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NC state credits | Federal credits and loans | Other states' incentives

Get 35% off the cost of renewable energy equipment! Even more for commercial installations.

NC has the best tax credits in the U.S.
Here we present links and information that we hope will help you get details about them and file the paperwork. The best starting point is the NC Department of Revenue's Guidelines For Determining Tax Credit For Investing In Renewable Energy Property. [This link takes you to the guide in .html form. The guide and NC tax forms can also be had in .pdf format from the NC Solar Center's site.] This excellent document details the categories of installations and the maximum credits in each, and exactly which items of equipment qualify and which do not.

The DoR summarizes the credits thusly:

"...35% of the cost of renewable energy property constructed, purchased, or leased by a taxpayer and placed into service in this State during the taxable year. If the property serves a single-family dwelling, the credit is taken for the taxable year in which the property is placed in service. For all other property, the credit is taken in five equal installments beginning with the year the property is placed in service. The credit can be applied against franchise tax or income tax. Subsection (b) provides that the credit expires and any remaining installments of the credit may not be claimed if the property is disposed of, taken out of service, or moved out of the State during the five-year installment period. Subsection (c) imposes ceilings on the credit. For nonresidential property, the credit ceiling is $250,000 per installation. For residential property, the ceilings are:

The last category covers pool heating, photovoltaic, hydro, wind, biomass, and other electricity generating or non-heating uses.

If the credit serves a single-family dwelling it can be taken in one year or spread over as much as five years. If it does not serve a single-family dwelling it is taken over five equal installments beginning with the year the equipment went into service. Note that the credit maxima are per dwelling unit, so a six-unit apartment with solar water heating could be eligible for as much as $8400 credit.

How do you file for the credits?

Disclaimer: the following information has been gleaned from the tax forms and instructions published by the NC Department of Revenue. Our interpretation of those has not been reviewed by or endorsed by the Department of Revenue or a tax accountant.

 The forms you need (for residential or commercial) are:

  1. NC-478G "Investing in Renewable Energy Property". One NC-478G is filled out for each location. This is now available for download at the corporate forms page, or you can get one by calling the forms request number (919) 715-0397. Be prepared to ask for this form by number; the workers manning the telephones do not seem to know it exists. Once you get it, use the Guide (mentioned above) to determine the eligible cost(s) to enter and follow the form through to come up with the credit. This amount is next entered on...
  2. NC-478 "Summary of Tax Credits Limited to 50% of Tax", Part 1, Line 7. Here your credit is summed with other credits (such as for creating jobs, building low-income housing, etc.) and then compared to ensure the credit does not come to over 50 percent of your total tax liability, and how you will allocate the credit if it is to be spread over several years. Also enter on line 30 the total cost of the equipment for which credit is claimed.

    For individual taxpayers the result from NC-478, line 29 belongs on...

  3. D-400TC "Individual Tax Credits" Part 4, Line 25: "Miscellaneous Tax Credits". The instructions in the tax booklet (p. 14) now mention the renewable energy credit. Part 4 totals up on line 31, and this is entered on your basic tax form...
  4. D-400, line 14. This is the basic income tax form which comes in the tax booklet.

    For corporate taxpayers, the result from NC-478 goes onto CD-425 "Corporate Tax Credit Summary", line 21. The result from this form goes to either CD-401S (for S corporations), or CD-405 (for C corporations). Also the Federal tax credits section, below. You can get an additional 10% credit and more.

If you wish to request the forms be mailed to you instead of downloading and printing them the DoR form request web page is http://www.dor.state.nc.us/request/

In addition to applying for tax credits, we would appreciate it if you would register your system for inclusion in the Million Solar Roofs Initiative database. The data helps NCSEA and the Solar Center determine the effect of our efforts. You do not have to supply any personal identifying information. All you need to do is go to the Solar Center's web site and click on "Add an Installation" to fill out the form.

