The Modified Accelerated Cost Recovery System (MACRS), established in 1986, is a method of depreciation in which a Business’ investments in certain tangible property are recovered, for tax purposes, over a specified time period through annual deductions. In addition to the 30% Federal Income Tax, qualifying Solar Energy Equipment is eligible for a cost recovery period of Five Years! The Feds allow Businesses to depreciate 85% of the Gross Cost of their Solar System over a five year period.
85% of Gross Cost = $85,000 that can be depreciated over the next five years,
even though the Net Cost of the System was only $70,000!
Many State Governments also offer tax credits. These vary by state and can be identified on the Database of State Incentives for Renewables and Efficiency: http://www.dsireusa.org
Installing a Solar System on your property will increase the property value by up to 20 times the annual electricity bill savings. The more proactive States have passed legislation that allows the increase in property value to be Exempt from Property Taxes.
The more proactive States also allow the purchase of the Solar System to be Exempt from Sales Tax. With the average State Sales Tax being around 6%, this means $6,000 in Savings on a $100,000 Solar System.
Incentives will not last forever! Many States and Utility Companies are already doing away with them. Most Rebate Programs have a budget. Once the budget is met, the program expires. Government Incentives may also soon be reduced, or become obsolete.
It’s necessary to act now to take advantage the incentives while they are available!
If your state doesn’t offer a State Income Tax Credit, it may require utility companies operating within the state to offer a rebate program. Rebate programs vary widely and are not available everywhere. The Database of State Incentives for Renewable and Efficiency is the most up-to-date resource for identifying what rebates are available in your area: www.dsireusa.com
In order to take advantage of the Rebate Programs, and the State and Federal Tax Credits, the Consumer must purchase and own the system. VORP Energy provides multiple Financing options to allow Commercial Property owners to take advantage of the available incentives, which significantly reduces ROI time (Return on Investment) for installing a Solar System.
In an effort to make it easy for Consumers to install Solar Systems, many states allow Solar Leasing. With this option the Consumer does not own the system and cannot take advantage of any Government Incentives or Rebate Programs. However, this option allows the Consumer to install a Solar System with no money out of pocket and experience immediate savings. This is a viable option for a Commercial Property Owner who does not want a monthly loan payment.
The Consumer agrees to Lease the system from the Provider, and allows the Provider to install the system on their property. The Provider maintains ownership of the system and takes advantage of the incentives available. The Consumer makes a monthly Lease Payment to the Provider. Because the Solar System is sending power to the Grid, it reduces the Consumer’s Power Bill. The Consumer now has two payments to make. The monthly Lease Payment and the reduced Electric Bill. The combined payments will be lower than the original bill from the Utility Company.
A Power Purchase Agreement is similar to a Lease option in the sense that Consumers can install a Solar System with no money out of pocket. The Provider installs the system and maintains ownership. The Consumer agrees to purchase the power that the system generates on a monthly basis. Rather than making a Lease Payment for the system, the Consumer is paying for the power generated by the system. Lease Agreements and Power Purchase Agreements are both fully transferable to the new property. owner should the Consumer sell the property. If the Solar System generates more power than is used in a month, the Utility Bill will reflect the credit (depending on the State).
“Net Metering” is a billing mechanism that credits Solar System owners for the Electricity being added to the Grid. As Electricity is drawn from the Grid, it passes through a Meter and is measured for billing purposes. During daylight hours, the Solar System pushes excess Electricity onto the Grid, where it is stored (in the form of credits). In the evenings, as Electricity is drawn from the Grid, in essence the “stored” Energy (credits) is used first. The Consumer pays the difference between the Electricity used, and the Electricity that was generated by the Solar System. Unused credits can roll over to the next billing cycle. Some of the more proactive States have passed Legislation requiring Utility Companies to compensate Consumers for unused credits on an annual basis.
Legislation governing Interconnection Standards vary by State.