Solar Rebates and Solar Tax Credits for Colorado

Holy Cross Energy's WE CARE (With Efficiency, Conservation And Renewable Energy) Program offers an incentive for customers who install renewable energy generation for net metering at their premises. Eligible renewable energy technologies include wind, hydroelectric, photovoltaic, biomass, and geothermal sources.

Incentive

The incentive offered varies by the size of the renewable energy system as follows:

• $500 per kW for the first 6 kW of a system,
• $335 per kW for the next 6 kW of a system, and
• $150 per kW for the next 13 kW of a system.

Note: The Taxpayer Certainty and Disaster Tax Relief Act of 2020, signed in December 2020, extended the phase out of this tax credit for certain technologies. The bill also provides a 30% tax credit for offshore wind facilities in inland navigable waters or coastal waters of the United States for which construction commences prior to 2026.   

The federal Business Energy Investment Tax Credit (ITC) has been amended a number of times, most recently in December 2020. The table below shows the value of the investment tax credit for each technology by year. The  dates are based on when construction begins.   

• Solar Technologies. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible. Passive solar systems and solar pool-heating systems are not eligible.
  
  
• Fuel Cells. The credit is equal to the applicable percentage of cost for a given year with no maximum credit. However, the credit for fuel cells is capped at $1,500 per 0.5 kilowatt (kW) of capacity. Eligible property includes fuel cells with a minimum capacity of 0.5 kW that have an electricity-only generation efficiency of 30% or higher. 

• Small Wind Turbines. The credit is equal to the applicable percentage of cost for a given year with no maximum credit. Eligible small wind property includes wind turbines up to 100 kW in capacity. Small wind turbines must meet the performance and quality standards set forth by either the American Wind Energy Association Small Wind Turbine Performance and Safety Standard 9.1-2009 (AWEA), or the International Electrotechnical Commission 61400-1, 61400-12, and 61400-11 (IEC)

• Geothermal Systems. The credit is equal to the applicable percentage of cost for a given year with no maximum credit limit stated. Eligible geothermal energy property includes geothermal heat pumps and equipment used to produce, distribute or use energy derived from a geothermal deposit. For electricity produced by geothermal power, equipment qualifies only up to, but not including, the electric transmission stage. For geothermal heat pumps, this credit applies to eligible property placed in service after October 3, 2008. Note that the credit for geothermal property, with the exception of geothermal heat pumps, has no stated expiration date.

• Microturbines. The credit is equal to the applicable percentage of cost for a given year with no maximum credit limit stated (explicitly). The credit for microturbines is capped at $200 per kW of capacity. Eligible property includes microturbines up to two megawatts (MW) in capacity that have an electricity-only generation efficiency of 26% or higher.

• Combined Heat and Power (CHP). The credit is equal to 10% of expenditures, with no maximum limit stated. Eligible CHP property generally includes systems up to 50 MW in capacity that exceed 60% energy efficiency, subject to certain limitations and reductions for large systems. See the note at the bottom of this page for more details. The efficiency requirement does not apply to CHP systems that use biomass for at least 90% of the system's energy source, but the credit may be reduced for less-efficient systems. This credit applies to eligible property placed in service after October 3, 2008.

• Production Tax Credit-Eligible Technologies. Technologies that are eligible for the Production Tax Credit (PTC) were eligible to opt for the ITC in lieu of the PTC if construction commenced prior to January 1, 2015. As of January 1, 2015, only wind energy systems are eligible to claim the ITC in lieu of the PTC.  

• Offshore Wind. Systems for which construction commences prior to 2026 are eligible for a 30% tax credit.

• Waste Energy Recovery. Qualified waste energy recovery property means property that generates electricity solely from heat from buildings or equipment if the primary purpose of such building or equipment is not the generation of electricity. The term “waste energy recovery property” does not include any property that has a capacity in excess of 50 megawatts.

In general, the original use of the equipment must begin with the taxpayer, or the system must be constructed by the taxpayer. The equipment must also meet any performance and quality standards in effect at the time the equipment is acquired. The energy property must be operational in the year in which the credit is first taken.

* Combined heat and power systems can only receive the full credit if the system has an electrical capacity of 15 MW or less, and a mechanical energy capacity of of 20,000 horsepower or less, or an equivalent combination of electrical and mechanical energy capacities. Larger combined heat and power systems (up to a maximum of 50 MW and 67,000 horsepower) can qualify for a reduced tax credit equal to the ratio between the actual system capacity and 15 MW.  For example, a 45 MW system can qualify for a tax credit worth 15/45 of the otherwise allowable credit. 

According to Section 136 of the U.S. Code, energy conservation subsidies provided (directly or indirectly) to customers by public utilities* are non-taxable. This exclusion does not apply to electricity-generating systems registered as "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978 (PURPA). If a taxpayer claims federal tax credits or deductions for the energy conservation property, the investment basis for the purpose of claiming the deduction or tax credit must be reduced by the value of the energy conservation subsidy (i.e., a taxpayer may not claim a tax credit for an expense that the taxpayer ultimately did not pay).

The term "energy conservation measure" includes installations or modifications primarily designed to reduce consumption of electricity or natural gas, or to improve the management of energy demand. Eligible dwelling units include houses, apartments, condominiums, mobile homes, boats and similar properties. If a building or structure contains both dwelling units and other units, any subsidy must be properly allocated.

The definition of "energy conservation measure" implies that utility rebates for residential solar-thermal projects and photovoltaic (PV) systems may be non-taxable. However, the IRS has not ruled definitively on this issue. Taxpayers considering using this provision for a renewable energy system should discuss the details of the project with a tax professional. Other types of utility subsidies that may come in the form of credits or reduced rates might also be non-taxable, according to IRS Publication 525.


* The term "public utility" is defined as an entity "engaged in the sale of electricity or natural gas to residential, commercial, or industrial customers for use by such customers." The term includes federal, state and local government entities.

Note: The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. 

Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. A number of renewable energy technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property. Such property currently includes*:

• a variety of solar-electric and solar-thermal technologies
• fuel cells and microturbines
• geothermal electric
• direct-use geothermal and geothermal heat pumps
• small wind (100 kW or less)
• combined heat and power (CHP)
• the provision which defines ITC technologies as eligible also adds the general term "wind" as an eligible technology, extending the five-year schedule to large wind facilities as well.

In addition, for certain other types of renewable energy property, such as biomass or marine and hydrokinetic property, the MACRS property class life is seven years. Eligible biomass property generally includes assets used in the conversion of biomass to heat or to a solid, liquid or gaseous fuel, and to equipment and structures used to receive, handle, collect and process biomass in a waterwall, combustion system, or refuse-derived fuel system to create hot water, gas, steam and electricity. Marine and hydrokinetic property includes facilities that utilize waves, tides, currents, free-flowing water, or differentials in ocean temperature to generate energy. It does not include traditional hydropower that uses dams, diversionary structures, or impoundments.

The 5-year schedule for most types of solar, geothermal, and wind property has been in place since 1986. The federal Energy Policy Act of 2005 (EPAct 2005) classified fuel cells, microturbines and solar hybrid lighting technologies as five-year property as well by adding them to § 48(a)(3)(A). This section was further expanded in October 2008 by the addition of geothermal heat pumps, combined heat and power, and small wind under The Energy Improvement and Extension Act of 2008.

Bonus Depreciation

Bonus Depreciation has been sporadically available at different levels during different years. Most recently, The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023.

Bonus Depreciation History

The 50% first-year bonus depreciation provision enacted in 2008 was extended (retroactively for the entire 2009 tax year) under the same terms by the American Recovery and Reinvestment Act of 2009 (H.R. 1), enacted in February 2009. It was renewed again in September 2010 (retroactively for the entire 2010 tax year) by the Small Business Jobs Act of 2010 (H.R. 5297). In December 2010 the provision for bonus depreciation was amended and extended yet again by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853). Under these amendments, eligible property placed in service after September 8, 2010 and before January 1, 2012 was permitted to qualify for 100% first-year bonus depreciation. The December 2010 amendments also permitted bonus depreciation to be claimed for property placed in service during 2012, but reverted the allowable amount from 100% to 50% of the eligible basis. The 50% first-year bonus depreciation allowance was further extended for property placed in service during 2013 by the American Taxpayer Relief Act of 2012 (H.R. 8, Sec. 331) in January 2013. The Tax Increase Prevention Act Of 2014 (H.R. 5771, Sec. 125), extended  these provisions through to December 31, 2014, and thus retroactively for the 2014 tax year.

For more information on the federal MACRS, see IRS Publication 946, IRS Form 4562: Depreciation and Amortization, and Instructions for Form 4562. The IRS web site provides a search mechanism for forms and publications. Enter the relevant form, publication name or number, and click "GO" to receive the requested form or publication. For guidance on bonus depreciation, including information relating to the election to claim either 50% or 100% bonus depreciation, retroactive elections to claim 50% bonus depreciation for property placed in service during 2010, and eligible property, please see IRS Rev. Proc. 2011-26.


*Note that the definitions of eligible technologies included in this entry are somewhat simplified versions of those contained in tax code, which often contain additional caveats, restrictions, and modifications. Those interested in this incentive should review the relevant sections of the code in detail prior to making business decisions.

According to Section 136 of the U.S. Code, energy conservation subsidies provided (directly or indirectly) to customers by public utilities* are non-taxable. This exclusion does not apply to electricity-generating systems registered as "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978 (PURPA). If a taxpayer claims federal tax credits or deductions for the energy conservation property, the investment basis for the purpose of claiming the deduction or tax credit must be reduced by the value of the energy conservation subsidy (i.e., a taxpayer may not claim a tax credit for an expense that the taxpayer ultimately did not pay).

The term "energy conservation measure" includes installations or modifications primarily designed to reduce consumption of electricity or natural gas, or to improve the management of energy demand. Eligible dwelling units include houses, apartments, condominiums, mobile homes, boats and similar properties. If a building or structure contains both dwelling units and other units, any subsidy must be properly allocated.

