Claim Your Tax Credits

CONTACT: Blake Christian
Partner September 29, 2009,
Holthouse Carlin & Van Trigt LLP
(562) 590-9535
October 15, 2009

Going Green – Without Breaking the Bank

Green Tax Credits for Corporations

Green tax credits are available to companies that invest in green technologies. Corporations often derive very significant up-front costs associated with the greening of their business. State and federal green tax credits along with other financial benefits are available to offset the added cost of "going green".

Despite the challenging economy and related capital markets restrictions, business owners across the country are continuing to invest in a variety of eco-friendly technologies. Businesses that choose to invest in green technologies do so for a variety of reasons including:

  • Being socially responsible,
  • Reducing long-term operating costs,
  • Public relations/ employee relations benefits,
  • Securing tax benefits
  • Or most likely a combination of all these factors.

And those companies that have not yet invested are certainly evaluating ways to reduce their long-term energy costs and "green" quotient. For these reasons the topic of green tax credit has come under much discussion and interest in recent years.

There are many types of investments that business owners are making to reduce their energy costs that can earn green tax credits, and lower the impact of their carbon footprint. These include:

  • Developing their own power sources, such as solar, cogeneration, geothermal, etc.,
  • Purchasing more energy efficient office and processing equipment,
  • Acquiring alternative powered vehicles,
  • Installing pollution control and energy control systems,
  • Adopting or improving their office and plant recycling programs and
  • Using more renewable raw materials and supplies,

While great strides are being made to reduce the carbon footprints of businesses and individuals, these new eco-friendly shoes can come at a very high price.

For example:

  • The capital outlay for a Liquid Natural Gas (LNG) semi-truck can exceed $200,000 per big rig (but such an investment can be partially offset with federal credits of over $28,000 per truck),
  • Solar panels generally have a 4 to 6- year payback period, and
  • An energy efficient LEED-certified building can increase construction costs by 50% or more.

As positive as these eco investments are on the environment and the communities these businesses operates in, business owners will still naturally look to the lowest cost method for greening their businesses. Unfortunately, sometimes this means deferring the planned upgrades until cash flow is sufficient to justify the significant up-front costs. This is where green tax credits can be of significant value .

On the bright side, there are a large number of green tax credits that come in the form of federal and state business tax incentives, including energy and pollution control tax incentives, hiring credit incentives research & development credits and accelerated depreciation benefits readily available to a large cross-section of industries.

Green Tax Incentives Available to Corporations

Green Energy Tax Credit

  • Federal Solar Credit of 30% on Solar Panels and related equipment
  • Federal Small Wind Energy Credit of 30% (Maximum Rating of 100 kilowatts)
  • Cogeneration energy production from alternative fuel sources – 30% federal credit
  • Alternative Fueling Stations, including electric recharging stations – federal credit equal to the lesser of: i) 50% of the eligible costs, or ii) $50,000 per station. More pricey hydrogen station credit caps are increased to the lesser of: 30% or $200,000 per station
  • Hybrid or Electric Vehicles - $2,500 to $15,000 per electric vehicle purchased or a 10% credit for conversion costs to convert a conventional or hybrid vehicle to a plug-in electric format. The pay-back period can be relatively quick at $3 per gallon of gasoline
  • Federal bonus depreciation at 50% of asset costs and IRC Section 179 “expensing” of most tangible personal property for assets purchased by December 31, 2009 also offer significant up-front tax advantages through the end of the year
  • Federal and state Research & Development costs for credits
  • Federal and state grants and loans are also readily available, but require some research and effort

Location Based Incentive Credits

For companies that design, manufacture, assemble or distribute green technology products, some of the largest green tax credit incentives come in the form of Location Based Incentive Credits (LBICs) which are available to most companies operating in any of the over 8,000 federal, state and local tax incentive zones throughout the country. Therefore, companies are very wise to carefully choose where they establish or expand their business in order to minimize their federal and state tax burdens.

A small sampling of the 40 state and numerous federal LBIC programs include:

  • The California Enterprise Zone Program available in 42 Zones throughout the state, which offers:
    1. Hiring credits up to $13,000 per year/ per qualified employee
    2. Equipment credits up to 10.75% on pollution control, energy control, technology, manufacturing and processing equipment used exclusively in a Zone
    3. Lender tax exemption for loans to businesses operating exclusively in a Zone
    4. Employee-Level credits up to $525
    5. Favorable permitting, bidding, grants and loans
  • Florida Enterprise Zone Program available in 56 regions throughout the state provides benefits including:
    1. Hiring credits up to 45% of wages paid to qualified employee
    2. Sales tax refunds up to $10,000 on electrical energy, building materials, and equipment used exclusively in a Zone
    3. Property tax credits up to $50,000 on taxes paid on new or improved property
  • Federal Empowerment Zone Program (up to $3,000 per qualified employee/ per year)
  • Federal Renewal Community Program (up to $1,500 per qualified employee/ per year)
  • Federal Rural Renewal County Program (up to $4,800 per qualified employee/ per year)
  • Federal Work Opportunity Tax Credit (WOTC) Program available to business operating in any location – from $2,400 to $4,800 per qualified employee and up to $8,500 for Welfare-to-Work employees

Businesses that either purchase or sell energy and pollution control equipment and spend the time educating themselves on the very beneficial green/ eco tax credits, state enterprise zone programs, federal tax incentive programs, can enhance their cash flow and profits and will gain significant competitive advantages. Green tax credit can have a significant impact on business and the environment.

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