North Carolina

According to the statutes, the basis for determining this tax credit must be reduced by the amount of any "public funds" received by the project. The federal government's 30% investment tax credit is not considered public funds, so the two credits may be claimed against the same basis. The NC Department of Revenue, however, had ruled in at least two cases that the US Treasury Department's cash grants in lieu of tax credit were public funds and would reduce the basis for determining this state tax credit. Senate Bill 388, signed in June 2010, states that the Treasury grants are not public funds, and thus, do not reduce the basis for determining the tax credit. This bill is effective retroactively to projects placed in service on or after January 1, 2009.  
 
North Carolina offers a tax credit equal to 35% of the cost of eligible renewable energy property constructed, purchased or leased by a taxpayer and placed into service in North Carolina during the taxable year. The credit has been amended several times since its original inception. Most recently, House Bill 512 of 2009 extended the eligibility to geothermal equipment, extended the expiration date to December 31, 2015, and allowed the credit to be taken against the Gross Premiums Tax. The credit is subject to various ceilings depending on sector and the type of renewable-energy system. The following credit limits for various technologies and sectors apply:

• A maximum of $3,500 per dwelling unit for residential active space heating, combined active space and domestic water-heating systems, and passive space heating;  
  
• A maximum of $1,400 per dwelling unit for residential solar water-heating systems, including solar pool-heating systems;  
  
• A maximum of $10,500 per installation for photovoltaic systems (also known as PV systems or solar-electric systems), wind-energy systems or certain other renewable-energy systems for residential use;  
  
• A maximum of $8,400 for geothermal heat pumps and geothermal equipment that uses geothermal energy for water heating or active space heating or cooling for residential purposes;  
  
• A maximum of $2.5 million per installation for all solar, wind, hydro, geothermal and biomass applications* for commercial or industrial facilities, including PV, daylighting, solar water-heating and space-heating technologies.

Renewable-energy equipment expenditures eligible for the tax credit include the cost of the equipment and associated design; construction costs; and installation costs less any discounts, rebates, advertising, installation-assistance credits, name-referral allowances or other similar reductions.  
 
The allowable credit may not exceed 50% of a taxpayer's state tax liability for the year, reduced by the sum of all other state tax credits. Single-family homeowners who purchase and install a qualifying renewable-energy system must take the maximum credit amount allowable for the tax year in which the system is installed. If the credit is not used entirely during the first year, the remaining amount may be carried over for the next five years.  
 
For all other taxpayers, the credit is taken in five equal installments beginning with the year in which the property is placed in service. If the credit is not used entirely during these five years, the remaining amount may be carried over for the next five years. The credit can be taken against franchise tax, corporate tax, income tax, or in the case of insurance companies, against the gross premiums tax.  
 
SB 3 of 2007 amended North Carolina's renewable energy tax credit statute to allow a taxpayer who donates money to a tax-exempt nonprofit to help fund a renewable energy project to claim a tax credit. The donor may claim a share of the credit -- proportional to the project costs donated -- that the nonprofit could claim if the organization were subject to tax. HB 2436 of 2008 applied this same mechanism to donations made to units of state and local governments.  
 
Click the links below to access relevant 2008 tax forms and instructions from the N.C. Department of Revenue.

• NC-478G 2009  
  
• NC-478 2009
• Instructions

 
 
 
* The NC Tax Credit Guidelines and the NC Statutes, both linked to above, provide a description of the types of biomass and biomass applications that are eligible for the tax credit. Note residential wood burning stoves do not qualify for the NC state tax credit. If they meet certain energy efficiency standards, however, they may qualify for a tax credit from the federal government.