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North Carolina ITC Safe Harbor Deadline Extended

Published by Brad Stanhope on Monday, June 1, 2015

Journal cover June 2015   Download PDF

North Carolina renewable energy developers got a measure of good news in late April when the state’s investment tax credit’s safe harbor deadline was extended by a year for some renewable projects.

The legislation, which passed the state House of Representatives by an 87-28 vote and the Senate by a 37-7 vote, was signed into law April 30 by Gov. Pat McCrory. It changed the expiration date of the state tax credit from Jan. 1, 2016, to Jan. 1, 2017, for projects that are fairly advanced in the development.

The extension applies to smaller projects (less than 65 megawatts capacity) that are at least 80 percent complete by Jan. 1, 2016, and larger projects (those with 65 megawatts capacity or more) that are at least 50 percent complete by that date. The state estimates that about $180 million in additional tax credits will be granted due to the extension, credits that will be granted over a five-year period.

Gov. McCrory, who has been at the center of many of North Carolina’s high-profile tax credit debates, said he hopes the extension will bring new renewable projects on line.

The extension was greeted as good news for those with developments in the pipeline. But it’s important to note that the actual tax credit, which expires at the end of the year, wasn’t extended–just the safe harbor date.

North Carolina is a significant state in renewable energy, especially solar. According to the Solar Energy Industries Association (SEIA), the state ranks fourth in the nation in installed solar energy. Last year North Carolina ranked second in the nation in the amount of solar electric capacity installed. That growth has led to differing interpretations of what needs to be done, with some encouraging the extension of the RETC and others insisting that the solar industry doesn’t need such incentives.

North Carolina’s expiring renewable energy tax credit (RETC) is worth 35 percent of qualified expenses, with a cap of $5 million for eco-industrial parks and $2.5 million for any other location. Those on both sides of the debate agree that it has worked: since 2007, the state credit turned $2.6 billion in investments into $4.7 in economic impacts, according to The NC Sustainable Energy Association (NCSEA).

An economic report commissioned by the same group showed that $80 million in state incentives in 2014 led to investments totaling more than $900 million in clean energy and energy efficiency. And according to the NCSEA’s Clean Energy Industry Census, North Carolina has more than 4,300 full-time equivalent solar professionals. That led to efforts to extend the credit.

In March, three Republican state senators introduced legislation to extend the credit, but that bill failed to get out of committee. The idea was revived, however, in late May when the state House of Representatives rolled out a spending plan that included a plan to extend the state RETC for two years, while decreasing it to 20 percent of the qualified expenses. Supporters heralded it as a compromise between supporters and detractors of the credit, but it still needed to get through the state Senate and be signed by Gov. McCrory to become law.

The state has been a battleground for tax credit battles this year, highlighted by the effort, led by Gov. McCrory, to reinstate the state historic tax credit.

In the past, Gov. McCrory has largely opposed any extension of the RETC, saying that incentives for the solar industry aren’t needed, but he has said he would support other non-solar renewables. But after he signed the safe harbor extension, it was unclear whether he would sign a bill extending the RETC for two years.

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