The definition of "energy conservation measure" implies that utility rebates for residential solar-thermal projects and photovoltaic (PV) systems may be non-taxable. However, the IRS has not ruled definitively on this issue. Taxpayers considering using this provision for a renewable energy system should discuss the details of the project with a tax professional. Other types of utility subsidies that may come in the form of credits or reduced rates might also be non-taxable, according to IRS Publication 525. 


* The term "public utility" is defined as an entity "engaged in the sale of electricity or natural gas to residential, commercial, or industrial customers for use by such customers." The term includes federal, state and local government entities.

Note: The Taxpayer Certainty and Disaster Tax Relief Act of 2020, signed in December 2020, extended the deadline for eligible systems to qualify for this tax credit. Wind projects started in either 2020 or 2021 will qualify for a production tax credit at 60% of the full rate on the electrical output for 10 years. Tax credits for other technologies may be claimed at the full rate. 

The federal renewable electricity production tax credit (PTC) is an inflation-adjusted per-kilowatt-hour (kWh) tax credit for electricity generated by qualified energy resources and sold by the taxpayer to an unrelated person during the taxable year. The duration of the credit is 10 years after the date the facility is placed in service for all facilities placed in service.

Originally enacted in 1992, the PTC has been renewed and expanded numerous times, most recently by the Taxpayer Certainty and Disaster Relief Act of 2020.

Amount

The tax credit amount is $0.015 per kWh in 1993 dollars for some technologies and half of that amount for others. The amount is adjusted for inflation by multiplying the tax credit amount by the inflation adjustment factor for the calendar year in which the sale occurs, rounded to the nearest 0.1 cents. The Internal Revenue Service (IRS) publishes the inflation adjustment factor no later than April 1 each year in the Federal Register. For 2020, the inflation adjustment factor used by the IRS is 1.6687.

Earlier legislation introduced a step down of the credit amount for wind, while phasing out the credit for other technologies. Subsequent legislation has pushed back the stepdown for wind and the phase out for other technologies. As such, the credit today includes a 40% step-down in the credit amount for wind, but other technologies can receive the full credit amount. Applying the inflation-adjustment factor for the 2020 calendar year, and the 40% step-down for wind, the production tax credit amount is as follows:

• Wind: $0.015/kWh 
• Geothermal and Closed-Loop Biomass: $0.025/kWh
• Open-Loop Biomass, Hydroelectric, Landfill Gas, Waste-to-Energy, and Marine Technologies: $0.013/kWh

The duration of the credit is 10 years after the date the facility is placed in service. Two exceptions applied to facilities placed in service more than a decade ago:

• open-loop biomass, geothermal, small irrigation hydro, landfill gas, and municipal solid waste combustion facilities placed into service after October 22, 2004, and before enactment of the Energy Policy Act of 2005, on August 8, 2005, were only eligible for the credit for a 5-year period, and
• open-loop biomass facilities placed in service before October 22, 2004, were eligible for the 5-year period beginning January 1, 2005.

Investment Tax Credit in Lieu of Claiming the PTC

Renewable energy facilities placed in service after 2008 and commencing construction prior to 2018 (or 2020 for wind facilities) may elect to make an irrevocable election to claim the Investment Tax Credit (ITC) in lieu of the PTC. Wind facilities making such an election will have the ITC amount reduced by the same phase-down specified above for facilities commencing construction in 2017, 2018, or 2019. 

Process for Claiming

The credit is claimed by completing Form 8835, "Renewable Electricity Production Credit," and Form 3800, "General Business Credit." For more information, contact IRS Telephone Assistance for Businesses at 1-800-829-4933.

Determination of Commencing Construction 

To claim the PTC, construction on an eligible project must have “commenced construction” prior to January 1, 2015. The IRS has issued guidance on how it will evaluate whether construction has commenced in IRS Notices 2013-29, 2013-60, 2014-46, 2015-25, and 2016-31 (please see the full text of these notices for complete information on determining the commencing of construction). The guidelines establish two methods—a “physical work” test and a 5% safe harbor (see sections below for details)—to determine when construction has begun on a qualified facility. Meeting the criteria of either method is sufficient to demonstrate that construction has commenced. 

Both methods require that a taxpayer make continuous progress towards completion once construction has begun by meeting the Continuous Construction Test (to satisfy the Physical Work Test) or the Continuous Efforts Test (to satisfy Safe Harbor).  If a taxpayer places a facility in service during a calendar year that is no more than four calendar years after the calendar year during which construction of the facility began, the facility will be considered to satisfy the Continuity Safe Harbor

Physical Work Test

The physical work test provides that a taxpayer may establish the beginning of construction by beginning "physical work of a significant nature.” The physical work test is based on the nature of the work performed rather than the cost of the work; if the work performed is of a significant nature, then “there is no fixed minimum amount of work or monetary or percentage threshold required to satisfy the Physical Work Test” (Notice 2014-46).

Notice 2013-29 provides several examples of actions that constitute work of a significant nature, including:

• for a facility that produces electricity from a wind turbine, the beginning of the excavation for the foundation, the setting of anchor bolts into the ground, or the pouring of the concrete pads of the foundation;
• physical work on a custom-designed transformer that steps up the voltage of electricity produced at the facility to the voltage needed for transmission; and
• beginning construction of roads integral to the activity performed by the facility including onsite roads used for moving materials to be processed (e.g., biomass) and roads for equipment to operate and maintain the facility. 

Safe Harbor

Safe Harbor with respect to a facility is demonstrated by showing that 5% or more of the total cost of the facility was paid or incurred.

Homeowners can take advantage of energy efficient mortgages (EEM) to either finance energy efficiency improvements to existing homes, including renewable energy technologies, or to increase their home buying power with the purchase of a new energy efficient home. The U.S. federal government supports these loans by insuring them through Federal Housing Authority (FHA) or Veterans Affairs (VA) programs. This allows borrowers who might otherwise be denied loans to pursue energy efficiency, and it secures lenders against loan default.

FHA Energy Efficient Mortgages
The FHA allows lenders to add up to 100% of energy efficiency improvements to an existing mortgage loan with certain restrictions. FHA mortgage limits vary by county, state and the number of units in a dwelling. See their website for more details. These mortgages were previously limited to $8,000.The maximum amount of the portion of an energy efficient mortgage allowed for energy improvements is now the lesser of 5% of:

• The value of the property,
• 115% of the median area price of a single-family dwelling, or
• 150% of the Freddie Mac conforming loan limit

Loan amounts may not exceed the projected savings of the energy efficiency improvements. These loans may be combined with FHA 203 (h) mortgages available to victims of presidentially-declared disasters and with financing offered through the FHA 203 (k) rehabilitation program. FHA loan limits do not apply to the EEM. Borrowers must obtain a home energy assessment by a qualified energy rater, assessor, or auditor using whole-assessment standards, protocols, and procedures. 

Borrowers may include closing costs and the up-front mortgage insurance premium in the total cost of the loan. The loan is available to anyone who meets the income requirements for FHA’s Section 203 (b), provided the applicant can meet the monthly mortgage payments. New and existing owner-occupied homes of up to two units qualify for this loan. Cooperative units are not eligible. Homebuyers should submit applications to their local HUD Field Office through an FHA-approved lending institution.

Department of Veterans Affairs (VA) Energy Efficient Mortgages
The VA insures EEMs to be used in conjunction with VA loans either for the purchase of existing homes or for refinancing loans secured by the dwelling. Homebuyers may borrow up to $3,000 if only documentation of improvement costs or contractor bids is submitted, or up to $6,000 if the projected energy savings are greater than the increase in mortgage payments. Loans may exceed this amount at the discretion of the VA. Applicants may not include the cost of their own labor in the total amount. No additional home appraisal is needed, but applicants must submit a HER, contractor bids and certain other documentation. The VA insures 50% of the loan if taken by itself, but it may insure less if the total value of the mortgage exceeds a certain amount.

This mortgage is available to qualified military personnel, reservists and veterans. Applicants should secure a certificate of eligibility from their local lending office and submit it to a VA-approved private lender. If the loan is approved, the VA guarantees the loan when it is closed.

Conventional EEMs
Conventional mortgages are not backed by a federal agency. Private lenders sell loans to Fannie Mae and Freddie Mac, which in turn allows homebuyers to borrow up to 15% of an existing home’s appraised value for improvements documented by a HER.

Fannie Mae also lends up to 5% for Energy Star new homes. Fannie Mae EEMs are available to single-family, owner-occupied units, and Fannie Mae provides EEMs to those whose income might otherwise disqualify them from receiving the loans by allowing approved lenders to adjust borrowers’ debt-to-income ratio by 2%. The value of the improvements is immediately added to the total appraised value of the home.

Freddie Mac offers GreenChOICE mortgages to "provide greater affordability for borrowers, offer more flexibility and combine the flexibilities of Home Possible Mortgages to offer borrowers additional affordable financing opportunities." Borrowers should apply directly to the lender. Click here for more details.

ENERGY STAR Partnership for Lenders
To promote EEMs and lenders who offer them, the federal ENERGY STAR program offers a partnership program for lenders who provide EEMs to borrowers. Becoming a partner allows lenders to utilize the Energy Star brand to promote themselves as Energy Star partners offering EEMs. To become a lender, partner lenders must first provide proof that they know how to write EEMs. To maintain their partnership benefits, lenders must write a certain number of EEMs per year. Energy Star does not have a lender certification program or process. Click here for more information about ENERGY STAR's lender partnership program, and here to access the partner locator tool. ENERGY STAR requires that its lender partners provide EEMs to qualified borrowers regardless of whether it is an FHA EEM, Fannie Mae EEM, or VA EEM.

Energy Smart Colorado is the first rural multi-jurisdictional consortium in the U.S. to implement a comprehensive residential energy efficiency program.

