Virginia would approve solar projects and offer tax credits

The Department of Energy would evaluate and approve qualifying solar and short-duration battery storage projects for the tax credit. The program would cover residential, commercial, industrial, and utility-scale projects in Virginia, including new projects and certain storage projects added to existing solar facilities. Residential projects would need to meet listed federal Inflation Reduction Act qualifications, be fully operational, and use storage lasting up to two hours. Commercial, industrial, and utility-scale projects would need to meet the listed federal qualifications, use storage lasting up to four hours, and have construction certified as complete within five years after construction began. Commercial and industrial projects would be evaluated based on the applicant’s willingness to join the State Corporation Commission’s virtual power plant pilot program. Utility-scale projects would be evaluated based on their ability to reduce electric utility costs for ratepayers. No project could receive the credit without Department approval. Projects generally would need to be in service or begin construction on or after July 1, 2026, and the act would take effect January 1, 2027.

An approved taxpayer would be allowed a one-time refundable tax credit equal to 35 percent of eligible project costs. The credit would be capped at $6,000 for a residential project, $2.5 million for a commercial or industrial project, and $5 million for a utility-scale project. The project would need Department approval and would have to meet the program’s requirements. Eligible costs would include direct costs for construction, installation, equipment, storage, engineering, permitting, interconnection, and related project work, but would exclude unrelated land, construction, lobbying, fossil-fuel systems, and other listed costs. Taxpayers would submit satisfactory purchase receipts with their income tax returns and retain cost records and approval certificates for at least five years. Credits would be available only while funds remain in the applicable category and annual cap. The total would generally be limited to $50 million per budget cycle, unless the General Assembly appropriates a different amount. The credit would apply to taxable years beginning on or after January 1, 2027, but before January 1, 2032. It would be earned when the project is placed in service and claimed in five yearly installments; remaining installments would expire if the equipment is disposed of, removed from service, or moved out of Virginia.

The Department of Energy would publish quarterly reports and maintain a public dashboard about approved projects and credit use. The reports would summarize credit allocation, while the dashboard would show regional participation, demographic information such as low- and moderate-income data, and progress by industry sector. The reporting and dashboard duties would apply after the act’s January 1, 2027 effective date.