1. Qualifying for Enhanced Tax Credits
- Prevailing Wages and Apprenticeship Requirements: Ensure that projects meet prevailing wage and apprenticeship requirements to increase the Investment Tax Credit (ITC) from 6% to 30% of the qualifying investment.
- Domestic Content Requirements: Projects that use domestically manufactured components can qualify for an additional 10% increase in tax credits.
- Energy Community Location: Projects located in energy communities may also qualify for an additional 10% increase.
2. Monetizing Tax Credits
- Transferability: Sell tax credits to unrelated buyers in a tax-free transaction to monetize the credits, which is particularly attractive for energy storage projects where complex offtake agreements may deter tax equity investors.
- Direct Pay Elections: Tax-exempt entities can opt for direct payments instead of tax credits, which can be beneficial for entities that cannot utilize tax credits themselves.
3. Project Structuring and Timing
- Standalone vs. Co-Located Projects: Take advantage of recent changes allowing standalone energy storage projects to qualify for tax credits without needing to co-locate with generation facilities.
- Early Planning and Execution: Ensure projects are planned and executed well in advance to meet application deadlines and maximize available credits, especially for programs with limited funds like the Maryland Energy Storage Tax Credit.
4. Tax Strategy Integration
- Combining Incentives: Leverage both federal and state incentives to maximize savings, especially where state programs are being redesigned or have specific requirements, such as Maryland.
- Fiscal Planning: Incorporate tax credits into broader financial planning strategies to optimize budgeting and forecasting for projects.
By combining these strategies, businesses can effectively maximize their tax benefits for energy storage projects while supporting broader sustainability goals.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-strategies-can-businesses-use-to-maximize-their-tax-credits-for-energy-storage-projects/
