This Renewable Energy World article has additional context on the ITC.

And an update explaining final rules.

@brtietz , the SETO article for residential and there is not basis reduction for ITC

Is there a specific SAM case/project file that shows what "effects" of the ITC percentage calculation is incorrect and for what markets?

Whoops. This is the correct article: https://www.energy.gov/eere/solar/federal-solar-tax-credits-businesses

This SAM file shows a case where the ITC basis is reduced by a taxable investment based incentive:
ITC_basis_reduction.zip The ITC credit should remain at $284,459 in this case (same as IBI)

This would also apply to CBI and PBI as well, assuming the taxable box is checked and the reduces bases box is unchecked.

I agree we should be consulting the rules for residences for the residential case. I believe the rules for businesses above apply to every other case.

Whoops. This is the correct article: https://www.energy.gov/eere/solar/federal-solar-tax-credits-businesses

This SAM file shows a case where the ITC basis is reduced by a taxable investment based incentive: ITC_basis_reduction.zip The ITC credit should remain at $284,459 in this case (same as IBI)

This would also apply to CBI and PBI as well, assuming the taxable box is checked and the reduces bases box is unchecked.

I agree we should be consulting the rules for residences for the residential case. I believe the rules for businesses above apply to every other case.

In digging through the code, I think the disconnect is the updated installed cost based on any IBI or CBI applied as:

This value affects the ITC percentage as it is based on the installed cost and the Investments and Capacity based incentives act to reduce the installed cost BEFORE the ITC is applied.

So, do we want to rework that equation so that the ITC is always based on the installed cost before IBI and CBI are applied?

Are you saying that the cost_installed in the code above should only be reduced if the IBI and CBI are not taxable?

The proforma was constructed so that IBI and CBI are applied in year 0 and the ITC was applied in year 1

I am not sure how to proceed here...

@cpaulgilman, any advice?

Are you saying that the cost_installed in the code above should only be reduced if the IBI and CBI are not taxable?

Yes. Given the checkboxes in the UI, the default of "taxable" and "does not reduce basis" should not run this code. If taxable is not checked, or if reduces basis is checked, then this code should run. Alternatively, we could simplify the code to only run if "reduces basis" is checked, and solve the inter-dependency between the two checkboxes in the GUI/help.

Breaking this into separate issues for other financial markets with this issue specific to hots developer and others will be updated accordingly. See #1722

See ssc pull request NREL/ssc#1141 for host developer market to address this issue

I'm not sure exactly what the issue is here:

1. Is the goal for a IBI and ITC incentive to be the same, i.e., a 30% ITC for a commercial business and 30% direct pay incentive (IBI) for a tax-exempt entity should a) be the same dollar amount, and/or b) have the same effect on the cash flow? If this is true, then I think our test file should compare two cases, one with a 30% ITC and one with a 30% IBI, not a single case with both.

2. Under what conditions would you have both a 30% IBI and a 30% ITC?

3. Where in the SETO article does it explain the effect of an IBI or other cash incentive on the ITC basis?

1. The goal of the test file is to show that the IBI and ITC should be the same in this case. We need a case to test the impact of taxable incentives on the ITC (see 3)
2. We encountered this case on PR-ERF, depending on how the incentive is structured.
3. See this discussion on tax basis, which indicated an error in the current behavior (reducing the ITC for taxable incentives):
   

@brtietz Thanks for the clarification.

Note the comment about the exception for PV at a residence: SAM's Host / Developer model may be used for a sytem installed on either a residential or commercial property, so we'll need to consider how to handle that correctly.

Thanks. I think in that case the user could check the "reduces basis" box under my "alternatively" scenario above.