Residents of Roaring Fork Valley and Eagle, Gunnison, Lake, and Summit Counties are eligible for energy efficiency and renewable energy assistance, rebates, and financing through the Energy Smart Colorado program. The program helps homeowners identify, finance, and complete energy improvements in their homes.

Each participating county operates an Energy Resource Center (ERC), providing homeowners and contractors with a local, reliable one-stop-shop for information and service. Each ERC is staffed with a Building Performance Institute certified Home Energy Advisor who provides expert advice, coaching, and assistance with enrollments, home energy assessments, and improvement projects.

Energy Smart in the Roaring Fork Valley

The Energy Smart program serves the Roaring Fork Valley through the Community Office for Resource Efficiency (CORE), a nonprofit organization promoting renewable energy and energy efficiency in western Colorado. The Roaring Fork Valley Energy Smart program is funded through the Renewable Energy Mitigation Program (REMP), which has raised over 12 million dollars since its inception in 2000. (Energy Smart Colorado serves Garfield County through the Clean Energy Economy for the Region.)

Home Energy Assessment

Interested homeowners can schedule a reduced-cost home energy assessment with a qualified Energy Smart Analyst who will come to the home and perform a comprehensive home safety and energy assessment. There are a variety of free improvements the Energy Smart Analyst may install at the time of the assessment including a programmable thermostat, efficient lighting, hot and cold water pipe insulation, a hot water tank insulation blanket, and door weather-stripping.

Rebates

In addition to the Home Energy Assessment, the homeowner may also be eligible to receive an Energy Smart rebate. Energy Smart provides direct rebates for energy improvement projects and also maintains up-to-date information on other financial incentives from utilities, state and local governments, and federal tax credits. For information on rebates for energy efficiency measures, click here. 

Financing

For information on the Loan Program, click here. 

Note: The U.S. Department of Agriculture's Rural Development issues periodic Notices of Solicitation of Applications for the Rural Energy for America Program (REAP) in the Federal Register. The FY 2018 solicitation for the REAP program includes a total budget of approximately $800 million. 

The Rural Energy for America Program (REAP) provides financial assistance to agricultural producers and rural small businesses in America to purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings and facilities, use renewable technologies that reduce energy consumption, and participate in energy audits and renewable energy development assistance.

Renewable energy projects for the Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loan and Grant Program include wind, solar, biomass and geothermal, and hydrogen derived from biomass or water using wind, solar, or geothermal energy sources. These grants are limited to 25% of a proposed project's cost, and a loan guarantee may not exceed $25 million. The combined amount of a grant and loan guarantee must be at least $5,000 (with the grant portion at least $1,500) and may not exceed 75% of the project’s cost. In general, a minimum of 20% of the funds available for these incentives will be dedicated to grants of $20,000 or less. For more information on grant, loan guarantees, loan financing, and opportunities for combinations thereof, visit the USDA website. 

Application due dates are published annually in the Notice of Funding Availability. 

Eligibility

Grants and Guaranteed Loans are generally available to small businesses and agricultural producers and other entities as determined by USDA. To be eligible for REAP grants and guaranteed loans, applicants must demonstrate sufficient revenue to cover any operations and maintenance expense as well as any applicable debt service of the project for the duration of the guaranteed loan or grant. Rural small businesses must be located in rural areas, but agricultural producers may be located in non-rural areas.

Eligible project costs include purchasing energy efficiency improvements or a renewable energy system, energy audits or assessments, permitting and licensing fees, and business plans and retrofitting. For new construction the replacement of older equipment with more efficient equipment may be eligible as a project cost only when a new facility is planned to be more efficient and similarly sized than the older facility. Working capital and land acquisition are only eligible for loan guarantees.

For more information regarding applicant and project eligibility for loans and grants, visit the USDA REAP eligibility webpage, read the eligibility requirements in the most recent Solicitation of Applications for REAP funding in the Federal Registry, and/or contact your state rural energy coordinator.

Regional rural energy coordinators provide loan and grant applications upon request.

History

The Food, Conservation, and Energy Act of 2008 (H.R. 2419), enacted by Congress in May 2008, converted the federal Renewable Energy Systems and Energy Efficiency Improvements Program,* into the Rural Energy for America Program (REAP). Similar to its predecessor, the REAP promotes energy efficiency and renewable energy for agricultural producers and rural small businesses through the use of (1) grants and loan guarantees for energy efficiency improvements and renewable energy systems, and (2) grants for energy audits and renewable energy development assistance. Congress has allocated funding for the new program in the following amounts: $55 million for FY 2009, $60 million for FY 2010, $70 million for FY 2011, and $70 million for FY 2012. REAP is administered by the U.S. Department of Agriculture (USDA). In addition to these mandatory funding levels, up to $25 million in discretionary funding may be issued each year. The American Taxpayer Relief Act of 2012 (H.R. 8) extended discretionary funding for FY 2013. The 2014 Farm Bill reauthorized the USDA to offer these programs and removed the mandate to offer grants for feasibility studies.

* The Renewable Energy Systems and Energy Efficiency Improvements Program was created by the USDA pursuant to Section 9006 of the 2002 federal Farm Security and Rural Investment Act of 2002. Funding in the amount of $23 million per year was appropriated for each fiscal year from FY 2003-2007. In March 2008, the USDA announced that it would accept $220.9 million in applications for grants, loan guarantees, and loan/grant combination packages under the Renewable Energy Systems and Energy Efficiency Improvements Program. The application deadline was June 16, 2008.

Land grant colleges and universities are referred to in the summary table as "schools" and "institutional" eligible sectors. K-12 schools are not eligible for this grant.

The U.S. Department of Energy's (DOE) Office of Indian Energy Policy and Programs promotes tribal energy sufficiency, economic growth, and employment on tribal lands through the development of renewable energy and energy efficiency technologies. The program provides financial assistance, technical assistance, and education and training to tribes for the evaluation and development of renewable energy resources and energy efficiency measures.

DOE's program offerings consist of program management through DOE headquarters, program implementation and project management through DOE's field offices, and technical support through DOE laboratories. Program management is carried out by DOE's Weatherization and Intergovernmental Program, which provides programmatic direction and funding to DOE field offices for program implementation. DOE's Golden Field Office solicits, awards, administers, and manages financial assistance agreements.

Program funding is awarded through a competitive process. Click here to view current program funding opportunities, and here to apply for technical assistance.

Note: The Taxpayer Certainty and Disaster Tax Relief Act of 2020, signed in December 2020, extended the phase out of this tax credit.

A taxpayer may claim a credit for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the "placed in service" date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

Solar-electric property

• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service after 12/31/2019 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024
• There is no maximum credit for systems placed in service after 2008.
• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2023.
• The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating property

• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service after 12/31/2019 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024
• There is no maximum credit for systems placed in service after 2008.
• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2023.
• Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
• At least half the energy used to heat the dwelling's water must be from solar in order for the solar water-heating property expenditures to be eligible.
• The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
• The home served by the system does not have to be the taxpayer’s principal residence.

Fuel cell property

• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service after 12/31/2019 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024
• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2023.
  
• The maximum credit is $500 per half kilowatt (kW).
• The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
• In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per 0.5 kW. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs he or she paid.
• The home served by the system must be the taxpayer’s principal residence.

Small wind-energy property

• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service after 12/31/2019 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024
• There is no maximum credit for systems placed in service after 2008.
• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2023.
• The home served by the system does not have to be the taxpayer’s principal residence.

Geothermal heat pumps

• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service after 12/31/2019 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024
• There is no maximum credit for systems placed in service after 2008.
• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2023.
• The geothermal heat pump must meet federal Energy Star criteria.
• The home served by the system does not have to be the taxpayer’s principal residence.

Biomass Heaters

• 26% for systems placed in service after 12/31/2020 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024
• Systems must have a thermal efficiency rating of at least 75%

Significantly, The American Recovery and Reinvestment Act of 2009 repealed a previous limitation on the use of the credit for eligible projects also supported by "subsidized energy financing." For projects placed in service after December 31, 2008, this limitation no longer applies.

Energy Storage

The federal tax code does not explicitly reference energy storage, so stand-alone energy storage systems do not qualify for the tax credit. However, the IRS issued Private Letter Rulings in 2013 and 2018, which address energy storage paired with PV systems. In both cases, the IRS ruled that the energy storage equipment when paired with PV met the statutory definition of a "qualified solar electric property expenditure," as was eligible for the tax credit. It is important to note that Private Letter Rulings only apply to the taxpayer who requested it, and do not establish precedent. Any taxpayer considering the purchase of an energy storage system should consult their accountant or other tax professional before claiming a tax credit.  

History

Established by The Energy Policy Act of 2005, the federal tax credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells. The Energy Improvement and Extension Act of 2008 extended the tax credit to small wind-energy systems and geothermal heat pumps, effective January 1, 2008. Other key revisions included an eight-year extension of the credit to December 31, 2016; the ability to take the credit against the alternative minimum tax; and the removal of the $2,000 credit limit for solar-electric systems beginning in 2009. The credit was further enhanced in February 2009 by The American Recovery and Reinvestment Act of 2009, which removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

Through its Renewable Energy Rebate Program, Colorado Springs Utilities (CSU) offers a rebate to customers who install grid-connected solar-electric (photovoltaic, or PV) systems. To calculate the PV system’s AC output, a de-rating factor is used to account for shading and suboptimal orientation or tilt.

All Renewable Energy Credits (RECs) generated from systems installed under this program are transferred to CSU for compliance with Colorado’s renewable portfolio standard.

The application, interconnection agreement, and other documents are available at the program website above. Qualifying PV modules and inverters must be included in the California Energy Commission's (CEC) lists of eligible equipment. Qualifying systems must also carry minimum manufacturer or installer warranties as outlined in the program guidelines.

Fort Collins Utilities offers its residential customers low-interest loans that may be used to finance up to 100% of the cost of eligible energy efficiency and renewable energy projects at existing homes. This loan program offers no-money-down financing for up to 15 years. Contact Fort Collins Utilities or Funding Partners (who administers the loans) for more information on this program. 

