The Ethics Of The Corporation

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takes into account both equipment and labor. The tax credit amounts to a 30% credit for solar, fuel cells, small wind and various other PTC-eligible technologies, and a 10% credit for geothermal, micro-turbines, and Combined Heat and Power (CHP). Unlike the PTC, the ITC has a time commitment of only five years, and the tax credit is realized the same year the project begins operation. Ownership transfers are permitted, but if a project owner sells its assets before the end of the five-year period, the Internal Revenue Code allows the government to recapture the unvested portion of the credit. Thus, for example, if the project owner sells his interest to another party after three years, the project owner will need to pay back 40% of the investment tax credit it received when the project began operation. There are several benefits that have made the ITC desirable for investors. Most notably, investors are not exposed to the risks of decreased demand or production obstacles, since selling electricity is not a requirement of the ITC. Moreover, the ITC reduces the depreciable basis of the project owner’s property and presents more incentive options for investors. Also, unlike the PTC and the Section 1603 cash grant, the ITC remains in effect until December 2016. However, if the PTC gets renewed, project owners may only take advantage of either one tax credit. Thus, if a project owner wants the ITC, he or she forgoes the benefits of the PTC. THE SECTION 1603 CASH GRANT
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