Eligible small business may elect to increase the carryback period for an applicable 2008 NOL from two years to any whole number of years elected by the taxpayer that is more than two and less than six. An eligible small business is defined as a taxpayer meeting a $15,000,000 gross receipts test. (see Sec. 448(c)) An applicable NOL is the taxpayer's NOL for any taxable year ending in 2008, or if elected by the taxpayer, the NOL for any taxable year beginning in 2008. However, any election under this provision may be made only with respect to one taxable year.



Remedy for AMT and R&D Credits in Lieu of Bonus Depreciation

Where a taxpayer is in a loss position, deductions in excess of income are unable to enjoy the benefit of bonus depreciation. This provision extends the allowance in the Foreclosure Prevention Act of 2008 that permits AMT and loss taxpayers to receive 20% of the value of their old AMT or R&D credits to the extent such taxpayers invest in assets that qualify for bonus depreciation. The amount is capped at the lesser of 6% of outstanding and unused AMT and R&D credits or $30 million. The extension of the additional first-year depreciation deduction is generally effective for property placed in service after December 31, 2008. The extension of the election to accelerate AMT and research credits in lieu of bonus depreciation is effective for taxable years ending after December 31, 2008.

On February 17, President Obama signed HR 1, The American Recovery and Reinvestment Act (a.k.a. the Stimulus Bill). The bill contains 19 provisions that help grow markets, finance projects, expand manufacturing, access federal lands, build transmission lines, increase research and development, train workers, and reduce the tax burden for solar companies. Combined, solar has access to over $25 billion in government funded construction projects, illustrating the President’s commitment to renewable energy and his specific interest in promoting solar technologies. This summary outlines how your business can take advantage of these funds in the most timely and efficient way. Below you will find the 15 provisions that most directly affect your business based on four categories:

1. Federal guidance pending: Agency guidance in the next 60 to 90 days.
   
2. Enhanced funding for existing State programs: Federal funds will be directed to States for distribution. State agencies will provide access to funds.
   
3. Agency specific appropriations: Funds directed to specific agencies for programs or projects that are most likely already in the pipeline.
   
4. Tax code provision: Effective upon enactment unless noted otherwise.

The provisions include (solar is eligible for a portion of this funding):

• Grants in lieu of 30% ITC
  
• Loan Guarantees - $6 billion should support $60 billion worth of loan guarantees


• State Funding - $16.8 billion including $3.1 billion for state energy programs
  
• Solar on Federal Property - $5.5 billion


• Clean Renewable Energy Bonds (CREBs) – an additional $1.6 billion


• Qualified Energy Conservation Bonds - $2.4 billion
• Solar for Schools - $9.75 billion


• Green Collar Jobs - $500 million
  
• Solar Water Treatment Plants - $6 billion
  
• Department of Interior Funding - $125 million


• Solar for the Military - $400 million
  
• Tax Provisions:
  1) Repeals Penalty for Subsidized Energy Financing 2) Extends Bonus Depreciation 3) 5-Year Carryback of Net Operating Losses 4) Remedy for AMT and R&D Credits in Lieu of Bonus Depreciation
  

A summary of each of these provisions and information about how you can take advantage of this funding will be presented in future blogs.

Power Purchase Agreements
A solar Power Purchase Agreement (PPA) is an alternative to financing and owning a system. It provides the opportunity to install solar without the upfront costs or system operation and maintenance. Typical agreements range from 15-25 years, allowing the user the benefit of pre-set electricity prices.

Benefits

• No upfront cost for solar



• No capital investment, balance sheet debt, operating responsibilities



• Pre-determined electricity rates for contract terms of 15-25 years



• Places emphasis on ensuring maximum productivity of solar purchase



• Customer purchases only what they need



• Continued system monitoring and maintenance by solar professionals



• Option to purchase the system at fair market value after set time period

Challenges

• Complex negotiations and possibly higher transaction costs than buying system outright



• Ongoing administrative costs of paying separate electricity invoice and allowing access to equipment by maintenance personnel



• Customer may be contractually prohibited from making changes to property that could affect the solar production

PPA Structure
Determined in advance, the host customer does not own the solar system, but by the PPA provider, who as a utility, sells electricity at a negotiated rate matrix. This rate can be fixed for the duration of the contract; it may have a known escalator; or it can vary as keyed to the local utility or another benchmark. There are a number of other factors that will drive this model, including available incentives, rebates, REC programs, but like all structures, it needs to react to the needs of the individual customer.

