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The Basics: Renewable Energy Tax Credits

The Basics: Renewable Energy Tax Credits

Empowering a more energy-independent and environmentally sustainable future.

Intended to promote production of energy from renewable energy resources, Renewable Energy Tax Credit (RETC) programs support the acquisition, installation and operation of commercial and residential renewable energy facilities, including solar, wind, biomass and geothermal energy.


RETC Overview

There are two primary types of RETCs: Investment Tax Credits (ITCs) and Production Tax Credits (PTCs).

  • Investment Tax Credits, which are utilized primarily for solar facilities, provide a tax credit equal to 30 percent of the eligible costs to the owners of certain renewable energy facilities that have been placed in service. This tax credit is available through 2019, followed by a two-year phase down of the credit (26 percent in 2020 and 22 percent in 2021), at which point it is reduced to a permanent 10 percent credit. As with previous extensions, the rules will allow renewable energy projects to qualify as long as they start construction before the end of the period.
  • Production Tax Credits, which are primarily available for wind facilities, provide a tax credit based on the amount of energy produced by renewable energy projects and are generally available to the owners of such projects. The PTC provides an inflation-adjusted cent per kilowatt-hour tax credit for the first 10 years of a renewable energy facility's operation and is available through 2016, followed by a multi-year phase down of the credit, permanently ending in 2020. As with previous extensions, the rules will allow wind projects to qualify as long as they start construction before the end of the period.
  • ITC in lieu of PTC: In 2008, Congress passed the American Recovery and Reinvestment Act, which permitted PTC-eligible projects to elect to receive the ITC in lieu of the PTC. Following the Consolidated Appropriations Act of 2016, the election will be preserved through 2020.

RETC Qualification Criteria

While qualifications differ for ITCs and PTCs, one or both forms of tax credits may be available for the following technologies:

  • Solar: Generation of electricity with equipment that uses solar energy to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat
  • Solar Thermal Technologies: Harnessing solar energy to generate heat using solar thermal collectors
  • Wind: Production of electricity from wind energy using a turbine
  • Clean Coal: Production of steam for energy generation using a liquid, gaseous, or solid fuel produced from coal (including lignite) or high carbon fly ash that involves reduced nitrogen oxide, sulfur dioxide and mercury emissions
  • Biomass: Conversion of renewable biomass fuels from living or recently living organisms to heat and electricity using processes similar to that used with fossil fuels
  • Fuel Cells: Conversion of a fuel into electricity using electrochemical means via an integrated system comprised of a fuel cell stack assembly and associated balance of plant components
  • Geothermal: Production of electricity derived from a geothermal deposit, where heat from the Earth is stored in rocks or in an aqueous liquid or vapor
  • Incremental Hydropower: Efficiency improvements or capacity additions in the generation of energy from the force or energy of moving water, which may be harnessed by hydroelectric and non-hydroelectric dams for useful purposes
  • Municipal Solid Waste: Generation of electricity using solid waste, which includes garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility and other discarded material, including solid, liquid, semisolid, or contained gaseous material resulting from industrial, commercial, mining, and agricultural operations, and from community activities, but does not include solid or dissolved material in domestic sewage, or solid or dissolved materials in irrigation return flows or industrial discharges
  • Landfill Gas: Production of electricity from gas derived from the biodegradation of municipal solid waste

Although personal federal tax credits are available for renewable energy facilities, our RETC staff partners exclusively with commercial owners and developers.

A Dedicated Team

Our experienced professionals are experts in RETCs and can help provide project financing to meet a range of needs.

Portfolio Highlights

Our work has provided investment capital and generated substantial returns for renewable energy projects nationwide.

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U.S. Bank and its representatives do not provide tax or legal advice. Each tax and financial situation is unique. Consult your tax and/or legal advisor for advice and information concerning a particular situation.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of its affiliates and third parties.

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