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Supercharged Savings with Energy Incentives

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How a Thoughtful Approach Maximized Benefits

Client

Our client owns a full-service electric vehicle charging facility on the West Coast.  The property combines over 40 EV chargers with amenities like a snack bar, complimentary seating, and free wi-fi, transforming charging time into productive time.

Infastructure

Energy for charging is provided by an extensive solar panel array as well as a Battery Energy Storage System (BESS).

Timeline

The newly constructed property (including the solar array) was placed-in-service in 2024, with an anticipated completion of the BESS slated for Q1 2026.

a solar panel on a field

Challenge

The client wanted to fully leverage tax savings on their newly constructed facility while maximizing the credits achieved. The client met prevailing wages requirements on the BESS, but the solar panel array was constructed without meeting the standards.

Approach

Our approach began by assessing the different aspects of the client’s property and the associated placed-in-service dates.

We proposed a two-fold strategy to maximize tax savings:

A Cost Segregation Study

  • To accelerate depreciation on the property’s shorter-lived asset classes
  • To capitalize on bonus depreciation
  • To carve out and quantify energy property, providing the documentation needed to support an Investment Tax Credit Study

An Investment Tax Credit (ITC) Study

  • To claim the Investment Tax Credit on the BESS and the solar array, the property’s two renewable energy systems

Strategic Timing & Tax Credit Analysis

Timing was considered carefully, As the client had valid concerns regarding whether the project met the PWA (Prevailing Wage and Apprenticeship) requirement for the maximum credit.  

The Cost Segregation Study was performed first, which carefully quantified all assets relating to the BESS and solar array.

With that data in hand, we turned our attention to the Investment Tax Credit (ITC) Study.  The Investment Tax Credit – or Clean Electricity Tax Credit – is a dollar-for-dollar incentive that supports the growth of renewable energy properties like solar panel or small wind systems.   

Incentive

The base credit value is 6% of the system’s purchase price, and the rate is multiplied by five (5) to 30% if Prevailing Wage and Apprenticeship (PWA) requirements are met. This credit can help offset the initial expense of installing renewable systems.

Eligibility

Eligible costs include equipment, mounting hardware, and installation costs.

Bonus Credit

Additional boosts to the Credit are available if certain criteria are met, including an “Energy Community Bonus” of 2% or 10% (depending on the satisfaction of PWA requirements).

Two Approaches

Initial Single Property Approach

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Revised Split Property Approach

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Single Property Approach

Initially, the BESS and the solar array were approached as one entity, since they share a single parcel of land with a unique Assessor’s Parcel Number (APN). But the overall project was not qualified for the higher credit amount since the solar panel did not meet the PWA requirements. Plus, the single entity (BESS + solar array) exceeded 1 megawatt (MW) in capacity, the combined systems did not qualify for the size-based exemption.

At a rate of 8% -- 6% base Credit + 2% Energy Community Bonus -- this translated to a Credit Value of $265,394.

After this review, the client and EisnerAmper decided there would be a better way to approach this project that would elicit more value.

Split Property Approach

Some energy projects with common ownership must be approached as a single unified entity. But others can be split into separate systems with each system addressed separately.   

A Hybrid Project Checklist was used to determine the approach. The questions are:  

  1. 1. Are the energy properties constructed on contiguous pieces of land?
  2. 2. Are the energy properties described in a common power purchase, thermal energy, or other off-take agreement?
  3. 3. Do the energy properties have a common intertie?
  4. 4. Do the energy properties share a common substation or thermal energy off-take point?
  5. 5. Are the energy properties described in one or more common environmental or other regulatory permits?
  6. 6. Are the energy properties constructed pursuant to a single master construction contract?
  7. 7. Is the construction of the energy properties financed pursuant to the same loan agreement?

If only 1-3 questions are answered as a “yes,” the energy project could be split into separate systems, where each system may be considered independently.

In this situation, “yes” was answered for  three questions:

  • The properties are constructed on contiguous pieces of land (Q. 1)
  • The properties do share a common intertie, in the sense that the BESS could theoretically charge the solar array (Q. 3)
  • The properties were permitted together under the same set of construction documents (Q. 5)

The property could therefore be split since only 3 questions were answered affirmatively.

BESS

The split approach worked out quite well for the BESS. The associated costs quantified by the cost segregation engineer totaled $2,461,800.

The PWA Requirements were satisfied during the BESS’ construction, so the credit rate was 30%. Additionally, the BESS qualified for a 10% “Energy Community Bonus,” boosting the total Credit rate to 40%.

40% of $2,461,800 = $984,720 Credit Value for BESS System.

Solar Array

The split property approach for the solar panel system also yielded enhanced credits.

The qualified costs for the solar panel system totaled $855,700. With the split approach, the Solar Array now qualified as a smaller system – with 1MW capacity or less – and was therefore now exempt from the PWA Requirements and could claim the 30% credit and 10% Energy Community Bonus.

40% x $855,700 = $342,280 Credit Value for Solar Array

Results

Changing from a Single Property to a Split Property approach made all the difference.

BESS

Rate

Solar Array Credit Value
Single Property Approach 8% (6% base + 2% bonus) $196,944
Split Property Approach 40% (30% base + 10% bonus) $984,720
BESS

Rate

Solar Array Credit Value
Single Property Approach 8% (6% base + 2% bonus) $68,450
Split Property Approach 40% (30% base + 10% bonus) $342,280

The result was a credit that was larger by 5-fold, resulting in a total credit available to the client of $1,327,000. This equals an additional $1,061,606 by utilizing the split property approach instead of the single property approach. 

The Cost Segregation Study results were also excellent.  The property’s depreciable basis was $14,468,800.  Engineers moved 53.9% of assets to 5-Year Personal Property, and 8.2% of assets to 15-Year Land Improvements, resulting in a first-year tax savings of $1,382,940.

Strategy and Benefit Summary

 

Cost Segregation Study

 $1,382,940 (First Year Tax Savings)

Single Property Approach

 $984,757 (Credit Value)

Split Property Approach

 $342,280 (Credit Value)

Sunset Challenges

Changes from the recent One Big Beautiful Bill Act (OBBBA) may limit opportunities to fully leverage tax savings on newly constructed facilities.

OB3 Sunset Date References

Incentive

Sunset Date

How can you still claim?
179D Deduction 6/30/2026 If construction commences before 6/30/2026 you can still claim
45L Credit 6/30/2026 If dwelling units are first sold or leased before 6/30/2026, can still claim
ITC | CEIC – Wind and Solar 12/31/2027 If system is placed-in-service before 12/31/2027, can still claim
ITC | CEIC – Other Systems (BESS, Geothermal, Nuclear) 12/31/2032 Plenty of time to claim – OB3 did not put a sunset on these systems
EV Station Recharging Credit 6/30/2026 If equipment is placed-in-service before 12/31/2026, can still claim

We encourage you to discuss your situation with an EisnerAmper team member to create a plan to maximize benefits.

Contact Us

Contact our team to identify and maximize renewable energy tax credit opportunities.