The following is a summary of the main tax credits and incentives that are currently in place to make solar more affordable to those interested in installing a solar system in Washington. Click for a list of Washington utilities to find out more about your utility's solar programs including net metering, if your utility participates in the state production incentive program, interconnection, and more.
Washington State Production Incentive
NEW INCENTIVE PROGRAM:
The Washington State Legislature passed a revised production incentive program on July 1, 2017. Click for a summary of the bill.
(UPDATED 11/2/17): The Washington State University Energy Program will administer the new incentive program for citizens and businesses of Washington. An online application system will be available soon. Click to view the WSU Renewable Energy System Incentive Program webpage.
- It modifies tax incentives for renewable energy systems and provides guidance for recycling related components.
- The Washington State University (WSU) Energy Program will administer the new incentive program.
- Projects eligible for incentives under the new program include renewable energy systems, such as solar photovoltaic energy systems, anaerobic digesters, or wind generators used for producing electricity.
- Incentive rates for the new program are based on the fiscal year that the system is certified, project type, and if the system qualifies for a made-in-Washington bonus.
Rules are being written currently to guide the WSU State Energy Office in the implementation of HB 5939. Click for details.
The WSU Energy Program has put together a Frequently Asked Questions (FAQ) document. WSU also has been working with the Department of Revenue and other state agencies that are involved in the program to achieve more clarity. Several matters still need additional clarification – which are being worked on.
(UPDATED 9/25/17): The Washington Dept. of Revenue has released its latest statement concerning changes to the Renewable Energy Cost Recovery Program and what happens before and after September 30 2017. Below is language from the release which applies to system owners, sellers, and installers. Click to view the release. (PDF file)
Language from the release:
Solar systems sales and use tax exemptions expire Sept. 30
- The exemptions and refund program for buyers of qualified solar energy systems capable of generating 500 kilowatts or less ends Sept. 30.
- The expiration of the exemption and refund also applies to charges for labor and installation of qualified machinery and equipment.
- See RCW 82.08.962, 82.12.962, 82.08.963, 82.12.963 and Engrossed Substitute Senate Bill 5939, Sections 14-17 (Chapter 36, Laws of 2017).
How can a solar system qualify for the machinery and equipment exemption or refund?
- The buyer must receive the machinery and equipment from the seller by Sept. 30.
How can a solar system qualify for the labor and service charges exemption or refund?
- The machinery and equipment must be installed by Sept. 30.
What if I invoice the customer now, but deliver the machinery and equipment or install it after September 30?
- Eligibility for the programs is not based on the invoice date or payment date—it is based on when the machinery and equipment was received by the buyer and installed.
- Machinery and equipment received by the buyer after the deadline are subject to sales tax at the pointof-sale and will not qualify for a refund.
- Installation labor and services performed after the end of September, are also subject to sales tax and do not qualify for the exemption or refund program.
Do sellers have any special recordkeeping requirements?
- Sellers must keep documents that reflect the actual delivery date of qualified machinery and equipment and the date labor and services were rendered to the buyer, in case eligibility for the exemption or refund must be substantiated. Proper records may include a bill of lading, shipping records, truck logs, or employee records indicating location of work.
What sales are still eligible for the exemption or refund after September 30?
- Solar systems capable of generating more than 500 kilowatts of electricity and other qualified renewable energy systems (wind, anaerobic digestion, biomass, etc.) capable of generating 1 kilowatt or more of electricity are still eligible for a 75 percent refund of the sales tax paid until Jan. 1, 2020.
- Thermal heat systems using solar energy and labor charges to install such systems are still eligible for the 100 percent exemption from sales and use tax through June 30, 2018.
Contact the Department of Revenue if you have questions about the renewable energy sales tax exemptions at (360) 705-6218 or click this link.
Federal Income Tax Credit
The Solar Investment Tax Credit (“ITC”) is a federal tax credit for solar systems placed on residential (under Section 25D) and commercial (under Section 48) properties. In December 2015, Congress acted to extend the 30% tax credit through 2019 with a step down in subsequent years: to 26% in 2020, to 22% in 2021, and thereafter it is 0 (zero) for homeowners and 10% for businesses.
The Wind Production Tax Credit declines on a different schedule than the tax credit for solar. Learn more about wind from the American Wind Energy Association and the Distributed Wind Energy Association.
Sales Tax Exemption in Washington State
The state sales tax exemption on residential and commercial solar PV systems of 10kW or less expired September 30, 2017.
Net metering allows system owners to receive credit for excess electricity produced by their system. Net-metered systems that produce more electricity than needed are credited for the excess production at retail electric rates on the next month’s utility bill. Credits carry forward month to month for a year period ending annually on April 30. Remaining credits are zeroed out on May 1 with no payment to the customer. Get more information.
Most utilities offer incentives and rebates for energy efficiency upgrades that help their customers reduce their use of electricity. Review a comprehensive list of PUDs and utilities in Washington state.
For Businesses - MACRS Depreciation of Solar Energy Property
The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation for some tangible property for tax purposes. Qualifying solar energy equipment is eligible for a cost recovery period of five years. The market certainty provided by MACRS has been found to be a significant driver of private investment for the solar industry and other energy industries. For equipment on which an Investment Tax Credit (ITC) or a 1603 Treasury Program grant is claimed, the owner must reduce the project’s depreciable basis by one-half the value of the 30% ITC. This means the owner is able to deduct 85 percent of his or her tax basis. The amount of the project cost that is eligible for a Bonus Depreciation is based upon the year of installation.
Washington State Department of Commerce Energy Efficiency and Solar Grants
For higher education, local governments, state agencies and K-12 public school districts
Commerce received a $25,000,000 appropriation in the 2015-2017 state Capital budget to continue the Energy Efficiency and Solar Grants program. Eligible entities include state public higher education institutions, local government facilities, state agencies and K-12 public school districts. This program focuses on funding the best projects possible to increase energy and cost savings in the publicly-built environment. The grants are awarded through a competitive process and must be used solely for energy and operational cost saving and solar installations. Click for more information about the program.
There is a proviso in the upcoming biennial budget to continue funding the energy efficiency and solar grant program for the 2018-19 biennium. Click for more info.