The Colorado Springs Utilities (CSU) Business Energy and Water Efficiency Rebate Program offers a variety of incentives to business customers for energy and water efficiency measures. Full efficiency and equipment guidelines are on the program website. Some rebates vary by the size, capacity or efficiency of purchased equipment. To receive a rebate, complete the application form with all necessary information.  Contact CSU or visit the program web site listed above for other information.

Colorado Springs Utilities offers a variety of energy and water efficiency incentives to its residential customers through the Residential Rebate Program. See program website for complete details. 

Black Hills Energy has a performance-based incentive (PBI) for photovoltaic (PV) systems up to 500 kilowatts (kW) in capacity. In exchange for a PBI, Black Hills Energy earns the renewable energy credits (RECs) associated with the PV-generated electricity for a period of time.

All incentive payments are subject to the availability of funds and a pre-installation site inspection. Black Hills Energy has established participation caps for each tier. The status of funding availability for each tier is available on the website above. PV installations are subject to on-site supervision by a NABCEP-certified professional to maintain a 3:1 ratio for the installation crew (one certified installer for every three solar installers). See the program web site for complete details. 

Locally Assessed Renewable Energy Property

Solar photovoltaic (PV) and wind energy facilities with a capacity of 2 megawatts (MW) AC or less are assessed locally for property taxes. Additionally, low impact hydro, geothermal, and biomass facilities with a capacity of 2 MW or less and which were placed in service prior to January 1, 2010, are also assessed locally for property taxes. In assigning value to renewable energy property, local assessors are required to use the cost approach outlined in the Assessors' Reference Library. Assessors must also examine the sales comparison and income approaches, both described in the Assessor's Reference Library. 

State Assessed Renewable Energy Property

Renewable energy systems with a capacity greater than 2 MW are assessed for property taxes by the State Assessed Properties Section of the Division of Property Taxation. Additionally, small or low impact hydro, geothermal, and biomass facilities of any size which were placed in service on or after January 1, 2010, are assessed by the state for property taxes. These facilities are valued as though their actual value for property taxation is that of a non-renewable energy facility, including all direct and indirect costs. The incremental value of the renewable energy facilities above the non-renewable facilities is disregarded. 

The Division of Property Taxation is responsible for determining the nonrenewable comparison value each year. Starting in 2014, state assessed properties use a five-year rolling average of the most recent rates. This valuation methodology applies to renewable energy that is connected to the grid through an interconnection meter. It does not apply to off-grid customer-sited resources.

For 2015, if the renewable energy facility was already in service before January 1, 2012, then only the generation cost of capital threshold rate is applied. For any new facility placed in service on or after this date, the additional delivery capital cost threshold rate will be included. A template spreadsheet is available at the above website that can be used to estimate property taxes for renewable energy property.

Generation Cost of Capital Threshold Rate

For the 2020 assessment year, the following capital cost threshold rates are to be applied for generation, based on the nameplate capacity of the facility:

• 0-2 MW: $1,267 per KW
• 2.001-5 MW: $1,146 per KW
• 5.001-10 MW: $1,001 per KW
• 10.001-50 MW: $645 per KW
• 50.001-100 MW: $518 per KW
• >100.001: $334 per KW

Delivery Cost of Capital Threshold Rate

For renewable energy facilities going into service on or after January 1, 2012, there is an additional valuation component to be considered for associated transmission lines. The typical non-renewable delivery threshold is $54,000.

Colorado enacted S.B. 07-145 in April 2007, authorizing counties and municipalities to offer property or sales tax rebates or credits to residential and commercial property owners who install renewable energy systems on their property. 

Eligible renewable energy property is defined as "any fixture, product, system, device or interacting group of devices that produce electricity from renewable resources, including, but not limited to, photovoltaic systems, solar thermal systems, small wind systems, biomass systems, or geothermal systems."

The incentive is administered at the local level by individual cities and counties. Individuals should contact the cities or counties where their property is located to see if a tax rebate or credit has been established in their community.

Websites for many Colorado cities can be found at the Colorado Municipal League website, www.cml.org.

Websites for Colorado counties can be found at the Colorado Counties, Inc. web site, www.ccionline.org.

Colorado enacted S.B. 07-145 in April 2007, authorizing counties and municipalities to offer property or sales tax rebates or credits to residential and commercial property owners who install renewable energy systems on their property. 

Eligible renewable energy property is defined as "any fixture, product, system, device or interacting group of devices that produce electricity from renewable resources, including, but not limited to, photovoltaic systems, solar thermal systems, small wind systems, biomass systems, or geothermal systems."

The incentive is administered at the local level by individual cities and counties. Individuals should contact the city and county where their property is located to find out if a tax rebate or credit will be established in their community.

Websites for many Colorado cities are available on the Colorado Municipal League website, www.cml.org.

Websites for Colorado counties are available on the Colorado Counties, Inc. website, www.ccionline.org.

Note: The Tax Cuts and Jobs Act of 2017 repealed section 54C of the Internal Revenue Code, which authorized the use of New CREBs. IRS Notice 2018-15  announced that the IRS will no longer process applications for or issue allocations of New CREBs. The summary below describes CREBs before they were repealed, and is here for historical purposes only. 

Clean renewable energy bonds (CREBs) may be used by certain entities -- primarily in the public sector -- to finance renewable energy projects. The list of qualifying technologies is generally the same as that used for the federal renewable energy production tax credit (PTC). CREBs may be issued by electric cooperatives, government entities (states, cities, counties, territories, Indian tribal governments or any political subdivision thereof), and by certain lenders.  The bondholder receives federal tax credits in lieu of a portion of the traditional bond interest, resulting in a lower effective interest rate for the borrower.* The issuer remains responsible for repaying the principal on the bond.

The Energy Improvement and Extension Act of 2008 (Div. A, Sec. 107) allocated $800 million for new Clean Renewable Energy Bonds (CREBs). In February 2009, the American Recovery and Reinvestment Act of 2009 (Div. B, Sec. 1111) allocated an additional $1.6 billion for New CREBs, for a total New CREB allocation of $2.4 billion. The Energy Improvement and Extension Act of 2008 also extended the deadline for previously reserved allocations ("Old CREBs") until December 31, 2009, and addressed several provisions in the existing law that previously limited the usefulness of the program for some projects. A separate section of the law extended CREBs eligibility to marine energy and hydrokinetic power projects.

Participation in the program is limited by the volume of bonds allocated by Congress for the program. Participants must first apply to the Internal Revenue Service (IRS) for a CREBs allocation, and then issue the bonds within a specified time period. The New CREBs allocation totaling $2.4 billion does not have a defined expiration date under the law; however, recent IRS solicitations for new applications require the bonds to be issued within 3 years after the applicant receives notification of an approved allocation (see History section below for information on previous allocations). Public power providers, governmental bodies, and electric cooperatives are each reserved an equal share (33.3%) of the New CREBs allocation. IRS Notice 2015-12, however, divided the remaining volume cap differently: $516,565,691.35 for public power providers, $597,134,963.60 for governmental bodies, and $280,778,469.00 for cooperative utilities.

The tax credit rate is set daily by the U.S. Treasury Department. Under past allocations, the credit could be taken quarterly on a dollar-for-dollar basis to offset the tax liability of the bondholder. However, under the new CREBs allocation, the credit has been reduced to 70% of what it would have been otherwise. Other important changes are described in IRS Notice 2009-33.

CREBs differ from traditional tax-exempt bonds in that the tax credits issued through CREBs are treated as taxable income for the bondholder. The tax credit may be taken each year the bondholder has a tax liability as long as the credit amount does not exceed the limits established by the federal Energy Policy Act of 2005. Treasury rates for prior CREB allocations, or "Old" CREBs are available here, while rates for New CREBs and other qualified tax credit bonds are available here.

In April 2009, the IRS issued Notice 2009-33, which solicited applications for the New CREB allocation and provided interim guidance on certain program rules and changes from prior CREB allocations. The expiration date for New CREB applications under this solicitation was August 4, 2009. Further guidance on CREBs is available in IRS Notices 2006-7 and 2007-26 to the extent that the program rules were not modified by 2008 and 2009 legislation. In October 2009, the Department of Treasury announced the allocation of $2.2 billion in new CREBs for 805 projects across the country. A new solicitation (IRS Announcement 2010-54) was issued in September 2010 for roughly $191 million in unallocated New CREB bond volume available only to electric cooperatives. The award announcement for this allocation was made in March 2011. It remains to be seen if or when the IRS will issue new funding announcements for Old CREB allocations which were not issued by the December 31, 2009 deadline, or New CREB allocations which miss the three-year issuance period.

History
The federal Energy Policy Act of 2005 (EPAct 2005) established Clean Energy Renewable Bonds (CREBs) as a financing mechanism for public sector renewable energy projects. This legislation originally allocated $800 million of tax credit bonds to be issued between January 1, 2006, and December 31, 2007. Following the enactment of the federal Tax Relief and Health Care Act of 2006, the IRS made an additional $400 million in CREBs financing available for 2008 through Notice 2007-26.

In November 2006, the IRS announced that the original $800 million allocation had been reserved for a total of 610 projects. The additional $400 million (plus surrendered volume from the previous allocation) was allocated to 312 projects in February 2008. Of the $1.2 billion total of tax-credit bond volume cap allocated to fund renewable-energy projects, state and local government borrowers were limited to $750 million of the volume cap, with the rest reserved for qualified municipal or cooperative electric companies.

For further information on CREBs, contact Zoran Stojanovic or Timothy Jones of the IRS Office of Associate Chief Counsel at (202) 622-3980. Questions on recent IRS Notice 2009-33 can be directed to Janae Lemley at (636) 255-1202.


*In March 2010 Congress enacted H.R. 2847 (Sec. 301) permitting New CREB issuers to make an irrevocable election to receive a direct payment -- a refundable tax credit -- from the Department of Treasury equivalent to and in lieu of the amount of the non-refundable tax credit which would otherwise be provided to the bondholder. This option only applies to New CREBs issued after the March 18, 2010 enactment of the law. In April 2010 the IRS issued Notice 2010-35 providing guidance on the direct payment option.

