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How Does The Solar Tax Credit Program Work?

Michael Korengold Solar Tax Credit Program

How Does The Solar Tax Credit Program Work?

  • The Solar Tax Credit program, like other federally-sponsored tax credit programs, is a government sponsored initiative designed to encourage taxpayers to help finance solar projects.
  • Tax credits provide a dollar-for-dollar reduction of a taxpayer’s income tax liability by repurposing tax payment reserves into qualifying tax credit projects.
  • By  investing in a qualified project, the tax credit investor receives tax credits, project cash flows and an exit payment
  • Tax credit investors take primarily program compliance risk (as opposed to underlying performance risk) and generate a return on the funds they otherwise would have used to satisfy their tax liabilities.

o   Enhanced offers an insurance policy that eliminates this compliance risk altogether and, as such, allows a taxpayer to generate a yield on their tax payments without that risk of loss. 

  • Many investors utilize solar tax credits to help meet their sustainability objectives.
  • Corporations, specifically C-corps, can generally offset up to 75% of their business income with tax credits

Return Characteristics

When an investor invests in a Solar Tax Credit, an investor receives the tax credit in year 1 and receives a return comprised of the following:

o   Tax credits

o   Depreciation benefits

o   Preferred cash returns

o   Exit payment proceeds

Not only will the corporation receive credit for their tax liability, they will also generate an additional return, thereby lowering the corporation’s effective tax rate.

Solar Tax Credits can also help a corporation to fulfill its ESG mandate as outlined below:

ESG Characteristics

Social Impact: Tax credit investments are direct investments into solar projects, which produce clean, affordable energy to communities across the country and help to create jobs in rural and low-income communities.  Local communities can benefit from lower cost power generated through these projects.  Additionally, projects can create local jobs through construction and maintenance, often in rural areas.

Environmental Impact: Tax credit investments are direct investments into projects whose solar panels last over 20 years, meaning that our work each year will make a positive environmental impact for years to come. Solar projects provide communities with a clean and sustainable energy source and are a lower emission substitute over fossil-fueled utilities.

Enhanced Capital is a national leader in helping unlock the benefits of the federally-sponsored solar tax credit program.  Solar tax credits can lower a corporation’s effective tax rate by repurposing their federal tax dollars into income producing investments in solar energy projects.

If you would like more information on this tax credit program, you can call 212.380.0433 to contact Michael Korehgold

Michael Korengold

Michael Korengold

About Enhanced
Founded in 1999, Enhanced Capital (Enhanced) is a diversified, national asset manager that focuses on building sustainable communities. Enhanced invests in small businesses, renewable energy projects, historic real estate rehabilitation and affordable housing projects through federal and state incentive programs and other public policy investment strategies. Enhanced is a Registered Investment Adviser regulated by U.S. Securities Exchange Commission and a Community Development Entity (CDE). Enhanced has been awarded a total of $753m in New Market Tax Credits allocations, participating in state and local programs to make investments in low-income communities. Since inception, Enhanced has financed over $1.5B across hundreds of businesses and projects in the US that promote economic development and sustainability.
Enhanced’s Tax Credit group creates customized solutions for tax credit and mission-focused investors based on their investment needs, including CRA requirements, geographic footprint of investments, and investment product type. To date, our team has financed over $1.5B in tax credits, which includes $336M in clean energy projects that provide an economic return to our investors in addition to helping them fulfill their ESG and sustainability mandates.