Federal business tax credits - not applicable if business uses AMT? [RE-

[Randy Sadewic]

Hi Bob,
Below is a cut and paste job from SEIA guide that can explain it.
Unfortunately it can limit the tax benefit. It could be related to the
type of business or it could be a short-term-related tax benefit.
Good luck!

Randy

7. Applying the Credit to Taxes
7.1 Alternative Minimum Tax and Floor
A commercial solar tax credit cannot be used to reduce a taxpayer's
regular income taxes by more than 75% of what the taxpayer would
otherwise pay, or below the taxpayer's alternative minimum tax (AMT)
amount, whichever is greater.14 Therefore,companies that pay the minimum
tax are unable to use energy tax credits -- at least in the year they
pay the AMT. The credits can be carried to another tax year. These
limits are limits not only on use of commercial solar tax credits, but
also on most other "business credits." Thus, the commercial solar tax
credits in combination with other business credits cannot reduce a
taxpayer's tax liability in a given year below the AMT floor.
7.2 Carryback and Carryforward of Credits
A commercial solar tax credit that a taxpayer cannot use because of the
floor can be carried back one year and forward 20 years. However, it
appears that only 10% of the 30% solar credit can be carried back before
2006. The remaining 20% of solar credits arising in 2006 cannot be
carried back. If a taxpayer ends up carrying unused energy credits
forward for 20 years and is still unable to use them, the unused credit
can be exercised in the year after the carryforward period ends.
However, only half the credit can be used in this situation - the rest
is lost.

Randy Sadewic
randy at positiveenergysolar.com
NABCEP Certified PV Installer
Positive Energy, Inc.
Phone 505 424-1112
Fax     505 424-1113
 
Enjoy the Sun!
 

-----Original Message-----
From: Bob Clark [mailto:bclark at solar-wind.us] 
Sent: Thursday, August 30, 2007 12:25 PM
To: RE-wrenches at topica.com
Subject: Federal business tax credits - not applicable if business uses
AMT? [RE-wre


WRENCHES:

PREFACE: This system is NOT in California; it is in Washington (state,
the OTHER Washington).

A potential business customer told us that without being able to use the
federal 30% tax credit for businesses, he could not afford to install
the large PV system we designed for him (pay back time was too long). He
said he talked to his tax consultant and that his tax consultant told
him that he could not use the RE tax credit because he was using the
alternative minimum tax (ATM).

How does the ATM work and how does it preclude using the RE tax credit?
If indeed it does, why? Is there any movement afoot to change this? I am
not looking for legally binding tax advice, just a layman's description
of how these things work. Can anyone out there relate similar
experiences?

This was a real bummer to hear this because this would have been quite a
system (many electrons and substantial $s).

Bob Clark
SolarWind Energy Systems, LLC


[Non-text portions of this message have been removed]


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