The Rural Energy for America Program (REAP) provides financial assistance to agricultural producers and rural small businesses in rural America to purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings and facilities, use renewable technologies that reduce energy consumption, and participate in energy audits and renewable energy development assistance.

Renewable energy projects for the Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loan and Grant Program include wind, solar, biomass and geothermal, and hydrogen derived from biomass or water using wind, solar, or geothermal energy sources. These grants are limited to 25% of a proposed project's cost, and a loan guarantee may not exceed $25 million. The combined amount of a grant and loan guarantee must be at least $5,000 (with the grant portion at least $1,500) and may not exceed 75% of the project’s cost. In general, a minimum of 20% of the funds available for these incentives will be dedicated to grants of $20,000 or less. For more information on grant, loan guarantees, loan financing, and opportunities for combinations thereof, visit the USDA website.

Application due dates are published annually in the Notice of Funding Availability.

Eligibility

Grants and Guaranteed Loans are generally available to small businesses and agricultural producers and other entities as determined by USDA. To be eligible for REAP grants and guaranteed loans, applicants must demonstrate sufficient revenue to cover any operations and maintenance expense as well as any applicable debt service of the project for the duration of the guaranteed loan or grant. Rural small businesses must be located in rural areas, but agricultural producers may be located in non-rural areas.

Eligible project costs include purchasing energy efficiency improvements or a renewable energy system, energy audits or assessments, permitting and licensing fees, and business plans and retrofitting. For new construction the replacement of older equipment with more efficient equipment may be eligible as a project cost only when a new facility is planned to be more efficient and similarly sized than the older facility. Working capital and land acquisition are only eligible for loan guarantees.

For more information regarding applicant and project eligibility for loans and grants, visit the USDA REAP eligibility webpage, read the eligibility requirements in the most recent Solicitation of Applications for REAP funding in the Federal Registry, and/or contact your state rural energy coordinator.

Regional rural energy coordinators provide loan and grant applications upon request.

History

The Food, Conservation, and Energy Act of 2008 (H.R. 2419), enacted by Congress in May 2008, converted the federal Renewable Energy Systems and Energy Efficiency Improvements Program,* into the Rural Energy for America Program (REAP). Similar to its predecessor, the REAP promotes energy efficiency and renewable energy for agricultural producers and rural small businesses through the use of (1) grants and loan guarantees for energy efficiency improvements and renewable energy systems, and (2) grants for energy audits and renewable energy development assistance. Congress has allocated funding for the new program in the following amounts: $55 million for FY 2009, $60 million for FY 2010, $70 million for FY 2011, and $70 million for FY 2012. REAP is administered by the U.S. Department of Agriculture (USDA). In addition to these mandatory funding levels, up to $25 million in discretionary funding may be issued each year. The American Taxpayer Relief Act of 2012 (H.R. 8) extended discretionary funding for FY 2013. The 2014 Farm Bill reauthorized the USDA to offer these programs and removed the mandate to offer grants for feasibility studies.

* The Renewable Energy Systems and Energy Efficiency Improvements Program was created by the USDA pursuant to Section 9006 of the 2002 federal Farm Security and Rural Investment Act of 2002. Funding in the amount of $23 million per year was appropriated for each fiscal year from FY 2003-2007. In March 2008, the USDA announced that it would accept $220.9 million in applications for grants, loan guarantees, and loan/grant combination packages under the Renewable Energy Systems and Energy Efficiency Improvements Program. The application deadline was June 16, 2008.

Land grant colleges and universities are referred to in the summary as "schools" and "institutional" eligible sectors. K-12 schools are not eligible for this grant.

La Plata Electric Association (LPEA) offers an incentive, not to exceed the cost of the system, to residential and small commercial customers who install a photovoltaic (PV), wind, or hydropower facility. To be eligible for the rebate, the system must be grid-tied and located in LPEA's service territory. Systems 10 kilowatts (kW) or less are eligible for an upfront incentive based on the nameplate capacity and other factors. Systems greater than 10 kW are eligible for a performance-based incentive.

Payments are made every 6 months for the first 10 years of operation.

Customers interested in installing wind or hydro systems should contact the utility to find out the rebate amount.

For the purposes of calculating the upfront incentive, the wattage of the system is determined as follows:

• Solar – the total installed PV panel capacity
• Solar with tracking – the total installed PV panel capacity times 1.25. This factor represents the additional energy output obtained by the use of a tracking device.
• Wind – the nameplate capacity times 0.30. This factor represents the expected energy output given the wind resources of LPEA service territory. If 12 months of hourly, site specific anemometer data can be provided, this factor may be adjusted to represent the site’s wind resource.
• Hydro – available head (in feet) times average annual flow rate (in cfs) times 84.64 (power conversion factor).

The Solar Grant Program provides grants for PV and solar water heating installations on income-qualified homes, site-based non-profit organizations, and low- to moderate-income housing owned and/or developed by a non-profit organization. Individual grant amounts are determined on a case-by-case basis but generally will not exceed 50% of the total out-of-pocket costs for the project after all rebates, tax credits, and other incentives are subtracted. There are two grant cycles each year. Submissions are due by April 30 and October 31. Additional information and grant applications can be found on the website listed above.

The Solar Grant Program is funded out of sales and use taxes paid on solar projects in the City of Boulder. A portion of those taxes are rebated under the Solar Sales and Use Tax Rebate program.

Section 1703 requires either an appropriation to cover the Credit Subsidy Cost (the expected long term liability to the Federal Government for providing the loan guarantee), or payment of the Credit Subsidy Cost by the borrower. A credit-based interest rate spread will be added to certain loans receiving a 100% loan guarantee from DOE and financing from the Federal Financing Bank. Rates and more information are available here.

Note: The Tax Cuts and Jobs Act (HR 1) of 2017 repealed the use of tax credit bonds effective January 1, 2018.  Issuers of QECBs that elected to receive direct payments from the Treasury issued on or before December 31, 2017, consistent with the Internal Revenue Code (Section 54D), will continue to receive direct payments. The summary presented below is for historical purposes. 

The Energy Improvement and Extension Act of 2008, enacted in October 2008, authorized the issuance of Qualified Energy Conservation Bonds (QECBs) that may be used by state, local and tribal governments to finance certain types of energy projects. QECBs are qualified tax credit bonds, and in this respect are similar to new Clean Renewable Energy Bonds or CREBs. The October 2008 enabling legislation set a limit of $800 million on the volume of energy conservation tax credit bonds that may be issued by state and local governments. The American Recovery and Reinvestment Act of 2009, enacted in February 2009, expanded the allowable bond volume to $3.2 billion. In April 2009, the IRS issued Notice 2009-29 providing interim guidance on how the program will operate and how the bond volume will be allocated. Subsequently, H.R. 2847 enacted in March 2010 introduced an option allowing issuers of QECBs and New CREBs to recoup part of the interest they pay on a qualified bond through a direct subsidy from the Department of Treasury. Guidance from the IRS on this option was issued in April 2010 under Notice 2010-35.

With tax credit bonds, generally the borrower who issues the bond pays back only the principal of the bond, and the bondholder receives federal tax credits in lieu of the traditional bond interest. The tax credit may be taken quarterly to offset the tax liability of the bondholder. The tax credit rate is set daily by the U.S. Treasury Department; however, energy conservation bondholders will receive only 70% of the full rate set by the Treasury Department under 26 USC § 54A. QECB rates are available here. Credits exceeding a bondholder's tax liability may be carried forward to the succeeding tax year, but cannot be refunded. Energy conservation bonds differ from traditional tax-exempt bonds in that the tax credits issued through the program are treated as taxable income for the bondholder.

For QECBs issued after March 18, 2010, the bond issuer may make an irrevocable election to receive a direct payment from the Department of Treasury equivalent to the amount of the non-refundable tax credit described above, which would otherwise accrue to the bondholder. The direct payment comes in the form of a refundable tax credit to the issuer in lieu of a tax credit to the bondholder. This option was formerly limited to Build America Bonds (see 26 USC § 6431, H.R. 2847 and IRS Notice 2010-35 for details). The advantage of either option is that it creates a lower effective interest rate for the issuer because the federal government subsidizes a portion of the interest costs.

In contrast to CREBs, QECBs are not subject to a U.S. Department of Treasury application and approval process. Bond volume is instead allocated to each state based on the state's percentage of the U.S. population as of July 1, 2008. Each state is then required to allocate a portion of its allocation to "large local governments" within the state based on the local government's percentage of the state's population. Large local governments are defined as municipalities and counties with populations of 100,000 or more. Large local governments may reallocate their designated portion back to the state if they choose to do so. IRS Notice 2009-29 contains a list of the QECB allocations for each state and U.S. territory. Implementing allocations and reallocations most often, but not always, takes place through State Energy Offices. As of this writing some states have yet to assign implementation responsibilities to a specific state agency.

The definition of "qualified energy conservation projects" is fairly broad and contains elements relating to energy efficiency capital expenditures in public buildings that reduce energy consumption by at least 20%; green community programs (including loans and grants to implement such programs); renewable energy production; various research and development applications; mass commuting facilities that reduce energy consumption; several types of energy related demonstration projects; and public energy efficiency education campaigns. In July 2012 the IRS issued Notice 2012-44 clarifying the meaning of "capital expenditures" and "green community program", and providing guidance on meeting the 20% energy consumption reduction requirement for energy -efficiency related capital expenditures in publicly-owned buildings (see 26 USC § 54D and IRS Notice 2012-44 for additional details). Renewable energy facilities that are eligible for CREBs are also eligible for QECBs.

Colorado exempts from the state's sales and use tax all sales, storage, and use of components used in the production of alternating current electricity from a renewable energy source for fiscal years beginning on or after July 1, 2006. The exemption for systems which produce electricity from a renewable resource includes, but is not limited to, photovoltaic (PV) systems, solar thermal-electric systems, small wind systems, biomass systems, or geothermal systems.

