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Clean Energy Investment Tax Credits
Reducing Carbon Emissions Through Clean Energy Programs

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Image by Science in HD
Image by Science in HD
A Stable Commodity

One constant during stock market ups and downs, economic cycles, seasonal changes and other uncertainties is the need for electricity.  Clean sustainable energy can reduce carbon emissions, but also capitalize on the byproducts of electricity production with commodities such as CO2, Distilled Water, Urea and more.

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Renewable energy is a fast-growing industry, with significant capital expenditures expected over the next several decades.
○  Today, renewables make up 17% of US capacity, but          are expected to make up:

               ○  25% in 2025       ○  64% in 2050

○  $5-10 Trillion of capital is required to meet future              projections for renewable energy capacity needs


○  37 states have current mandates or goals to increase          sustainable renewable power generation
Data provided by US Energy Information Administration, Bloomberg NEF
Renewable Power Plants

A renewable power plant provides supplemental electricity to utility providers who use that energy to reduce consumer prices.  Renewable energy companies align with utility providers under long term contracts; typically, between 15-25 years; called Power Purchase Agreements (PPAs).  These PPAs can provide a stable stream of cash flow.

Clean Energy Investment Tax Credits

Internal Revenue Code (IRC) Section 48 provides an investment tax credit (ITC) for certain energy-related investments.  The incentive was enacted in 1978 and has been substantially modified over time, however there is a permanent 10% ITC for solar and geothermal technologies.

Certain investments in renewable energy property qualify for an ITC.  The amount of the credit is determined as a percentage of the taxpayer’s basis in eligible property (generally, the cost of acquiring or constructing eligible property).  The tax credit rate and other credit parameters depend on the type of property or technology for which the credit is being claimed.

 

The Tax Cuts and Jobs Act increased the bonus depreciation percentage from 50 percent to 100 percent for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. This includes qualified CHP property and equipment with a life of less than 20 years.

 

Investors in an established LLC have a significant benefit in the ability to allocate profits, losses and ownership percentages, accordingly, to maximize the investor’s tax benefit in the joint venture.  The tax credits and bonus depreciation are subject to the recapture rules within the first five years of taking the benefit.