Frequently Asked
Questions.

The Investment Tax Credit, now known as the Clean Electricity Investment Credit, has been part of the U.S. Tax Code since 1978. Corporations and institutions have used this strategy on scale projects for decades. Retail taxpayers now have the same opportunity via Balcony Advantage. Based on IRS Tax Code, Title 26, § 38 and § 46.

Rooftop solar is available through December 31, 2027, with an extension possible if construction begins on a project by July 4, 2026 (per IRC §48E(4) and IRS Notice 2025-42). Battery and storage is available through December 31, 2032, with a phaseout following that date (per IRC §48E(e)).

Solar facilities must be placed in service by December 31, 2027 to qualify for the §48E ITC under the OBBBA. If construction begins on or before July 4, 2026 and work continues continuously, there's a potential extension — up to December 31, 2030 to place the asset in service.

We provide clients with energy community compliance documents and are still waiting for guidance from the Treasury on FEOC requirements.

No. It is a direct investment in renewable energy assets which, given the tax code, may reduce your current tax liability.

The program is structured as an asset purchase, not a loan — so there's no principal repayment in the traditional sense. Clients purchase a solar or energy storage asset outright through an LLC. In return, clients receive a federal tax credit (ITC) equal to a percentage of your investment (typically 30%+). The asset itself has ongoing value and is part of your LLC's balance sheet. At the end of the program, assets may be sold, transferred, or wound down — but this is different from a debt instrument returning principal. The return on investment comes primarily from the tax credit, not from cash repayment. Think of it less like a bond and more like purchasing property that generates a tax benefit.

The net effect is that you're reallocating money you were already going to pay in taxes rather than reaching into savings. Clients typically pay approximately one-third of the total asset cost out of pocket — with the tax credit and depreciation benefits offsetting the rest.

We can form an LLC on your behalf, manage installation on residential properties, and provide bill(s) of sale. We provide maintenance, insurance, and warranties via a technical services agreement and issue a variety of tax documents for your CPA to file your return.

Total asset cost = equity contribution + prepayment income from the homeowner. Example: $100K equity + $150K prepayment = $250K gross basis. Reduced by 50% of ITC to arrive at depreciable basis ($200K after $50K reduction). Per IRC § 1012.

The federal tax credit is 30% of the eligible tax basis. Qualifying projects in designated energy communities may receive an additional 10% adder. Projects meeting domestic content requirements (U.S.-produced steel, iron, manufactured products) may also receive an additional 10% adder.

Depreciation = basis minus half of the tax credit. Clients may also depreciate against state income — rules vary by state. California, for example, allows full basis depreciation without the 50% credit reduction.

Yes. The prepayment amount must be recognized by your LLC as income in the year received or deferred one year under IRC § 451(c), depending on your accounting method election.

The tax credits are subject to recapture if the solar asset is sold or ceases operation within the compliance period — typically five years from when the asset is placed in service.

This strategy still provides savings for clients in states without income taxes.

The IRS requires 100 hours per year of material participation and no one can work more hours than the business owner. Widely held C-Corps have no material participation requirement.

Qualifying activities may include: investigating the solar business opportunity, setting up the legal entity, reviewing contracts and financial models, attending meetings with the solar developer, studying IRS rules, managing financial responsibilities, time with accountants/lawyers/advisors, conducting site visits, market research, and attending conferences. Clients receive access to an online hub with all asset and tax documents, plus the Solar.Study e-learning platform with video modules, tutorials, and white papers to build and track participation hours. Our client care team regularly shares best practices.* *Examples are provided for illustrative purposes only and are not an exhaustive list of activities that may qualify toward material participation. Whether an activity or taxpayer satisfies the requirements of IRC §469 depends on the individual facts and circumstances. Clients should maintain appropriate records of their participation and consult their tax advisor regarding qualifying activities and material participation.

No K-1s are issued from us or the LLC. Exception: if the LLC is filed as a partnership (e.g., husband and wife), members issue the K-1 to each other — never from us.

A year-end tax reporting package including: Ownership Summary, Asset Details, Form 3468 Guide, Form 3468 Increased Credit Amount Statement, Domestic Content Certification Statement, Energy Production Revenue Recognition Report, and Journal Entry View of Assets.

Most clients form a single member LLC treated as a disregarded entity.

