Hawaii is perhaps the best place in the nation for businesses to go solar electric. Not only do we have the sun in great abundance across the islands, but also the generous state and federal tax credits, along with an accelerated depreciation schedule, make the installation of a photovoltaic system an outstanding investment.

Up to 47 percent of the system's total cost can be returned to the purchaser within the first year. Factoring in the accelerated depreciation, by the end of the first five years up to 85 percent of the cost of the system returns to the purchaser. (Please see the examples below.)

Financial Incentives for Hawaii Businesses
to go Solar Electric:

• State of Hawaii Energy Conservation Tax Credit
  
• State of Hawaii Capital Goods Excise Tax Credit
  
• Federal Business Energy Tax Credit
  
• Federal and State Accelerated Depreciation
  
• Energy Savings

State of Hawaii Energy Conservation Tax Credit: This corporate income tax credit allows a credit of 35 percent of the cost of equipment and installation of an active solar electric system. The credit is to be applied in the year in which the system is purchased and put into use. This credit is available for systems installed for commercial or industrial use, and there is no maximum limit to the total amount of the credit. Tax credits that exceed the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. (Department of Taxation Form N-157)

State of Hawaii Capital Goods Excise Tax: This tax credit reimburses businesses for the general excise tax or use tax they pay on the purchase of a solar electric system. To be eligible for the credit, the property shall be depreciable property, used in the taxpayer's trade or business in Hawaii, and was subject to Hawaii's general excise or use tax at the rate of 4 percent upon acquisition. The credit is equal to 4 percent of the cost of the solar electric system and is refundable. The credit must be claimed within 12 months of the close of the taxable year. (Department of Taxation Form N-312)

Federal Business Energy Tax Credit: The business energy tax credit is a 10 percent tax credit available to commercial businesses that invest in or purchase energy property in the U.S. Energy property includes solar and geothermal energy. The energy property must be operational in the year in which the credit is first taken. The property must also be constructed by the taxpayer and used by the taxpayer. Credit may not be taken if financing for the project is subsidized or from tax-exempt bonds. The tax credit is limited to $25,000 per year, plus 25 percent of the total tax remaining after the credit is taken. Remaining credit may be carried back to the three preceding years and then carried forward for 15 years. (IRS Form 3468)

Federal and State Accelerated Depreciation: An additional incentive for businesses to go solar electric is the Modified Accelerated Cost Recovery System (MACRS). Under MACRS, businesses can recover investments in solar electric equipment through depreciation deductions. For solar electric equipment, the current MACRS property class is five years. (IRS Publication 946, Form 4562)

Energy Savings: A ProVision solar electric system provides a monthly savings on your electric bill by replacing some or all of your purchased utility kilowatt-hours with solar-generated electricity. These savings will depend on the size of the installed system, business location and the price of electricity and will be realized every month over the life of the equipment, which is estimated at 30 years. The savings potential will be even greater should the cost of utility electricity rise over the time.

Summary

The benefits for Hawaii businesses to go solar electric are very compelling. Assuming that the business has state and federal tax liabilities, financial incentives reduce the cost of the system to a small fraction of the initial purchase price. While the simple payback for the system will depend on a number of factors, including the price of electricity and the location of the business, an excellent payback period of four to six years could be expected. Other benefits of going solar electric include energy security, lessening our reliance on fossil fuels and improving environmental quality.

The following examples show the dramatic savings business owners can achieve by investing in a ProVision solar electric system.

Example 1

Example 2

Example 3