Renewable Energy Tax Credit (Personal)

Summary

Note: This credit expired at the end of 2015. Systems installed in 2016 or later years will not qualify for this credit. Senate Bill 372, signed in April 2015, provides a delayed sunset of the tax credit for projects that meet certain criteria and received pre-approval from the Department of Revenue. See below for more information.

North Carolina offers a tax credit equal to 35% of the cost of eligible renewable energy property constructed, purchased or leased by a taxpayer and placed into service in North Carolina during the taxable year. The credit has been amended several times since its original inception. House Bill 512 of 2009 extended the eligibility to geothermal equipment, extended the expiration date to December 31, 2015, and allowed the credit to be taken against the Gross Premiums Tax. HB 1829 of 2010 further extended this credit to combined heat and power systems. The credit is subject to various ceilings depending on sector and the type of renewable-energy system. The following credit limits for various technologies and sectors apply:

• A maximum of $3,500 per dwelling unit for active solar space heating, combined active solar space and domestic water-heating systems, and passive solar space heating used for a non-business purpose;
• A maximum of $1,400 per installation for solar water-heating systems, including solar pool-heating systems used for a non-business purpose;
• A maximum of $8,400 for geothermal heat pumps and geothermal equipment that uses geothermal energy for water heating or active space heating or cooling used for a non-business purpose;
• A maximum of $10,500 per installation for photovoltaic systems (also known as PV systems or solar-electric systems), wind-energy systems, combined heat and power systems, or certain other renewable-energy systems used for a non-business purpose
• A maximum of $2.5 million* per installation for all solar, wind, hydro, geothermal, combined heat and power (as defined by Section 48 of the U.S. Tax Code), and biomass applications** used for a business purpose***, including PV, daylighting, solar water-heating and space-heating technologies.

Renewable-energy equipment expenditures eligible for the tax credit include the cost of the equipment and associated design; construction costs; and installation costs less any discounts, rebates, advertising, installation-assistance credits, name-referral allowances or other similar reductions provided by public funds. SB 388 of 2010 clarified that federal grants made available by Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 do not constitute public funds.

The allowable credit may not exceed 50% of a taxpayer's state tax liability for the year, reduced by the sum of all other state tax credits. Qualifying renewable-energy systems used for a non-business purpose must take the maximum credit amount allowable for the tax year in which the system is installed. For all other taxpayers, the credit is taken in five equal installments beginning with the year in which the property is placed in service. 

If the credit is not used entirely in the first year (for non-business systems) or during the first five years (for business systems), the remaining amount may be carried over for the next five years. The credit can be taken against franchise tax, corporate tax, income tax, or in the case of insurance companies, against the gross premiums tax.

SB 3 of 2007 amended North Carolina's renewable energy tax credit statute to allow a taxpayer who donates money to a tax-exempt nonprofit to help fund a renewable energy project to claim a tax credit. The donor may claim a share of the credit -- proportional to the project costs donated -- that the nonprofit could claim if the organization were subject to tax. HB 2436 of 2008 applied this same mechanism to donations made to units of state and local governments.

Click the links below to access the relevant 2014 tax forms and instructions from the N.C. Department of Revenue.

• NC-478G 2014
• NC-478 2014
• NC-D-400 TC 2014
• Instructions

Delayed Sunset

The tax credit is scheduled to expire on December 31, 2015. SB 372, signed in April 2015, provides a delayed sunset of December 31, 2016 for projects that meet certain criteria. Projects with a total size of less than 65 MW, can qualify for the delayed sunset if it incurred 80% of its costs and completed 80% of the construction by December 31, 2015. Projects with a total size of 65 MW or greater, can qualify for the delayed sunset if it incurred 50% of its costs and completed 50% of the construction by December 31, 2015. The legislation provides further stipulations about certain documentation and application fees that must be provided in order to qualify.  

* House Bill 1973 of 2010 specified that systems installed for business purposes at a site that has been certified as an eco-industrial park by the Secretary of Commerce are subject to a higher tax credit cap of $5 million. Section 5.1 of the bill describes the characteristics required to be deemed an eco-industrial park.

** The N.C. Tax Credit Guidelines and relevant North Carolina statutes provide a description of the types of biomass and biomass applications that are eligible for the tax credit. (See links above.) Note that residential wood burning stoves do not qualify for this tax credit. 

***HB 1829 of 2010 states "renewable energy property is placed in service for a business purpose if the useful energy generated by the property is offered for sale or is used on-site for a purpose other than providing energy to a residence."