Effective July 1, 2009, through July 1, 2017, all sales, storage, and use of components used in solar thermal systems are exempt from the state's sales and use tax.  Effective May 5, 2014, through July 1, 2019, all sales, storage, and use of components used in biogas production systems are exempt from the state's sales and use tax (see H.B. 1159).

System Components Exempt from Taxation

Eligible components include, but are not limited to, wind turbine generators, rotors and blades, solar modules, trackers, supporting structures or racks, inverters, towers and foundations, plus balance of system components such as wiring, control systems, switchgears, and generator step-up transformers. Also exempt are concentrating solar power components that include, but are not limited to: mirrors, plumbing, and heat exchangers.

Ineligible components include any components beyond the step-up transformers located at the production site, labor, energy storage devices, or remote monitoring systems. 

The exemption only applies to state sales and use taxes – not to sales and use taxes assessed by incorporated towns, cities, and counties. However, Colorado has granted local jurisdictions the authority to exempt renewable energy equipment from sales and use taxes if a local government chooses to do so.

In 2006, the City of Boulder established a solar sales and use tax rebate for photovoltaic (PV) and solar water heating installations. Solar system owners may receive a rebate (essentially a tax refund) drawn from the unrestricted tax revenues collected from solar energy sales.

Out of the sales and use taxes paid to the City of Boulder for solar projects, approximately 55% of revenues go to restricted funds. Within one year of the city’s final inspection, solar project owners can apply to receive a refund of 35% from the amount paid to unrestricted (general) funds, making the value of the refund about 15% of the city sales and use tax paid. The average rebate is approximately $140 for a 4.5 kW photovoltaic system.

The remaining 65% of the unrestricted revenues are used to fund the Solar Grant Program. The Solar Grant Program funds solar energy systems for local nonprofit organizations and income-qualified homeowners.

An application for Boulder's Solar Energy Sales and Use Tax Rebate is available here, and an immigration form must be completed and returned with all applications to comply with House Bill 06S-1023.

Grant Criteria can be found here.

Property Tax Exemption

Renewable energy personal property that is located on a residential classified property, owned by the residential property owner, and produces energy that is used by the residential property is exempt from Colorado property taxation.

Independently owned residential solar electric generation facilities that meet the criteria listed in § 39-1-102 (6.8), C.R.S. are exempt from Colorado property taxation under § 39-3-102, C.R.S. To qualify for the exemption the solar electric generation facility must be located on residential real property, used to produce electricity from solar energy primarily for use in the residential improvements, and have a production capacity of no more than one hundred 100 kilowatts of AC electricity.

Eligible Technologies

Most locally assessed renewable energy property meet the criteria to be classified as personal property under § 39-1-102 (11), C.R.S. 

For Colorado property taxation purposes, solar energy facilities (e.g., PV panels, community solar gardens) property used to produce 2 megawatts (MW) or less of AC electricity and wind energy facilities property used to produce 2 MW or less of AC electricity are locally assessed. In addition, locally assessed renewable energy property includes small or low impact hydroelectric facilities, geothermal energy facilities, and biomass energy facilities as defined in § 39-4-101, C.R.S., used to produce 2 MW or less of AC electricity and placed into use prior to January 1, 2010. Community solar gardens are classified as locally assessed properties.

Ineligible Technologies

Renewable energy property in Colorado is taxable unless specifically exempt by the Colorado Constitution.

All renewable energy systems with greater than 2 MW of AC electricity generation capacity are valued as public utility property by the State Assessed Properties Section of the Division of Property Taxation (Division). Small or low impact hydroelectric facilities, geothermal energy facilities, and biomass energy facilities, as defined in 39-4-101, C.R.S., that are put into use on or after January 1, 2010 and not primarily designed to supply electricity for consumption on site are state assessed regardless of AC generation capacity.

San Miguel Power Association (SMPA) is providing rebates to its residential and commercial customers for installing photovoltaic (PV), small wind, and solar water heating systems systems as well as other renewable energy systems (e.g., micro-hydro, biomass) on a case-by-case basis. Applicants must own the system to qualify for the rebate. Systems leased from a third party are ineligible. 

See website above for more information.

NOTE: The most recent solicitation for this program closed December 14, 2015. Please check the program website for information on future solicitations.

The U.S. Department of Agriculture (USDA) offers an ongoing grant program for the improvement of energy generation, transmission, and distribution facilities in rural communities. This program began in 2000. Eligibility is limited to projects in communities that have average home energy costs at least 275% above the national average. Retail power suppliers serving rural areas are eligible to apply for grant funding, including non-profits (cooperatives and limited dividend or mutual associations), commercial entities, state and local governments entities, and tribal governments. Under the most recent solicitation for projects, a total of $7 million was available for qualifying projects. Under this solicitation grants ranging from $50,000 to $3 million were available for a variety of activities, including:

• Electric generation, transmission, and distribution facilities;
• Natural gas or petroleum storage or distribution facilities;
• Renewable energy facilities used for on-grid or off-grid electric power generation, water or space heating, or process heating and power;
• Backup up or emergency power generation or energy storage equipment; and
• Weatherization of residential and community property, or other energy efficiency or conservation programs.

This grant program is not limited to renewable energy or energy conservation and efficiency measures, but these measures are eligible for this grant program.

EnergySmart for Boulder County helps residents identify, finance, and schedule energy improvements in their homes. This “One Stop Shop” aims to reduce the hassles and hurdles associated with improving a home’s energy efficiency by providing an energy advisor to each participant at no cost. The advisor serves as a guide and advocate by scheduling a home energy assessment, installing free energy conservation materials, identifying and applying for all applicable incentives, and coordinating work through an approved list of contractors. 

Homeowners can receive rebates through EnergySmart on selected efficiency improvements. EnergySmart rebates can be combined with local utility rebates. Multi-Family Units of five or more are not eligible. 

The City of Aspen encourages interested residents and businesses to increase the energy efficiency of homes and offices through rebates and incentives for both single-family and multi-family dwellings. Rebates are available for geothermal heat pumps, solar photovoltaics, air sealing, insulation, water heaters, lighting, and refrigerators. Custom rebates are available for incentives not specifically offered by the utility, but require pre-approval.

Note: Funds provided by Boulder County for rebates have been fully expended for 2016. However, utilities and some cities continue to offer rebates on a first-come, first-serve basis.

EnergySmart services are available to all businesses within Boulder County.

EnergySmart offers a full suite of energy efficiency services. EnergySmart helps businesses (and homeowners) identify and implement energy efficiency improvements. The “One Stop Shop” aims to reduce the hassles and hurdles associated with improving the energy efficiency and comfort of a home or business by providing an expert Energy Advisor to each participant. The Advisor assists with scheduling an energy assessment, reviewing contractor bids, and identifying and applying for all applicable incentives.

EnergySmart also provides rebates to commercial building owners and businesses for a wide variety of energy efficient technologies. Solar photovoltaic (PV) and other renewable energy measures may also be eligible for rebates. The total of all incentives (i.e., EnergySmart rebates, utility rebates, grants, and other available incentives) for lighting and other non-HVAC measures will be limited to 60% of project cost. HVAC projects are also capped at 50% of the project cost or $5,000, whichever limit occurs first. A $10,000 rebate limit will be applied to renewable energy projects, and demonstrated energy efficiency performance or improvements are required first. A $100 rebate bonus is available to qualifying businesses that work with an Advisor to benchmark energy usage prior to starting an upgrade. 

Rebates are first-come, first-served. Businesses may reserve rebate dollars by submitting a bid to EnergySmart. Reservations for lighting projects will be held for up to 30 days, and reservations for other projects will be held for up to 60 days. Call an Energy Advisor at 303-441-1300 for more information on eligibility and the current availability of funds.

In addition to the prescriptive rebates, businesses in the city of Boulder may also be eligible for custom efficiency rebates for a wide variety of measures. The program is offered by Partners for a Clean Environment (PACE). Contact PACE at 303-786-PACE or [email protected] for more information.

Commercial properties in Boulder County may also be eligible for low-interest energy loans offered through Elevations Credit Union. 

Note: In December 2014, the Public Utilities Commission approved Xcel Energy to acquire between 6.5 MW and 30 MW per year through the Solar*Rewards Community Program in 2014-2016. Xcel Energy is currently soliciting bids through a 2016 RFP to develop projects up to 2 MW . Submissions are due April 4.

Legislation approved in 2010 allowed for the development of "community solar gardens" in Colorado. Under the rules of traditional net metering, a utility customer may offset their electricity consumption with electricity produced by a renewable energy system located on their property. Community solar gardens allow for multiple utility customers to purchase or lease interests in a single photovoltaic (PV) system not located on their property, and to have the electricity produced by their share of the system offset the electricity consumption of their home or business.

Xcel Energy's Solar*Rewards Community Program provides incentives to stimulate the development of community solar gardens in its service territory. Of the total megawatts (MW) of projects dedicated to Solar*Rewards Community annually, a portion will be allocated to standard offers of 500 kilowatts (kW) or less. The remaining MW will be dedicated to the large request for proposal (RFP) program for large (greater than 500 kW) systems, for competitive project development. In 2012-2013, 19 solar gardens were approved though the Standard Offer program and 6 through a RFP program.

Xcel offers an incentive for the renewable energy credits (RECs) associated with the electricity produced by the system. Xcel purchases RECs awarded to the subscriber organization which develops the project at a price specified in the developer's bid. Subscribing customers will receive bill credits for the amount of electricity produced by their share of the larger system, but will not receive the REC payments.

Community solar gardens must have at least 10 customer subscribers to qualify for this program. The minimum subscription size is 1 kW. No one subscriber can own an interest in more than 40% of a single project. Further, subscribing customers are limited to subscriptions that will produce no more than 120% of their annual electric usage. Subscribers must be Xcel Energy electric customers, and must reside in the same county as the solar garden unless the county has less than 20,000 residents.

