Congress Extends Federal Solar Energy Tax Credits Through End of 2008

January 07, 2007 by Jeff Shepard

The 109th Congress passed legislation that would extend the 30% solar energy investment tax credit (ITC) for homeowners and businesses for one additional year, through the end of 2008.

The Solar Energy Industries Association (SEIA) applauded the one-year extension of the solar ITC in H.R. 6111, the "Tax Relief and Health Care Act of 2006." At the same time, the industry cautioned that the lifespan of the credits is too short to encourage significant industry growth and cost reductions.

"While this bill does not constitute a long-term solar growth policy, it does provide some breathing room for solar projects in the 12- to 18-month pipeline," said Rhone Resch, SEIA President. "It ensures that the solar industry will continue to grow at a record rate in 2007. The passage of this bill with an extension of the solar ITC is recognition by Congress that solar is indispensable to our clean energy future."

An eight-year extension of the ITC will remain the solar industry's top legislative priority in 2007. A long-term extension is essential to reducing the cost of solar energy, as it would create market conditions that allow solar companies to make investments and drive down costs through economies of scale. A longer duration will also be needed to help stimulate the development of large-scale concentrating solar power projects.

SEIA's Resch expressed optimism that the 110th Congress would enact an eight-year extension as contained in S. 2677 and H.R. 5206, the "Securing America's Energy Independence Act," a bill which gained a bipartisan group of 80 House and 15 Senate cosponsors this year.

The bill includes a Residential Solar Tax Credit, which extends a 30% tax credit, created in the Energy Policy Act of 2005, for the purchase of residential solar water heating, photovoltaic equipment, and fuel cell property. This will expire after December 31, 2008.

There is also a Business Solar Tax Credit and Fuel Cell Tax Credit, which extends a 30% business credit, established in the Energy Policy Act of 2005, for the purchase of fuel cell power plants, solar energy property, and fiber-optic property used to illuminate the inside of a structure. After December 31, 2008, the credit reverts to a permanent 10% level.