Public Policy and Tax Incentives - Renewable Energy Tax Credits and other 2009 Renewable Energy Laws
Tax Credits
North Carolina’s public policy has for more than 10 years included the allowance of tax credits for investing in renewable energy property, and the General Assembly in the past legislative session (2009) extended the credit and added to the definitions of “renewable energy property” to include geothermal heat pumps and other geothermal equipment.
The General Assembly extended the sunset provision that would have permitted the renewable energy tax credit to have expired on January 1, 2011. The new sunset date is January 1, 2016, and the 2009 changes also added the geothermal equipment to the definition of renewable energy property in House Bill 512 (Session Law 2009-548), amending Sections 105-129.15, 105-129.16A, and 105-129.17 of the North Carolina General Statutes.
Renewable energy property eligible for the credit is “machinery, equipment or real property” including biomass equipment and “related devices for converting, conditioning and storing the liquid fuels, gas, and electricity produced with biomass equipment,” hydroelectric generators and related devices solar energy equipment and related devices, solar energy equipment and related devices, wind equipment and related devices, geothermal heat pumps and other geothermal equipment that uses the internal heat of the earth as a substitute for traditional energy for water heating or active space heating and cooling.”
The tax credit is available to the North Carolina taxpayers that construct, purchase, or lease renewable energy property placed in service in this State during the taxable year. The credit is 35% of the cost of the property. For renewable energy property serving a single-family dwelling, the credit must be taken in the year in which the property is placed in service. For all other renewable energy property, the entire tax credit may not be taken in the placed in service year, but must be taken in five equal installments beginning with the taxable year in which the property is placed in service.
The tax credit is subject to expiration if the non-residential property with respect to which the credit is claimed is no longer owned and is disposed of by the taxpayer, or if the property is taken out of service during any of the remaining credit period years. In these events, the credit expires, and the taxpayer may not take any remaining installment, except that a portion of an installment that accrued in a previous year and was carried forward may be taken to the extent permitted under Section 105-129.17.
State tax credits are subject to certain ceilings in the tax law. Federal tax credits are also available. We’ll discuss federal credits in a separate article.