top of page

Senators Introduce Storage ITC Bill


Senator Martin Heinrich (D-NM) introduced S. 3159 to make energy storage eligible for an investment tax credit (ITC) under section 48. The bill introduced last month would make energy storage systems with a capacity of at least five kilowatt hours, regardless of whether it was supplied by a renewable resource, investment tax credit eligible. For instance, a stand-alone storage project that drew power from the grid would be ITC eligible under this bill.


The bill would also allow individuals to own a storage system with a capacity of at least three kilowatt hours used at their homes and to claim a residential energy efficient property tax credit under section 25D. Like the proposed ITC rules for storage, an individual could qualify for the credit even if the storage system was unrelated to a solar system.


Importantly, the bill has a Republican co-sponsor: Senator Dean Heller (NV). To emphasize, the bipartisan support of the bill, Senator Heller issued a press release. Five other Democrats co-sponsored it: Franken (MN), Merkley (OR), Reed (RI) and Hirono (HI); further, Senator King (I-ME) co-sponsored it.


So far the bill has been endorsed by the Energy Storage Association, the National Electrical Contractors Association and the National Electrical Manufacturer’s Association. Many renewable energy companies are reported to support the bill; however, the solar and wind trade associations have not endorsed it yet, which may be a function of the fact that it is not squarely in their wheelhouses.


Unfortunately, a path forward for the bill is less than clear. An optimist could hope that it is combined with other compelling tax legislation, like bills to exclude Olympic medals from taxation and to save Newman’s Own Foundation from being subject to a 200 percent tax, and marked up by the Ways and Means Committee in September. However, that would require support from Ways and Means Chairman Kevin Brady (R-TX), but the bill has yet to be introduced in the House, much less endorsed by Chairman Brady.


Another scenario would be for it to be included in an “extenders” package at year end in a lame duck session of Congress. However, extenders bills usually merely change effective dates in existing legislation, rather than tackling new tax programs like this storage bill.


In 2013, Senator Wyden (D-OR) who is the ranking minority member of the Finance Committee introduced a bill that provided a 20 percent tax credit capped at $1.5 million per energy storage projects that would have expired in 2020. However, that bill did not gain traction, but the public seems to be more focused on storage in 2016 than it was in 2013. The mainstream media has discovered the importance of “grid resiliency,” and this bill would bring the American grid closer to that aspiration.


Under the bill, the ITC for storage would ratchet down in the same manner as the ITC for solar:

  • 30 percent ITC for projects that “start construction” before 2020;

  • 26 percent ITC for projects that start construction in 2020;

  • 22 percent ITC for projects that start construction in 2021; and

  • 10 percent ITC for projects that start construction after 2021.

Further, for a project to be eligible for an ITC over 10 percent, the project must be “placed in service” before 2024 (regardless of the date it started construction). The 10 percent ITC for storage would be “permanent” for storage, as it is for solar. Therefore, for storage projects that either (i) start construction after 2021 or (ii) are placed in service after 2023, there would be a 10 percent ITC. The IRS has provided detailed guidance for what it means for a wind project to “start construction.” Our article analyzing that guidance is available here. (The IRS is working on guidance for what it means for a solar project to start construction.)


With respect to the tax credit for storage installed by individuals at their homes, the credit would follow the phase out in section 25D for solar currently:

  • 30 percent tax credit if it is placed in service before 2020;

  • a 26 percent tax credit if it is placed in service in 2020;

  • a 22 percent credit if it is placed in 2021; and

  • No tax credit if it placed in service after 2021.

For storage (or solar) placed in service by an individuals at their house after 2021, there would be no tax credit. Unlike the ITC rules, the tax credits rules for individual taxpayers have neither a “start of construction” concept nor a 10 percent permanent credit. Our article addressing the phase out rules for residential solar projects owned by individuals is available here.


What's Happening?