The Investment Tax Credit (ITC) is a powerful federal policy mechanism that has been instrumental in driving the growth of renewable energy, particularly solar energy, in the United States. It is a dollar-for-dollar credit for expenses invested in renewable energy properties, such as solar developments. The ITC has enabled the solar industry to expand more than 200-fold, creating hundreds of thousands of jobs and investing billions of dollars in the country. In general, large scale photovoltaic projects located in sunny areas will receive more value if they opt for the Production Tax Credit (PTC).
On the other hand, projects located in less sunny areas, that incur high installation costs or that qualify for tax rebates, are more likely to benefit from the ITC. The Solar Energy Industries Association (SEIA) has also fought for the successful passage of many other important tax measures in the Internal Revenue Act (IRA), such as adding energy storage to the ITC, creating tax credits for solar energy manufacturing and ensuring that interconnection costs are a qualifying expense for solar projects of less than 5 MWac. The ITC is currently a 30 percent federal tax credit that is requested against the tax liability of residential (under Section 25D) and commercial and utility investors (under Section 4) in solar energy properties. Projects that begin construction on or after January 1, 2025 are only eligible for the § 48E Clean Electricity Investment Tax Credit (which is only available for projects that are put into service after December 31, 2020).It is important to note that companies requesting the ITC must retain ownership of the system until the sixth year of operation of the system or will have to reimburse part of the tax credit.