Basic Parameters to a PPA project

• Commercial, Municipal, Industrial customers using large amounts of electricity, generally more than 150,000kWh annually



• Control of property



• Demonstrate credit-worthiness



• Offer a minimum of 10,000 square feet of usable space, preferably flat



• Located in an area with pro-solar policies and incentives

Learn More
PPAs offers a wide range of customers the opportunity to buy only the solar power they use, and at a known rate for a set period of time. To learn more about PPAs and possible options for your customers, please contact us at 866-208-5041 or solar@gosunsolar.com.

FAQs on Leasing

Q: What’s the difference between a loan and a lease?
A: Generally, the equipment being financed is the only collateral on a lease. That may notbe the case with a loan, where the lender, say the customer’s bank, may put a lien onsome or many of the borrower’s other assets. Sometimes a bank will even put a “blanket” lien on all the customer’s assets—cash, accounts receivable, inventory, other equipment, etc. Also, a lease will have fixed payments over a fixed term of so many months or years. A loan can be either fixed-term or could be “revolving” like a line of credit, and may have “floating” rates or adjustable payments.

Q: What’s the difference between a Non-Tax/Capital Lease and a Tax/True Lease? A: The difference lies in the ownership of the system, and the tax and accounting treatments that result.

In the Non-Tax/Capital Lease, the customer (lessee) owns the equipment and uses the tax credit, accelerated depreciation and write off of interest paid.

In the Tax/True Lease, the Lender (lessor) owns the equipment and receives the tax benefits. In this case, the customer will indirectly get those benefits through lease payments that are much lower than those in a loan or Non-Tax Lease.

Q: Which lease works best for most customers?
A: Overwhelming, the Tax/True Lease works best for most “for-profit” enterprises because many businesses, even though profitable, can’t make full use of the tax benefits! With the Tax/True Lease, they can still get the benefit—indirectly, through lower payments. Also, the Tax/True Lease can be used for those customers who can use the tax benefits, but may prefer the True Lease because it’s simpler to predict resulting cash flow and savings.

Even during these trying financial times, you can still go solar. And better yet, you can afford it. For both residential and commercial systems, leasing offers a great alternative to purchasing your solar electric system outright.

Why Leasing?
Commercial leasing is the smart way to acquire equipment and make your energy project a reality. For those new to leasing, the rule of thumb is: Buy what appreciates, lease what depreciates. Leasing provides the opportunity to not only go green, but do so in a way that is beneficial to your bottom line.

• Control Your Business
  With leasing, only the equipment is used as collateral. This allows your business to avoid liens on property and the financial restrictions that banks might require.


• Preserve Working Capital
  With conventional borrowing, more upfront money, plus a significant down payment may be required. This constrains your working capital and prevents the flexibility offered by leasing.
  
• Provides Fixed Payment
  With commercial leasing, you will know your payment over the lease term, allowing for more accurate forecasting and easier budgeting for monthly expenses.
  
• Hedge Against Inflation
  When you lease equipment, you pay for it as you use it. When you purchase with cash, you pay in current dollars for future use of the equipment


• Tax Advantages
  Leasing can lessen the burden that taxes have on your company’s wallet. Depending on how the lease is structured, you may be able to fully deduct lease payments as business expenses, as opposed to depreciating the value of the equipment as if it were an asset.

Sun Solar recommends you consult with your financial adviser to determine what the best arrangement is for your company’s unique financial position. If your interested in leasing your solar electric system, give us a call at 866-208-5041 or 847-810-0136.

Non-Tax Lease/Capital Lease
The most commonly used program in which the customer owns the system, uses the tax credit and accelerated depreciation; the term, or length, is usually 5 to 15 years, then customer buys system for a fixed predetermined amount, usually $1.00 to 20% of system cost.

Lease payments will be much higher than projected cost savings produced by the system, but solar incentives can be used by customer to make up the difference in overall cash flow. In this respect, and for tax and accounting purposes, the Non-Tax Lease is very similar to a bank loan.
Business owners who acquire equipment for their business: Photovoltaic Systems, HVAC, machinery and other tangible goods, usually prefer to deduct the cost in a single tax year, rather than a little at a time over a number of years. This deduction is known by its section in the tax code, a Section 179 deduction.

Benefits of a Non-Tax/Capital Lease
The benefit of a Non-Tax/Capital Lease is that it can take advantage of Section 179: Under Section 179, businesses that spend less than $450,000 a year on qualified equipment, can write off up to $112,000 in 2007 ($125,000 in 2008). The rules are designed for small companies, so the $112,000 deduction phases out when a business purchases more than $450,000 in one year. (Companies cannot write off more than their taxable income).

