New California legislation would create a 30% tax credit with a direct pay option for qualifying mic
On April 14th 2021, California State Congressman Jimmy Panetta (D-Carmel Valley) introduced the Making Imperiled Communities Resistant to Outages with Generation that is Resilient, Islandable, and Distributed (MICROGRID) Act. The legislation incentivizes the expansion and deployment of microgrids to provide backup power during emergencies. The bill would create a 30% tax credit for a qualifying microgrid property through 2025, phasing down to 10% by 2028 and sunsetting in 2029 to incentivize the expansion and deployment of microgrids at the local level. The credit can be taken by governments and non-profits as a direct payment, helping communities take advantage of the credit.
Now you must be wondering what is a tax credit?
A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. It is the amount of money that taxpayers can subtract directly from taxes owed to their government. Unlike deductions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed.
For example, claiming a $1,000 federal tax credit reduces your federal income taxes due by $1,000.
What is the federal solar tax credit?
The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system.2 Other types of renewable energy are also eligible for similar credits but are beyond the scope of this guidance. Your solar PV system must be installed before December 31, 2019, to claim a 30% credit. which will decrease to 26% for systems
installed in 2020 and to 22% for systems installed in 2021.Moreover, the tax credit expires starting in 2022 unless Congress renews it.
How to know if you are eligible for federal solar tax credit?
Your solar PV system was installed between January 1, 2006, and December 31, 2021.
The solar PV system is located at your primary or secondary residence in the United States, or for an off-site community solar project, if the electricity generated is credited against, and does not exceed, your home’s electricity consumption.
You own the solar PV system i.e., you purchased it with cash or through financing but you are neither leasing nor are in an arrangement to purchase electricity generated by a system you do not own.
The solar PV system is new or being used for the first time. The credit can only be claimed on the “original installation” of the solar equipment.
Definitely a step in the right direction by offering a higher tax credit percentage, not only gives microgrid properties, an opportunity to take advantage of this, but also its ability to offer to the home owners. Especially since the future goals are to harness more from clean energy sources.
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