Tax Equity Investment Partnerships
We work with our Tax Equity Investors and Companies to develop projects on timelines that meet their investment requirements for tax credits.
As the name suggests, tax equity investors receive valuable tax benefits. These include federal tax credits, such as the Investment Tax Credit (ITC) for renewable energy projects, and accelerated depreciation deductions. These benefits can significantly reduce the investor's tax liability. Tax equity investments often involve long-term contracts with stable cash flows, reducing some of the traditional risks associated with equity investments. Additionally, the structure of these deals often prioritizes the tax equity investor's return, providing a layer of protection.
Investment Tax Credits
Investment Tax Credits for PV Solar Projects
PV solar projects that begin construction in 2024, the ITC is 30% of the project’s qualified costs (e.g., panels, inverters, balance-of-system equipment, etc.). This rate is set to be in place through 2032, before gradually stepping down to 26% in 2033 and 22% in 2034, unless further legislation is enacted. Additional incremental tax credit is available for eligible projects based on domestic content, low income locations, and designated energy communities.
Bonus Accelerated Depreciation
Under MACRS, solar projects can depreciate the value of the system over a 5-year period, enabling investors to deduct a portion of the system's cost from their taxable income each year. Bonus Accelerated Depreciation is 40% for 2025 and will step down to 20% in 2026. This means tax equity investors can offset taxable income with large depreciation deductions in the early years of the project, potentially reducing their overall tax liability significantly.
