Bonus Depreciation in SAM

For projects with either the Commercial PPA or Utility IPP financing option, you can use the Custom option under either Federal Depreciation or State Depreciation on the Financing page to model 5-year MACRS with 50% Bonus Depreciation. Here's how:

Assuming that the 5-yr MACRS depreciation schedule is 20, 32, 19.2, 11.52, 11.52, and 5.76 percent for years 1 through 5:

Year 1: 50% bonus + 10% MACRS = 60%
Year 2: 16%
Year 3: 9.6%
Year 4: 5.76%
Year 5: 5.76%
Year 6: 2.88%

In SAM, you specify the values as percentages (not decimals) without the '%' symbol.

Note that for the Utility IPP and Commercial PPA options, SAM calculates the depreciable basis as follows:

Depreciable Basis = Total Installed Cost - ( Total ITC × 0.5 + Total IBI + Total CBI + Total PBI )

To model the incentive using one of the Advanced Utility IPP financing options, you can explicitly specify bonus depreciation on the Financing page.

Here's a description of MACRS + Bonus Depreciation on the DSIRE website:

dsireusa.org/incentives/incentive.cfm?Incentive_Code=US06F

And, here's a useful website listing federal depreciation rates:

www.smbiz.com/sbrl012.html

Best regards,
Paul.

Paul,

I understand the custom depreciation schedule, but can you confirm that to have the Federal depreciable basis be 85% of the system cost (cost - .5*ITC), we should check the box for "Reduces Depreciation Basis - Federal"?

Thanks,

Alex

Yes: When you check the "Reduces Depreciation Basis - Federal" check box on the Tax Credit Incentives page, SAM reduces the depreciation basis by 50% of the ITC amount.

For a 30% ITC that applies to 100% of the total installed cost, the basis reduction would be 0.5*30%=15%, or 85% of the total installed cost.

For the advanced utility financing options (single owner, partnership flip, sale leaseback), the depreciable amount is the sum of total installed cost and other applicable fees and costs, including development fee, equity closing cost, debt service reserve and working capital reserve accounts, and debt closing costs and fees. For those financing options, the basis reduction is 50% of the total depreciable amount.

Best regards,
Paul.