The Investment Tax Credit (ITC) benefits small-scale and large-scale projects differently, primarily through the application of bonus credits and labor requirements. Here are the main differences:
Key Differences for Small-Scale Projects
- Exemption from Prevailing Wage and Apprenticeship Requirements: Small-scale projects with a maximum net output of less than one megawatt of electrical energy (or thermal energy for energy storage) are exempt from meeting prevailing wage and apprenticeship requirements (PWA), allowing them to claim the full credit without these additional conditions.
- Bonus Credits for Low-Income Communities: Small-scale projects (under 5 MW) in low-income communities or on Indian land are eligible for additional bonuses, such as a 10% bonus credit. Projects classified as “qualified low-income residential or economic benefit projects” can receive a 20% bonus credit.
- Simplified Process: Small-scale projects typically have fewer bureaucratic hurdles, making it easier for them to claim the credit without complex compliance procedures.
Key Differences for Large-Scale Projects
- Requirement to Meet Labor Standards: Large-scale projects must meet prevailing wage and apprenticeship requirements to receive the full 30% ITC. If these requirements are not met, the credit drops to 6%.
- Access to More Bonus Credits: While all projects can apply for bonus credits like the Domestic Content Bonus and Energy Community Bonus, large-scale projects may require more stringent compliance with these criteria to maximize benefits.
- Compliance and Documentation: Large-scale projects require detailed documentation and compliance with numerous regulations, which can increase administrative costs but also offer opportunities for significant tax savings if all requirements are met.
In summary, small-scale projects benefit from exemptions that simplify the process, while large-scale projects require more compliance but can achieve higher savings through additional bonuses.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-itc-benefit-small-scale-projects-differently-than-large-scale-projects/
