To maximize tax credits for energy storage projects, businesses can follow these strategies:
1. Meet Prevailing Wage and Apprenticeship Requirements
- Increased Credit Rate: Ensure that your energy storage project meets prevailing wage and apprenticeship requirements to increase the tax credit from 6% to 30% of the qualified investment.
- Bonus Adders: Additional bonuses may apply, potentially boosting the total credit up to 50% of the project’s cost.
2. Use Transferability and Direct Pay Options
- Transferability: Sell tax credits to unrelated buyers for cash, providing businesses with upfront capital to fund projects or offset costs.
- Direct Pay: For eligible entities like tax-exempt organizations and local governments, opt for the direct pay election to receive tax credits as a refund, which can be particularly beneficial for entities with limited tax liability.
3. Ensure Eligibility for Additional Incentives
- Domestic Content Bonus: Projects meeting certain domestic content requirements can increase their credit by up to 10 percentage points.
- Location in Energy Communities: Receive up to a 10% bonus if the project is located in areas that have faced significant job loss due to coal mine or fossil fuel plant closures.
4. Standards for Energy Storage Projects
- Standalone Qualification: Recent IRS guidance allows energy storage projects to qualify for tax credits on a standalone basis, not just when co-located with renewable energy projects.
- Timing for Placing in Service (PIS): Ensure that the project is placed in service within the specified time frames for tax credits. The PIS date does not need to coincide with the first use of the facility.
5. Application and Filing Processes
- For credits like the Advanced Energy Project Credit, undergo the required multi-step application process with the Department of Energy approval.
- Use IRS Form 8936 for claiming certain commercial clean vehicle credits or other relevant forms for energy storage projects.
6. Leverage Offtake Agreements
- Energy storage projects have unique revenue streams due to unpredictable output, such as compensation for capacity and ancillary services. Tailor offtake agreements to monetize these benefits effectively.
By strategically utilizing these options, businesses can optimize their financial benefits from energy storage projects and support sustainable energy development.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-can-businesses-maximize-their-tax-credits-for-energy-storage-projects/
