Modified Accelerated Cost-Recovery System (MACRS)

Businesses and corporations have another tax incentive available to them in 2013: bonus depreciation! Renewable projects are generally depreciated on a five year schedule under the Modified Accelerated Cost-Recovery System (MACRS). However, in 2013, business entities can depreciate 50% of their project costs first year, with the balance being divided over the remaining four. This incentive, coupled with the investment tax credit or production tax credit, provides businesses with yet another way to make their return on investment more lucrative. For more information on accelerated depreciation, click on this link: www.dsireusa.org or call (217) 825-4206 to speak with a WindSolarUSA, Inc. professional!

  • a variety of solar-electric and solar-thermal technologies
  • fuel cells and microturbines
  • geothermal electric
  • direct-use geothermal and geothermal heat pumps
  • small wind (100 kW or less)
  • combined heat and power (CHP)
  • the provision which defines ITC technologies as eligible also adds the general term "wind" as an eligible technology, extending the five-year schedule to large wind facilities as well.

In addition, for certain other types of renewable energy property, such as biomass or marine and hydrokinetic property, the MACRS property class life is seven years. Eligible biomass property generally includes assets used in the conversion of biomass to heat or to a solid, liquid or gaseous fuel, and to equipment and structures used to receive, handle, collect and process biomass in a waterwall, combustion system, or refuse-derived fuel system to create hot water, gas, steam and electricity. Marine and hydrokinetic property includes facilities that utilize waves, tides, currents, free-flowing water, or differentials in ocean temperature to generate energy. It does not include traditional hydropower that uses dams, diversionary structures, or impoundments.

The 5-year schedule for most types of solar, geothermal, and wind property has been in place since 1986. The federal Energy Policy Act of 2005(EPAct 2005) classified fuel cells, microturbines and solar hybrid lighting technologies as five-year property as well by adding them to § 48(a)(3)(A). This section was further expanded in October 2008 by the addition of geothermal heat pumps, combined heat and power, and small wind under The Energy Improvement and Extension Act of 2008.

Bonus Depreciation

The federal Economic Stimulus Act of 2008, enacted in February 2008, included a 50% first-year bonus depreciation (26 USC § 168(k)) provision for eligible renewable-energy systems acquired and placed in service in 2008. The allowance for bonus depreciation has since been extended and modified several times since the original enactment, most recently in December 2015 by the Consolidated Appropriations Act Of 2015 . Equipment placed in service before January 1, 2018 can qualify for 50% bonus depreciation. Equipment placed in service during 2018 can qualify for 40% bonus depreciation. And equipment placed in service during 2019 can qualify for 30% bonus depreciation. (Source: dsire.org)

This incentive, coupled with the investment tax credit, provides businesses with yet another way to make their return on investment more lucrative. For more information on accelerated depreciation, click on this link: www.dsireusa.org or call(217) 825-4206 to speak with a WindSolarUSA, Inc. professional!

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