At least 5% of the allocation must be attributed to income-qualified subscribers. Customers that are a member of Energy Outreach Colorado, The Atmosphere Conservancy, the Colorado LEAP Program, or a Municipal Housing Authority qualify as low income. Customers must complete a Low Income Verification Form signed by a representative of the relevant organization. Low-income customers do not face the 1 kW minimum subscription level.

Additional rules apply. See website above for complete details.

The Elevations Energy Loan can be used to finance a wide variety of efficiency and renewable energy projects in homes and businesses. Homes and businesses located in Boulder County or the City and County of Denver are eligible for the low-cost financing. Loan applicants receive assistance from an Energy Advisor through EnergySmart and Denver Energy Challenge, respectively. Homeowners must select from a qualified pool of contractors. All borrowers will be required to pay a $25 processing fee and become members of Elevations Credit Union.

Elevations Credit Union has partnered with Boulder County and the City/County of Denver to offer this full-suite of services. Both EnergySmart and the Denver Energy Challenge help residents and businesses identify, finance, and schedule energy improvements in their homes by providing an energy advisor to each participant. The advisor can assist with scheduling an energy assessment, reviewing contractor bids, and identifying and applying for all applicable incentives.

Rates, terms, and conditions are subject to change and may vary depending on each individual's credit history and underwriting factors. Residents and businesses in Boulder County can contact EnergySmart at http://www.EnergySmartYES.com or 303-441-1300 (for businesses) and 303-544-1000 (for homes) for more information. Residents and businesses in the City and County of Denver can contact the Denver Energy Challenge at http://www.denverenergy.org or 720-865-5520 for more information. This video also provides additional information. 

The Elevations Energy Loan can be used to finance a wide variety of efficiency and renewable energy projects in homes and businesses. Homes and businesses located in Boulder County or the City and County of Denver are eligible for the low-cost financing. Loan applicants receive assistance from an Energy Advisor through EnergySmart and Denver Energy Challenge, respectively. Homeowners must select from a qualified pool of contractors. All borrowers will be required to pay a $25 processing fee and become members of Elevations Credit Union.

Elevations Credit Union has partnered with Boulder County and the City/County of Denver to offer this full-suite of services. Both EnergySmart and the Denver Energy Challenge help residents and businesses identify, finance, and schedule energy improvements in their homes. The “One Stop Shop” provides an energy advisor to each participant. The advisor can assist with scheduling an energy assessment, reviewing contractor bids, and identifying and applying for all applicable incentives.

Rates, terms, and conditions are subject to change and may vary depending on each individual's credit history and underwriting factors. Residents and businesses in Boulder County can contact EnergySmart at http://www.EnergySmartYES.com or 303-441-1300 (for businesses) and 303-544-1000 (for homes) for more information. Residents and businesses in the City and County of Denver can contact the Denver Energy Challenge at http://www.denverenergy.org or 720-865-5520 for more information. This video also provides additional information. 

Energy Smart Colorado is the first rural multi-jurisdictional consortium in the U.S. to implement a comprehensive residential energy efficiency program.

Residents of Roaring Fork Valley and Eagle, Gunnison, Lake, and Summit Counties are eligible for energy efficiency and renewable energy assistance, rebates, and financing through the Energy Smart Colorado program. The program helps homeowners identify, finance, and complete energy improvements in their homes.

Each participating county operates an Energy Resource Center (ERC), providing homeowners and contractors with a local, reliable one-stop-shop for information and service. Each ERC is staffed with a Building Performance Institute certified Home Energy Advisor who provides expert advice, coaching, and assistance with enrollments, home energy assessments, and improvement projects.

Home Energy Assessment

Interested homeowners can schedule a reduced-cost home energy assessment with a qualified Energy Smart Analyst who will come to the home and perform a comprehensive home safety and energy assessment. There are a variety of free improvements the Energy Smart Analyst may install at the time of the assessment including a programmable thermostat, efficient lighting, hot and cold water pipe insulation, a hot water tank insulation blanket, and door weather-stripping.

The Renewable Energy and Energy Efficiency for Schools (REEES) Loan Program was created in 2009 to provide low-interest loans to school districts for the purpose of installing renewable energy systems and purchasing energy efficient school buses. The program was amended in May 2014 via S.B. 14-202 to broaden the scope of eligible energy efficiency projects to include all projects that result in a more efficient use of energy or resources, including water conservation projects. Eligible types of renewable energy include wind, solar, biomass, small hydro, and “other sources of renewable energy.”

Renewable energy project loans are provided to qualified school districts on a competitive basis. School districts are eligible to use loans for renewable energy projects that have third-party ownership or include interest in a community solar garden. Although a charter school is not directly eligible to receive a loan, its authorizing school district can apply for a loan on its behalf.

The maximum loan a school district can receive is $1,000,000, and the maximum loan term is 15 years. The semi-annual application cycle closes on October 31 and April 30 each year.

Applications that meet the criteria for completeness and financial feasibility are ranked on the following three criteria (with corresponding weights):

• energy cost reductions (30%),
• technical merit (40%), and
• educational benefit (30%).

Loan recipients must submit quarterly progress reports and a final project report to the Office of Energy. More information on the program including program rules and applications are available on the program website. 

Note: As of January 1, 2021, this incentive is no longer available.

Community solar gardens are classified as locally assessed properties for the purpose of property taxation. H.B. 1101 exempts from property tax the percentage of electricity capacity (AC) of a community solar garden that is attributed to residential subscribers, governmental subscribers, or organizations that already have been granted property tax-exempt status. The property tax exemption is for the tax years beginning on January 1, 2015 and ending before January 1, 2021. 

Energy Smart Colorado is the first rural multi-jurisdictional consortium in the U.S. to implement a comprehensive residential energy efficiency program.

Residents of Roaring Fork Valley and Eagle, Gunnison, Lake, and Summit Counties are eligible for energy efficiency and renewable energy assistance, rebates, and financing through the Energy Smart Colorado program. The program helps homeowners identify, finance, and complete energy improvements in their homes.

Each participating county operates an Energy Resource Center (ERC), providing homeowners and contractors with a local, reliable one-stop-shop for information and service. Each ERC is staffed with a Building Performance Institute certified Home Energy Advisor who provides expert advice, coaching, and assistance with enrollments, home energy assessments, and improvement projects.

Home Energy Assessment

Interested homeowners can schedule a reduced-cost home energy assessment with a qualified Energy Smart Analyst who will come to the home and perform a comprehensive home safety and energy assessment. There are a variety of free improvements the Energy Smart Analyst may install at the time of the assessment including a programmable thermostat, efficient lighting, hot and cold water pipe insulation, a hot water tank insulation blanket, and door weather-stripping.

Rebates

The Green Colorado Credit Reserve (GCCR) is a loan loss reserve that was created by the Colorado Energy Office (CEO) to incentivize private lenders in Colorado to make small commercial loans up to $250,000 for capital improvements that promote energy efficiency and renewable energy. The GCCR is administered by the Colorado Housing Finance Authority (CHFA) on behalf of the CEO.

How the Loan Loss Reserve Works

For each loan made by a participating lender, the GCCR will provide a loan loss reserve equal to 15% of the amount of the loan. For example, if a participating lender makes a loan for $100,000, the lender will have $15,000 available to cover any losses in case of loan default.

According to the CEO, A 15% loan loss reserve increases lenders’ risk thresholds, enabling them to offer lower interest rates for loans that promote energy efficiency and renewable energy. Furthermore, the loan loss reserve encourages banks to close multiple loans because the reserve aggregates as the lender makes more loans. For example, if a lender makes ten loans for $100,000, the lender will have aggregated $150,000 for any possible loan losses.

Lender Participation

A list of participating lenders is available through the CHFA. Lenders interested in participating in the GCCR Program should review the program guidelines, and must submit an application to CHFA for approval. By providing a risk sharing mechanism, the GCCR invites lenders to make more of these loans by giving them the experience necessary for them to feel more comfortable with these products in the future.

Contact the CEO Director of Finance & Operations for more information.

Xcel Energy connects residential customers with third-party lending partners, Elevations Credit Union and Lendkey, to provide qualifying residential customers with access to loan products for home energy efficiency improvements. Loans for qualifying home energy efficiency projects can be combined with rebates to make projects even more affordable (loans are also available for non-rebated measures).

LendKey Home Energy Efficiency Loan: The LendKey Home Energy Efficiency Loan is available to residential customers throughout Xcel Energy’s Colorado service territory. This loan features a field of highly vetted contractors and an instant-approval process.

Elevations Energy Loans: In City and County of Denver and Boulder County, homeowners have access to the Elevations Energy Loan, which offers low interest rates and access to an energy advisor.

Visit the program website for more information on this program.

Federal Housing Administration (FHA) through its PowerSaver loan program offers three financing options for homeowners to make energy efficiency and renewable energy upgrades in their residences. For all three PowerSaver products, borrowers must select from a list of approved PowerSaver lenders. Please check the HUD website to find a list of participating FHA approved lender for the program. PowerSaver products are not currently offered in all states, so all potential applicants are encouraged to first check the program website to ensure product availability in their location. 

Eligibility

Homeowners must have following requirements to be eligible for the program:

•  Minimum credit score of 660
•  Maximum total debt to income ratio of 45% (monthly income divided by monthly debt payments)
• Maximum combined loan-to-value: 100%
• Property type: One-unit, owner-occupied, principal residence properties only
• Appraisal requirement: exterior-only inspection appraisal or other FHA method of valuation
• PowerSaver insures lien position in the first place, or second place, and also insures loans without lien, as long as the loan amount is less than $7,500. 

