Do Solar Incentives Work: Qualified Low-Income Community Investment
In this guide you'll learn:
- What are community investments
- What are the goals of these investments
- What are the potential Solar incentives when going solar
What is QLICI?
A Qualified Low-Income Community Investment (QLICI) refers to an investment eligible under the New Markets Tax Credit (NMTC) program. The NMTC program, established by the Community Renewal Tax Relief Act of 2000, aims to stimulate economic development and job creation in low-income communities by providing tax incentives to investors. And Solar incentives maybe one of them.
QLICIs are investments made by a Community Development Entity (CDE) into a qualified active low-income community business (QALICB) or into certain real estate or equipment that will be leased or sold to such a business. These investments can take various forms, including equity investments, loans, or financial counseling and other services provided to businesses in low-income communities.
What do these programs want to achieve?
The primary goal of QLICI is to direct capital towards underserved areas to help spur economic growth, support small businesses, and create jobs in communities that traditionally lack access to investment capital. Investors in QLICIs receive a tax credit worth 39% of the investment cost, claimed over a seven-year credit allowance period, thus reducing their federal income tax liability as an incentive for their investment in low-income areas.
What can you gain from it?
The NMTC program is overseen by the Community Development Financial Institutions Fund (CDFI Fund) of the U.S. Department of the Treasury, which allocates NMTCs to qualified CDEs based on a competitive application process. These CDEs, in turn, use the credits to attract investors to make QLICIs in low-income communities.
This framework creates a beneficial cycle: communities gain access to much-needed capital for development projects, businesses receive the financing and services they need to grow, and investors get a tax incentive for contributing to economic revitalization efforts.
