Incorporating renewable energy technology into a new project or into a rehabilitation of an existing development is a great idea, but paying for it is a real challenge. There is funding out there if you know where to look, according to Brad Mondschein, an attorney with the Connecticut-based firm Pullman and Comley LLC. Mondschein presented an outline of different funding sources at a recent renewable energy conference at the University of Connecticut School of Law.
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- Energy-Efficient Commercial Building Tax Deduction – Run through the Department of Energy's (DOE) Energy Star® Program, this program provides a deduction of up to $1.80 per square foot for energy improvements.
- Modified Accelerated Cost-Recovery System (MACRS) and Bonus Depreciation – Under the federal MACRS, businesses may recover investments in certain property through depreciation deductions. A number of renewable energy technologies are classified as 5-year property for depreciation purposes.
- Renewable Electricity Production Tax Credit – This tax credit is a per-kilowatt credit for electricity generated by qualified energy resources and sold by the taxpayers to an unrelated person during the taxable year.
- Renewable Energy Grants and Investment Tax Credit (ITC) – An ITC generally allows taxpayers to take a single tax credit against a project’s tax basis equal to 30 percent in its first year and allows a taxpayer to elect certain qualified facilities to be characterized as energy property eligible for a 10 percent or 30 percent ITC, depending on the technology.
- USDA Programs – The USDA offers the Business and Industry Guaranteed Loan Program that provides loans for environmental improvements in rural communities, and the Rural Energy for America Program (REAP), through which project developers work with local lenders, who, in turn, apply to USDA for a loan guarantee of up to 85 percent of the loan amount.
- Bonding – State and local governments, cooperative electric companies, clean renewable energy bond lenders and tribal governments are able to finance certain renewable energy projects through Qualified Energy Conservation Bonds, Clean Renewable Energy Bonds (CREBS), and Property-Assessed Clean Energy Bonds (PACE).