Eligible Measures

Eligible home energy upgrades include, but are not necessarily limited to, the following:

• A whole home upgrade through Home Performance with ENERGY STAR
• Insulation and air sealing
• Replacing doors and windows
• Upgrading heating, ventilation, and air-conditioning systems and hot water systems
• Home automations systems and controls (e.g., smart thermostats)
• Installing solar photovoltaic (PV) systems, solar thermal hot water systems, small wind power, or geothermal heat pumps

PowerSaver Home Energy Upgrade—Up to $7,500

This unsecured consumer loan is intended for smaller projects (e.g., insulation, air and duct sealing, water heating, replacing heating and cooling equipment, etc.). It does not require a home appraisal or lien on the property. Single-family homeowners may qualify for the loan if they have manageable debt and a credit score of 660 or higher. Interest rates vary, but typically range from 4.99% to 7.75%. PowerSaver participating lenders, markets, and contact information is available here.

PowerSaver Second Mortgage (Title I)—Up to $25,000

This Title I loan is intended for financing larger retrofit projects, including energy efficiency, PV, solar hot water, geothermal, or other renewable energy projects. A home appraisal or equity is generally not required, but PowerSaver lenders may request it if required by their investor. Borrowers cannot currently have an existing home equity loan, a second lien, or second mortgage to qualify for this product. Interest rates vary but typically range from 4.99% to 9.99%, and the maximum loan term is 20 years. PowerSaver Title I participating lenders, markets, and contact information is available here.

PowerSaver Energy Rehab (203(k))—First mortgage up to FHA loan limits

This 203(k) loan is for home purchase or refinance, targeting either home buyers wishing to combine home improvements with a home purchases or to homeowners wishing to include home improvements when refinancing an existing mortgage. It is FHA-insured up to 100% for a home purchase or refinance, plus the cost of a home improvement project. Current loan limits for a single-unit property vary by area from $217,500 to $625,000 (higher amounts are permitted for two-, three- and four-unit properties); specific loan limits for an area can be found at this website. In order to qualify as a 203(k) PowerSaver loan, at least $3,500 of the home improvements must consist of eligible PowerSaver measures. PowerSaver 203(k) participating lenders, markets, and contact information is available here.

The two types of PowerSaver 203(k) loans are Standard and Streamlined. Standard 203(k) loans are for major improvements, where a home improvement project costs at least $5,000 and includes $3,500 in energy upgrades. The Streamlined 203(k) loans are for minor home improvements, where the home improvement project cost must not exceed $35,000. A HUD consultant is only required for oversight of home improvements for Standard 203(k) loans. 

NOTE: Only multifamily properties are eligible for the program. Single family homeowners are not eligible for this program. 

The Fannie Mae Green Financing Business provides mortgage financing to apartment buildings and cooperatives (with 5 or more units) to finance energy and water efficiency property improvements. Its green financing programs include Green Rewards, and preferential pricing for loans secured by a property with an eligible Green Building Certification. All Fannie Mae green loans are securitized as Green Mortgage Backed Securities (Green MBS). To learn more about these programs, multifamily property owners should coordinate with a Fannie Mae DUS Lender:  https://multifamily.fanniemae.com/about-multifamily/our-partners/dus-lenders

Green Rewards, launched in 2015, provides preferential pricing and up to an additional 5% of loan proceeds by including up to 75% of projected owner energy and water savings and 25% of projected tenant savings in the loan underwriting. Conventional and affordable multifamily properties, as well as cooperatives, seniors, military, and student housing properties are eligible for this program. To qualify for a Green Rewards loan the property owner must commit to making property improvements that are projected to reduce the whole property’s annual energy and water consumption by at least 30%, which a minimum of 15% must be attributable to savings in energy consumption. Properties may be located anywhere in US, and the selected property upgrades must be completed within 12 months of loan closing.

Fannie Mae also provides preferential pricing for an acquisition or refinance loan on a conventional or affordable property that has a current, eligible Green Building Certification per Fannie Mae Form 4250.

Please visit the Fannie Mae Green Financing website for more information and detailed program requirements.

Note: This incentive is not available for renewable energy projects coming into service on or after January 1, 2021; a bill to extend the credit's availability was introduced in the 2020 legislative session but did not pass.

Colorado's Enterprise Zone (EZ) program provides tax incentives to encourage businesses to locate and expand in designated economically distressed areas of the state -- those having a high unemployment rate, low per capita income, or a low population growth rate.  A taxpayer may claim an EZ investment tax credit for qualified investments located in an enterprise zone. The income tax credit is equal to 3% of the investment. A taxpayer can claim up to $750,000 during any tax year for eligible renewable energy. 

Refund in Lieu of a Tax Credit

A taxpayer who places a new renewable energy investment in service on or after January 1, 2015, but before January 1, 2021, may elect to receive a refund of 80% of the amount of the EZ investment tax credit (and forgo the remaining 20% as a cost of such an election). If 80% of the EZ investment tax credit is less than or equal to $750,000, the taxpayer receives the full refund in the first tax year; otherwise, the taxpayer annually receives a refund not to exceed $750,000 per tax year until 80% of the EZ investment tax credit has been refunded to the taxpayer.

The taxpayer makes an election by filing an election statement with the Colorado Department of Revenue when filing a tax return. 

Eligible Renewable Energy Investments

Renewable energy investments include recycled energy, renewable energy resources, or greenhouse gas neutral electricity generated using coal mine methane or synthetic gas (conditional on a determination from the Colorado Public Utilities Commission (PUC), done on a case-by-case basis). Synthetic gas is defined as “gas fuel produced through the pyrolysis of municipal solid waste.” 

Recycled energy is defined as "energy produced by a generation unit with a nameplate capacity of not more than 15 megawatts (MW) that converts the otherwise lost energy from the heat from exhaust stacks or pipes to electricity and that does not combust additional fossil fuel,” and excludes energy produced by any system whose primary purpose is the generation of electricity.

Renewable energy resources include solar, wind, geothermal, biomass (nontoxic plant matter consisting of agricultural crops or their byproducts, urban wood waste, mill residue, slash, or brush; animal wastes and products of animal wastes; and methane produced at landfills or as a by-product of the treatment of wastewater residuals), new hydroelectricity with a nameplate rating of 10 MW or less, hydroelectricity in existence on January 1, 2005, with a nameplate capacity of 30 MW or less, and fuel cells using hydrogen derived from eligible renewables.

Carryover

Any excess credit allowed for a renewable energy investment made in an income tax year commencing before January 1, 2018, may be carried forward 22 income tax years following the year the credit was originally allowed.

Colorado has created a statewide PACE program that allows property owners to finance 100% of the up-front costs of an energy efficiency, renewable energy, or water conservation improvement. Property owners repay the financing as a special assessment on their property tax bill over the financing term, up to 20 years. Typically, the annual energy savings exceed annual assessments, making PACE projects cash flow positive from the first year. C-PACE funding is available to commercial, industrial, agricultural, non-profit and multifamily properties. New construction may use PACE financing for up to 20% of the total construction costs when designing and building energy efficiency measures beyond what is required by the existing code. 

C-PACE is administered by Sustainable Real Estate Solutions SRS on behalf of the state New Energy Improvement District (NEID), which was authorized by HB 10-1328 (and amended by SB 13-1212 and SB 16-171). NEID by statute is governed by a Board of Directors that includes representatives from the Colorado Energy Office, real estate development, banking, energy efficiency and renewable energy, and public utilities. Counties must opt in to the program through a participation agreement with the NEID in order to make C-PACE financing available to properties located within the county. Counties are responsible for collecting assessment payments and remitting those payments to NEID in order to distribute repayments to the original capital provider. To cover the costs of these services, counties may leverage a 1% servicing fee, usually included in the total financed amount and repaid over the course of the financing. Boulder and Adams are participating in the C-PACE program, and several others are in discussions with NEID (as of June 2016: Arapahoe, Broomfield, Denver, Eagle, Garfield, Jefferson, Mesa, Pitkin, Pueblo, and Summit). 

Financing is provided by private capital providers who meet the program’s criteria. Projects may select their capital provider before applying to the program, or may apply without pre-arranged funding and use a pool of eligible capital providers to find the best-fit financing. 

PACE liens, as special assessments, are senior to mortgages and other commercial liens. Therefore, property owners must receive the consent of all mortgage holders on the property to participate in the program. Qualification for C-PACE financing is based on the property’s market value, the dollar value of the energy improvement, the property owner’s equity in the property, and the owner’s mortgage and property tax payment history. The amount of allowable financing is based on the property’s financial statements, including the loan to value percentage, and other considerations of the mortgage holder. The repayment period is limited by the effective useful life of improvements. Interest rates vary but are fixed and typically low compared to alternative sources of financing. There is a program administration fee of 2.5% of the project finance amount, with a maximum fee of $75,000.

C-PACE provides support to contractors through building selection, project scoping, proposal preparation, technical review, financing, construction, and commissioning. Attendance of a contractor training workshop is required to be registered with the C-PACE program.

See the program website for more details, including a complete program guide, application forms, and information tailored to contractors, property owners, mortgage holders, counties, and capital providers. 

History of PACE in Colorado

The C-PACE program operates under the statutory authority of CRS 32-20-101 et seq. HB 10-1378 established the NEID, and SB 13-212 made further amendments to establish the C-PACE program with the ability to utilize third-party financing to fund energy improvements. Colorado originally passed PACE enabling legislation in 2008 with HB 08-1350, though the more recent legislation supersedes this original statute.

The Colorado Energy Office has partnered with Elevations Credit Union to provide loans for home energy upgrades through the Residential Energy Upgrade (RENU) Loan Program. Participants must work with a RENU-approved contractor to identify energy improvements and receive a cost estimate. Customers must then apply for the loan through Elevations Credit Union.  See website above for more information.

The City of Aspen offers a variety of incentives to its commercial customers to encourage the use of energy efficient products. Rebates are available for water heaters, low flow fixtures, toilets, solar photovoltaics, geothermal heat pumps, and custom projects.

For water efficiency rebates, contact the City of Aspen Climate Action Office at [email protected] or 970-920-5039.

For custom rebates, schedule a custom rebate consultation by calling at 970-925-9775.

For more information on any of these programs, visit the program website.