In addition, you may depreciate any excess on the depreciation schedule for that asset. Examples of Non-Tax/Capital Leases include a $1.00 Buyout Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease. Example Calculation: Assume you finance $125,000 worth of business equipment, put it in use in 2007, and take advantage of Section 179. Your tax savings could be significant.

Example:

• Equipment Cost - $125,000
• 1st Year Write Off: $112,000 ($112,000 is the maximum Section 179 write-off in 2007
• Normal 1st Year Depreciation: $2,600 ($125,000-$112,000 = $13,000 x 20% = $2,600
• **Depreciation calculated at 5 years = 20%
• Total 1st Year Deduction: $114,600 ($112,00+ $2,600 = $114,600)
• Tax Savings Assuming Rate of 35%: $40,110 ($114,600 x .35 = $40,110)
• 1st Year Savings / Lowered Equipment Cost: $84,890($125,000 - $40,110 = $84,890)
  

The above example shows how taking advantage of Section 179 can significantly lower the true cost of equipment ownership from $125,000 to $84,890. For the specific impact to your company, please contact your tax advisor. Note: For complete details, or changes to the tax incentives, please visit www.irs.gov or contact the IRS helpline at: 800-829-4933


Tax Code Section 179 & Election to Expense Detail
The election, which is made on Form 4562, is for the tax year the property was placed in service or an amended return filed within the time prescribed by law. The total cost of property that may be expensed for any tax year cannot exceed the total amount of taxable income during the tax year. Section 179 property is property that you acquire by purchase for use in the active conduct of your business. To ensure property qualifies, reference Publication 946.

This expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property as an expense rather than a capital expenditure. Under Section 179, equipment purchases, up to the amount approved for a given year, can be expensed (deducted from taxable income) if installed by December 31st. Non-Tax leases qualify for this deduction in their year of inception. Any excess above the expensed amount can be depreciated depending on the equipment type. Not all states follow federal law. Contact your tax adviser for further detail or visit http://www.irs.gov/for specific detail.

Tax Lease/True Lease
Tax/True Lease Lender owns the system and receives the tax benefits. The customer enjoys greatly reduced monthly payments as a result—often at or below the cost savings of the system, so customer has net savings with solar. Term is usually 5 to 15 years; customer buys system at end for the greater of:A) a stated percentage of original cost, usually 10% to 20%, orB) its then Fair Market Value (FMV), which we define as its value to another

For tax purposes, the customer can write off the lease payments and reduce taxes. Accounting-wise, the true lease may qualify as an “off-Balance Sheet” financing transaction.

Benefits of a Tax/True Lease
If a lease is a Tax Lease/True Lease, the lessor retains ownership and you, as the lessee, may be allowed to claim the entire amount of the monthly investment as a tax deduction. Many rental contracts qualify as a true lease including a 10% Option and a Fair Market Value Lease.

Example Calculation: Assume that you have a Tax/True Lease with a $1,000 monthly payment – check out the tax savings that may be available:

• Monthly investment = $ 1,000
• Finance Term = 36 months
• Tax bracket = 35%
• Monthly tax savings = $1,000 x .35 = $350.00
• Total tax savings over the term of the contract = $12,600.00
  

Reminder: To take advantage of the current year tax incentives, your business equipment must be put in use by year-end. Each company should contact their tax adviser to learn about the specific impact to your business.

Which approach to use will depend on many factors, but the most important will be thecustomer’s ability to use the federal tax credit and the accelerated depreciation: few if any PV systems will make economic sense if these tax benefits are not used in the mostefficient manner. One of our goals is that everyone understands how the customer’sability - or inability - to use these benefits almost automatically makes the choice ofappropriate financing strategy.

Non-Profit Lease Programs (Non-Tax Lease)
The only choice for Non-Profit (501c) entities that desire to utilize leasing to obtain equipment. Most all equipment types are acceptable.

Municipal Lease (Tax Exempt Lease/Purchase)
Tax-Exempt Lease (aka “Muni” Lease) for government entities for terms of 10 to 25 years. Customer must be a tax-exempt government entity, or possibly a non-profit sponsored by one; customer owns the system, but cannot use the tax credit and accelerated depreciation because of tax exempt status.

This loss is mitigated by A) extremely low interest rates B) terms as long as 15, 20 or even 25 years, and C) higher rebates in California. Lower monthly payments result from a) and b), and net system price is reduced by c), all of which make the system more affordable.

With the increasing demand for services, public agencies have embraced tax-exempt leasing as an alternative means of acquiring needed equipment or upgrades.
Examples: State & Local Government Agencies, School Districts, Fire & Police Districts