Tax Law Insights

On February 16, 2016, a new income tax credit for taxpayer's who construct, purchase, or lease solar energy property was enacted, and is effective for income tax years beginning after 2015. L. 2016, H3874 (to be codified at S.C. Code § 12-6-3770). The credit is scheduled to sunset on December 31, 2017. The credit is equal to 25% of the cost, including installation cost, of solar energy property. The maximum credit that can be claimed is $2,500,000. The credit is claimed over five years in equal annual installments. To qualify for the credit, the solar energy property must be located on the Environmental Protection Agency's National Priority List, National Priority List Equivalent Sites, or on a list of related removal actions, as certified by the Department of Health and Environmental Control. A list of sites is available on the South Carolina Department of Health and Environmental Control website.

On February 16, 2016, S.C. Code § 12-6-3587 was amended to provide an income tax credit equal to 25% of the costs incurred by a taxpayer for the purchase and installation of geothermal machinery and equipment. S.C. Code § 12-6-3587 continues to provide an income tax credit equal to 25% of the costs incurred by a taxpayer for the purchase and installation of a solar energy system or small hydropower system. A taxpayer can claim a maximum of $3,500 or 50% of the taxpayer's income tax liability each year, whichever is less. Credits that exceed the maximum can be carried forward for up to ten years. Consequently, the credit has a potential gross value of $38,500. The amendment is effective on January 1, 2016 and is not scheduled to sunset.

South Carolina provides a number of valuable tax credits and incentives for renewable energy, in addition to these two new credits. These state credits, which can often be coupled with federal tax incentives, can turn an otherwise uneconomical renewable energy investment into an attractive project.