@misc{21741,
  keywords = {Energy Markets and Policy Department, Energy Analysis and Environmental Impacts Division},
  author = {Mark Bolinger and Galen L Barbose and Ryan H Wiser},
  title = {Shaking Up the Residential PV Market: Implications of Recent Changes to the ITC},
  abstract = {<p>In early 2006, Berkeley Lab published an LBNL/CESA case study that examined the financial impact of EPAct 2005's solar tax credits on PV system owners, in light of the $2,000 cap on the residential credit, as well as the fact that most PV systems in the U.S. also receive cash incentives from state-, local-, or utility-administered PV programs, and that these cash incentives may reduce the value of federal tax credits in certain situations. That case study was subsequently revised in February 2007 to reflect new Internal Revenue Service (IRS) guidance. The findings of that case study, which are briefly recapped in the next section, remained relevant up until October 2008, when the Energy Improvement and Extension Act of 2008 extended both solar credits for an unprecedented eight years, removed the $2,000 cap on the residential credit, and eliminated restrictions on the use of both credits in conjunction with the Alternative Minimum Tax (AMT). These significant changes, which apply to systems placed in service on or after January 1, 2009, will increase the value of the solar credits for residential system owners in particular, and are likely to spur significant growth in residential, commercial, and utility-scale PV installations in the years ahead. In light of these substantial changes to the solar ITC, this report takes a fresh look at the value of these revised credits, focusing specifically on the Section 25D residential credit. After first setting the stage by briefly reviewing our previous findings, the document proceeds to cover four specific areas in which the removal of the $2,000 cap on the residential ITC will have significant implications for PV program administrators, PV system owners, and the PV industry that go beyond the obvious market growth potential created by these more-lucrative federal incentives. These four areas include:</p><ol><li>The financial implications of whether or not residential cash rebates are considered to be taxable income;</li><li>The role of low-interest loan programs and other forms of "subsidized energy financing" under an uncapped ITC;</li><li>The degree to which taxable and non-taxable rebate levels might be reduced in response to the extra value provided by an uncapped ITC; and</li><li>The impact of an uncapped ITC on third-party financing and ownership models that are just beginning to emerge in the residential sector.</li></ol><p>The document concludes by highlighting a common thread that runs throughout: the need for PV program managers to understand whether or not their rebates are considered to be taxable income before they can react in an appropriate manner to the recent changes in federal solar policy and, if financing programs are offered, the need to understand whether the IRS considers these programs to be "subsidized." Finally, we note that this paper is based on current law; future legislative changes to the ITC could, of course, alter the conclusions reached here.</p>},
  year = {2008},
  journal = {Case Studies of State Support for Renewable Energy},
  pages = {12},
  month = {11/2008},
  publisher = {LBNL},
  address = {Berkeley},
}