The Federal Solar Tax Credit extends the 30% tax breaks for another eight years through 2016. Residential caps will be removed on any system completed after Dec 31, 2008, and there are no caps on commercial PV systems, or other power systems.

The ITC Grant is a new provision to incent rapid implementation of solar electric power and to reward early adopters.

Extension of Energy-Efficient Buildings Deduction. Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for property installed in commercial buildings as part of: (i) interior lighting systems, (ii) heating, cooling, ventilation, and hot water systems, or (iii) the building envelope. Expenditures must be certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison to certain established standards. The bill extends the energy efficient commercial buildings deduction for five years, through December 31, 2013.

Bonus depreciation, now extended through 2009, allows solar power systems to be depreciated 100% in one year, if the system costs less than $200,000 for businesses making less than $400,000 net profit.

Research and Development Tax Credit. The bill would extend the research and development tax credit equal to 20 percent of the amount by which a taxpayer’s qualified research expenditures for a taxable year exceed its base amount for that year. The R&D tax credit expired December 31, 2007. The provision would be extended retroactively to January 1, 2008 and through the end of 2009. In addition, the proposal would increase the alternative simplified credit from 12% to 14% for the 2009 tax year, and repeal the alternative incremental research credit for the 2009 tax year. The proposal is effective for amounts paid or incurred after December 31, 2007. Research expenditures incurred by the solar energy industry would qualify for the credit.

Qualified Energy Conservation Bonds (QECBs). The bill creates a new category of tax credit bonds to finance State and local government initiatives designed to reduce greenhouse emissions. QECBs can be issued to finance capital expenditures incurred for: (1) reducing energy consumption by at least 20%; (2) implementing green community programs; and (3) rural development involving the production of electricity from renewable resources. The bonds can also be used to finance research facilities and provide research grants for, among other things, technologies to reduce peak use of electricity, allocated to States, municipalities and tribal governments.

A maximum of $2.5 million per installation for all solar, wind, hydro and biomass applications for commercial or industrial facilities, including PV, daylighting, solar water-heating and space-heating technologies. Renewable-energy equipment expenditures eligible for the tax credit include the cost of the equipment and associated design; construction costs; and installation costs less any discounts, rebates, advertising, installation-assistance credits, name-referral allowances or other similar reductions. 
 
The allowable credit may not exceed 50% of a taxpayer's liability for the year, reduced by the sum of all other credits. Single-family homeowners who purchase and install a qualifying renewable-energy system must take the maximum credit amount allowable for the tax year in which the system is installed. If the credit is not used entirely during the first year, the remaining amount may be carried over for the next five years. 

 For all other taxpayers, the credit is taken in five equal installments beginning with the year in which the property is placed in service. If the credit is not used entirely during these five years, the remaining amount may be carried over for the next five years. The credit can be taken against franchise tax, income tax or, if the taxpayer is an insurance company, against the gross premiums tax. 

SB 3 of 2007 amended North Carolina's renewable energy tax credit statute to allow a taxpayer who donates money to a tax-exempt nonprofit to help fund a renewable energy project to claim a tax credit. The donor may claim a share of the credit -- proportional to the project costs donated -- that the nonprofit could claim if the organization were subject to tax. HB 2436 of 2008 applied this same mechanism to donations made to units of state and local governments.