Arizona’s tax credit for solar and wind installations in commercial and industrial applications was established in June 2006 (HB 2429). The credit is available to all non-residential entities who install qualified systems on their facilities, or entities who finance, install, or manufacture a qualified system and is the transferee of tax credits secured by the purchaser of the device. Tax exempt entities are also eligible for the credit if they are subject to tax on unrelated business taxable income (UBTI) if the relevant tax credits relate to activities that generate UBTI.
The tax credit, which may be applied against corporate or personal taxes, is equal to 10% of the installed cost of qualified “solar energy devices” and applies to systems installed between January 1, 2006 and December 31, 2018.
A solar energy device is defined by A.R.S. §42-5001(15) as “a system or series of mechanisms designed primarily to provide heating, to provide cooling, to produce electrical power, to produce mechanical power, to provide solar daylighting or to provide any combination of the foregoing by means of collecting and transferring solar generated energy into such uses either by active or passive means, including wind generator systems that produce electricity. Solar energy systems may also have the capability of storing solar energy for future use. Passive systems shall clearly be designed as a solar energy device, such as a trombe wall, and not merely as a part of a normal structure, such as a window.”
The maximum credit per taxpayer is $25,000 for any one building in the same year and $50,000 in total credits in any year. If the allowable credit exceeds the taxpayer’s income tax liability, the amount of the claim not used to offset taxes may be carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.
To qualify for the tax credits, a business must submit a Request for Preapproval to the Arizona Commerce Authority (ACA). Preapproval applications are subject to a non-refundable processing fee of 1% of the amount of tax credits reserved. After the system is installed, the business must submit a Request for Postapproval to the ACA. If approved, the ACA will then issue a credit certificate to the business and funds will be reserved. The Arizona Department of Revenue will also receive a copy of the credit certificate.
The ACA may certify tax credits up to a total of $1 million each calendar year. The date the system is placed in service determines the calendar year cap from which the credit will draw. If a system is placed in service in a given year it can only receive a credit in that year. If the $1 million statewide cap has already been reached for that year, it will not receive a credit that year, and it will not be considered in the next year. In these instances, these systems will not be eligible for a tax credit.
Forms and additional information can be found at the website above.
|Incentive Type:||Corporate Tax Credit|
|Administrator:||Arizona Department of Revenue|
|Eligible Renewable/Other Technologies:||
|Incentive Amount:||10% of installed cost|
|Maximum Incentive:||$25,000 for any one building in the same year and $50,000 per business in total credits in any year|
|Eligible System Size:||No size restrictions specified, but systems must receive approval from Commerce's Solar Committee.|
|Carryover Provisions:||Unused credit may be carried forward for up to five consecutive taxable years|
|Technologies:||Solar - Passive, Solar Water Heat, Solar Space Heat, Solar Thermal Electric, Solar Thermal Process Heat, Solar Photovoltaics, Wind (All), Daylighting, Solar Pool Heating, Wind (Small)|
|Sectors:||Commercial, Industrial, Agricultural|
|Parameters:||The incentive is 10.00 %, The incentive has a minimum of $25000.00|
|Name:||A.R.S. § 43-1085|
|Name:||A.R.S. § 43-1164|
|Name:||A.R.S. § 41-1510.01|
|Name:||Tax Credit Guidelines|
|Organization:||AZ Department of Revenue|
1600 W. Monroe
Phoenix AZ 85007
This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.
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