If you go to the Department of Revenue looking for information beyond what we list here, you may run into some difficulties. You can avoid pitfalls by keeping in mind that the credits were simplified and expanded several years ago to cover additional technologies, so they are now called "renewable energy" instead of "solar" tax credits. If you search the DoR web site for "solar" credits you will find outdated information.

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Investment Tax Credit for Solar Energy Property

The 10% investment Tax Credit for Businesses is permanently extended as part of EPAct 1992. Any commercial entity which invests in or purchases qualified solar energy property can take credit. Only commercial entities are eligible. The main applicable paperwork is IRS Form 3468. There are also Instructions for Form 3468. All you have to know about your renewable energy equipment is its cost, which is entered on line 2. For a sole proprietorship the tax credit comes back into Form 1040 on line 50; for corporations it goes onto Form 1120, Schedule J, line 6d; Form 1120-A, Part I, line 4a; Form 1041, Schedule G, line 2c; or the applicable line of your return. The Federal definition of energy property is: 1. Equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat or 2. Equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of (Schedule section 613(e)(2)).

Available to: Any commercial entity in all 50 states is eligible.
Eligible Technology: Photovoltaics, Solar Hot Water, and Energy Storage equipment

Investment Tax Credit Frequently Asked Questions:

Q. Are there limitations on the amount of credit I can take?
A. In any one year you may not take any tax credit that exceeds the total tax owed. The allowable tax credit for any one year is also limited to $25,000, plus 25% of the total tax remaining after the credit is taken. For example, if you are allowed the full 10% credit for an investment of $500,000, which is $50,000, and you owe $100,000 in taxes, you may take $25,000 plus 25% of the remaining $75,000 ($18,750), which equals $43,750. Credit not allowable in one year may be taken in other tax years (see below).

Q. Do I have to use the credit in the year the purchase or investment is made?
A. No. If you cannot use part or all of the credit because of tax liability limitations, you may carry any excess back to each of the three preceding years, beginning with the earliest. If you have an unused credit after carryback, it may be carried forward to each of the 15 years after the year of the credit.

Q. Are there special tax forms needed to take the credit?
A. Yes. You will need form 3486 (Investment Credit), and you may need form 3800 (General Business Credit) and their corresponding instruction forms.

Additional Info: contact your accountant or tax professional.

Accelerated Capital Depreciation for Solar Energy Property
Changes in 2003 tax code gave stronger depreciation bonuses for solar. Prior to the 5-year accelerated depreciation, a business gets 50% depreciation in the first year.

The US Government offers a 5 year Accelerated Capital Depreciation for any commercial entity which invests in or purchases qualified solar energy property. Only commercial entities are eligible. This is part of the US Code Citation: 26 USC Section 168.

Available to: any commercial entity in all 50 states is eligible
Eligible Technology: Photovoltaics, Solar Hot Water, and Energy Storage equipment
Additional Info: the United States Government Internal Revenue Service.

USDA Rural Business Enterprise Grant

This grant program is to facilitate the development of rural small business enterprises. Eligible activities include land acquisition, construction, rehabilitation, building, roads, utilities. Contact your local USDA office for more information.

Available to: Rural, commercial, public, not-for-profit or Native American Tribal groups
Eligible Technology: photovoltaics, Solar Hot Water and all Home Energy Upgrades.
Additional Info: Local USDA Rural Development Offices; or on the web at: http://www.usda.gov

Small Business Administration 7A+02 Energy Loan Program

The Small Business Administration offers loan guaranties for up to $750,000 or 75% of loan amount or up to 80% of loan amounts under $100,000. Maximum interest rate is prime plus 2.75%. Terms for working capital is 7 years, equipment is 10 years, and building is 25 years.

Available to: Small Businesses throughout the United States
Eligible Technology: Photovoltaics, Solar Thermal Systems
Additional Info: US Small Business Administration. Contact your local SBA office. Or on the web at: http://www.sba.gov/financing

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This link takes you to the Database of State Incentives for Renewable Energy, maintained by the NC Solar Center.

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