Renewable energy tax credits are incentives offered by the federal government to encourage the production and use of renewable energy sources. The Renewable Electricity Production Tax Credit (PTC) and Investment Tax Credit (ITC) are two of the most common credits available. The PTC is a tax credit per kilowatt-hour (kWh) for the production of wind energy in a qualifying facility during its first 10 years of operation. The ITC is a flat-rate tax credit for expenses invested in renewable energy properties, most often in solar developments.
Both credits currently represent 26 percent of the total cost of installation. In addition to federal tax credits, some states have specific requirements and others have voluntary goals related to the participation of electricity generation or sales in a state that comes from renewable energy. A positive point in cooperative renewable energy production are community solar or small-scale solar projects of moderate size that are jointly owned or subscribed to by several individuals or organizations. The Department of Energy (DOE) and other federal government agencies fund research and development of renewable energy technologies. There are also financial products available for sale, purchase, or trade that allow the purchaser to pay for the production of renewable energy without directly producing or purchasing renewable energy. The IRS states that external solar panels or solar panels that are not directly in the taxpayer's home could still qualify for the federal residential solar tax credit under some circumstances. Non-profit organizations located in these communities and that provide services will be able to apply for these credits through the direct payment option when installing renewable energy systems. The IRA also states that investing in environmental justice communities could add additional percentage points to the basic ITC and PTC tax credits.
In the coming months, the Department of the Treasury will need to provide guidelines on how these organizations can request reimbursement at the point of sale instead of tax credits. A renewable portfolio standard (RPS) typically requires that a percentage of electrical energy sales in a state come from renewable energy sources.
