Affordable Housing Benefits from IRS Rules Change on Solar Tax Credit

In May 2008, the Internal Revenue Service (IRS) issued a letter clarifying the rules for using the federal solar investment tax credit in conjunction with tax-exempt bond financing in affordable housing projects. The tax credit provides incentives for businesses purchasing solar arrays; it is set to expire at the end of 2008, although bills designed to extend the credit are still making their way through Congress.

Before this ruling, projects using tax-exempt bond financing could apply for half the value of the solar investment tax credit; the new rule allows these projects to apply for the full credit if the project team can prove that the bond funds were not used to purchase the solar equipment. Since it will make solar arrays more affordable, this ruling opens the door for many affordable housing projects to pursue the technology. This, in turn, will help them meet the green building requirements often associated with state funding for affordable housing (see

EBN

Vol. 17, No. 4).