Generally, a renewable energy project cannot claim both the Investment Tax Credit (ITC) and the Production Tax Credit (PTC) simultaneously for the same facility. However, there are specific scenarios and considerations based on project characteristics and timing that might influence eligibility. Here are the primary eligibility criteria for each credit:
Investment Tax Credit (ITC)
- Eligibility: Available for solar, wind, geothermal, and other renewable energy systems. Energy storage technologies and certain microgrid components also qualify.
- Calculation: A one-time credit based on the total qualifying project cost. The current rate is 30% for projects meeting prevailing wage and apprenticeship requirements, or 6% for those that do not.
- Eligibility Period: Extended through 2032, with step-downs in subsequent years. Projects must be placed in service by the end of 2032 to qualify at full value.
- Geographic and Size Considerations: Eligible for projects located in the United States or its territories, using primarily new equipment. Projects under 1 MW AC are exempt from prevailing wage and apprenticeship requirements.
Production Tax Credit (PTC)
- Eligibility: Available for biomass, landfill gas, hydroelectric, marine and hydrokinetic renewable energy systems.
- Calculation: Based on the amount of electricity produced over a period, typically 10 years. The base rate varies depending on the technology and whether prevailing wage and apprenticeship requirements are met.
- Eligibility Period: Like the ITC, projects must be operational and generating electricity within a certain timeframe to claim the PTC.
Claiming Both Credits
Generally, a project can claim either the ITC or the PTC but not both for the same facility. The choice between credits depends on project specifics, such as production potential and upfront costs. Projects can be structured to claim one credit for part of the facility and another credit for a different part, but this typically requires separate facilities or components within the project.
Additional Considerations
- Project Definition: The IRS may consider multiple facilities as a single project if they meet certain criteria, such as shared infrastructure or common ownership.
- Excess Credits and Transfers: Tax-exempt entities can receive direct payments for credits, and eligible taxpayers can transfer credits to other parties.
In summary, while claiming both ITC and PTC for the same facility is not typically allowed, projects can be structured to optimize benefits by choosing the most advantageous credit based on their specific needs and characteristics.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-eligibility-criteria-for-claiming-both-itc-and-ptc-for-a-single-project/
