There could be tax benefits for amending returns to capture incentives under the Tax Cuts and Jobs Act (TCJA) for clients with investments in renewable energy and sustainability. By making these amendments, businesses can potentially save a substantial amount of money.
One of the most significant benefits under the TCJA is accelerated depreciation for Modified Accelerated Cost Recovery System (MACRS). Qualified property, including renewable energy property, is now eligible for 100% bonus depreciation in the year that it is placed in service. This allows companies to deduct the entire cost of the property in the first year instead of spreading it out over several years.
This tax benefit offers substantial savings to companies that invest in renewable energy and sustainability. For example, a company that spends $1 million on solar panels can deduct the full amount in the year they are installed. This can significantly reduce the company’s taxable income and, in turn, its tax liability.
It is important to note that the tax benefits for accelerated depreciation under the TCJA expire at the end of 2022. Therefore, companies must act quickly and amend their returns to capture these benefits before they expire.
Moreover, in addition to accelerated depreciation, the TCJA offers other tax incentives for companies investing in renewable energy and sustainability. For instance, the Production Tax Credit (PTC) provides businesses that generate electricity from renewable energy sources such as solar and wind power with a credit for each kilowatt-hour produced. This credit can be claimed for up to 10 years after the facility has been put in service.
Another example is the Investment Tax Credit (ITC), which offers a credit for the cost of installing solar energy property. Businesses can use this credit to offset their tax liability or receive a cash payment if their tax liability is insufficient.
It is essential to note the relevant sections and regulations of the IRS tax code when dealing with these incentives. For example, Section 45 of the Internal Revenue Code (IRC) governs the PTC, while the IRC Section 48 governs the ITC. Moreover, the Treasury Department and the IRS have issued guidance to implement these tax incentives, including Notice 2018-59 (updated due to COVID-19 by Notice 2021-41) and Revenue Procedure 2020-12.
In conclusion, businesses that invest in renewable energy and sustainability can benefit greatly from amending their returns to capture the tax benefits provided under the TCJA. Accelerated depreciation for MACRS and tax incentives such as the PTC and ITC offer substantial savings to companies that invest in renewable energy and sustainability. It is crucial for businesses to act quickly and seek the guidance of experienced tax professionals to maximize their tax savings and comply with the relevant IRS tax code sections and regulations. Please feel free to contact Burrell Law for a consultation.