Policy

USDA REAP Grant Guide for Business & Property Owners

The USDA will help fund your solar project in Utah and Wyoming! The newly expanded REAP program is aiming to make renewable energy more accessible to businesses in rural areas and agriculture businesses in both high and low population areas.

For any business and property owners who are interested in the USDA REAP Program or are considering using REAP funds to acquire a solar energy system, this is the guide for you. This guide also takes into account the newly expanded Inflation Reduction Act, which now allows individuals and businesses to claim 30% of project costs on their taxes (ITC). Factors like choosing American-made equipment, and where your business is located, can both have an impact on how much money you can save – and we’re here to help you figure it out.

Below, Creative Energies has broken down all of the important REAP information so business owners can determine if they qualify.

2023 REAP Applications due March 31, 2023

  • Applications for REAP are accepted at your local state USDA Office (See offices at the bottom).


What is the USDA REAP Grant and What Does the Program Do?

Rural Energy for America Program (REAP) is a grant program funded by the United States Department of Agriculture to make adopting renewable solar energy more financially viable for rural business and property owners. REAP provides two forms of renewable energy funding: a) guaranteed loan financing and b) grant funding for clean energy systems to businesses in rural areas and agriculture producers.


Who May Apply for the REAP Program?

Ag businesses and agricultural producers. 50 percent of their gross income must come from agricultural operations. Below are examples of Ag businesses that may qualify for REAP grant funding:

  • Farmers
  • Ranchers
  • Animal feed manufacturers
  • Breeding companies
  • Farm machinery producers
  • and more!

Small businesses in eligible rural areas. Below are examples of types of businesses that may be eligible to receive REAP grant funding:

  • Restaurants
  • Grocery Stores
  • Retail Shops
  • Manufacturers
  • and more!


Eligible Areas for Grant & Loan Funding

  • Rural regions with a population density of 50,000 residents or less.
  • Agricultural producers in regions of varying population density.


Using Loan & Grant Funds

Installing renewable energy systems, such as wind and SOLAR!

Installation and construction of energy efficiency improvements, such as:

  • High efficiency heating, ventilation and air conditioning systems (HVAC)
  • Insulation
  • Lighting
  • Cooling or refrigeration units
  • Doors and windows
  • Etc.


Available Funding (In addition to the 30% tax credit)

  • Loan guarantees on loans up to 75% of total cost of the project.
  • Grants for up to 40% of total cost of the project.
  • Combined grant and loan guarantee funding up to 75% of total cost of the project.


What are the Loan Guarantee Terms?

The loan officer will establish the guaranteed loan term based on several factors: a) the use of loan funds, b) the lifetime of the renewable energy assets being used (aka solar panels, inverters, racking, etc.) and c) the business owner’s ability for repayment. Loan terms vary but will never exceed forty years.


Interest Rates & Underwriting Requirements for the Loan Guarantee

  • Interest rates are determined by the lender and the borrower.
  • Consistent with lending procedures, the loan officer will evaluate the credit of the borrower.
  • The business and/or property owner must demonstrate ability to repay the loan guarantee.
  • Projects must be utilizing commercially available technology.
  • An audit may be required for energy efficiency projects.


Grant Terms

Renewable energy system grants are set at a $1,000,000 maximum funding request.

Energy efficiency grants are set at a $500,000 maximum funding request.


How the Loan and Grant Process Works

  • You CAN claim the REAP on 100% of the project and claim the tax credit on 100% of the project costs. BUT you would need to claim the REAP grant as income.
  • If you do REAP as not being income, you would only be able to claim a tax credit on 50% of the project cost (or whatever amount is not covered by REAP).


What is MACRS?

The Modified Accelerated Cost Recovery System (MACRS) refers to the depreciation of an asset. Now, you might be wondering, what exactly is depreciation?

Good question! We recommend listening to what the Internal Revenue Service has to say about the issue:

“Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.”

In other words, the value of any physical asset–a car, a TV, or solar panels–decreases over time, especially as you use it. In tax law, depreciation is a way to lower your taxable earnings. By depreciating the value of an asset, you take the amount that the asset has lost value by and ‘allocate’ it to a specific time period (such as a year) when that asset was providing value.

Here is an example of a calculation of REAP funding when combined with the federal tax credit and the MACRS depreciation. It illustrates how these various forms of funding can cover the majority of the cost of the project. In this example, we are assuming the project costs $100,000, and the grant recipient is claiming the REAP awards as income:

  1. REAP: $100,000 x 40% = $40,000
  2. ITC: $100,000 x 30% = $30,000
  3. MACRS: add back 50% of ITC
    1. $15,000 + $60,000= $85,000
    2. Multiply by Owners tax bracket (assumed 22%)
    3. 22% x $85,000 = $18,700
  4. NET system cost after REAP, 30% ITC & MACRS
    1. $100,000 - $40,000 - $30,000 - 18,700 = $11,000

Below, see how these various form of funding can cover most of the cost of the entire renewable energy system:

USDA REAP Program Summary:

The REAP Grant is a huge opportunity for businesses to fund their renewable solar energy system. As explained in the guide, there are multiple options for businesses depending on their situation. The REAP program can provide more funding for those who want to pay less immediate costs for solar using the loan option. Even if you are just thinking about going solar, reach out to Creative Energies and become informed of what funds are available to your property or business.

Visit the United States Department of Agriculture for more details:

USDA REAP Info Page.


CONTACTS:

USDA Rural Development - Wyoming State Office

100 East B St., Room 1217

Casper, WY 82601

(307) 233-6700


USDA Rural Development - Idaho State Office

9173 West Barnes Drive, Suite A1

Boise, ID 83709

Voice: 1 (800) 632-5991 (toll free)

(208) 378-5615

Fax: (208) 378-5643


USDA Rural Development - Utah State Office

125 South State Street, Room 4311

Salt Lake City, UT 84138

Voice: (801) 524-4320

Fax: (844) 715-5084


GRANT WRITER - USDA REAP GRANT:

Sarah Biddle Wolcott

saltashmountain@gmail.com

Website: https://saltashmountain.com/

(406) 600-0029


GRANT WRITER - USDA REAP Grant Specialist:

Alex Arnold

Alex@lightshed.us

Webiste: https://lightshed.us



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