Yes, we're happy to share a sample 3468, 3800, and bonus credit documentation.

The Bill of Sale establishes the placed-in-service date. Every project has one, along with UCC Fixture filings, permission to operate letters, purchase agreements, PPAs, and more.

Yes.

Projects are installed throughout the United States on other people's residential and small commercial roofs.

Your LLC or corporation owns the assets. You receive a bill of sale and corresponding tax certificates proving ownership, filed alongside your 1040. Balcony Advantage and our solar developer monitors, warrants, and insures all solar projects for twenty years.

Taxpayers are not taking construction or payment risk. Balcony's strategy focuses on substantially completed residential solar systems. The taxpayer is not funding construction or waiting for milestones. If an asset doesn't meet Balcony's acquisition, documentation, or diligence requirements, it is not included.

FMV is determined through a desktop appraisal using standard market principles — no physical inspection required. Factors include age, location, size, equipment type, operating/maintenance/service costs, electricity value, and solar incentives. An AFR component accounts for energy the site host prepaid for but hasn't yet received.

For smaller-scale residential projects, a full third-party appraisal would create unreasonable cost burden. Valuation is supported through arm's- length transaction elements: PPA pricing, developer pricing, negotiated capital contributions, and a tax advisory calculation tool.

EPC dollar-per-watt caps are reviewed annually with tax counsel and advisory firms to ensure pricing aligns with broader market benchmarks. Statement of work documents provide a breakdown of costs for homeowners.

There's a 'should'-level opinion on ownership, service-contract, material-participation, and economic-substance questions. It's a structural opinion — your client's CPA should review it directly. Available to a client's CPA on request.

We only work with homeowners who sign pre-paid power purchase agreements.

The homeowner.

Yes. We provide power purchase agreements, scope of work, and a copy of the check used to pay for the electricity.

No default risk — we only work with homeowners who pre-pay for electricity. The homeowner reps and warrants that the system stays on the home regardless of sale. There is no debt.

Yes. We also carry a secondary insurance policy at the corporate level and sell your LLC a tertiary insurance policy as good business practice.

Solar panels, inverters, and batteries carry manufacturer warranties meeting or exceeding the 20-year Prepaid PPA term. All systems include a minimum 10-year contractor's workmanship warranty covering engineering, permitting, installation, and commissioning.

Clients may sign a TSA agreement with the O&M provider or may purchase their own insurance and monitoring services outside of our organization.

Service agreements (insurance, warranty, operations) are between the service provider and the LLC. Our existence is an irrelevant component of those agreements.

Decades.

Balcony provides audit-support coordination for taxpayers and their CPA. This includes organizing project documentation, coordinating with advisors and counterparties, and supporting responses regarding solar assets, eligible basis, placed-in-service status, transfer documentation, and related diligence materials.

Audit support, not full audit defense. We prepare a comprehensive audit defense file for every asset — IRS-ready — including prepayment confirmation, call recordings, utility bills, proof of financing, and PTO. Our team assists your CPA or tax attorney during an audit.

Four clients have been audited, and the IRS came back with “no-change" on three of them while the fourth audit is ongoing.

Indemnification provisions are built into core agreements. Under the APA, the Seller indemnifies the Purchaser against losses from breach of covenant/representation/warranty or violations of law. The TSA includes mutual indemnification for breach and legal compliance. Indemnification is not insurance against audit outcomes or tax position changes.

O&M fees are charged under the TSA and calculated based on DC nameplate capacity (kWDC) of solar assets, or kWh capacity for batteries. Usually 60-75 bps per year.

Nothing other than annual O&M fees and whatever the state may charge for their annual LLC fees.

O&M fees plus the initial capital contribution and/or any additional CPA fees.

Our fees are baked into the full cost of the asset — no additional fees. Clients earn depreciation and credits on our fees.

Site hosts have first right to purchase. If they decline, clients may sell to the secondary market at FMV, or retain the asset and continue receiving an Annual Admin Fee from the property owner.

We will compile a report on historical resale data in 2027. Industry-wide data on FMV for residential asset resale is available in 2026.

Best efforts. Structuring as a guaranteed sale could undermine the at-risk rules.

Balcony Advantage is the New York-based sales office working closely with our solar developer on operations, installations, management, warranties, tax preparation, and beyond. Our solar developer, founded in 2020, has saved clients over $490M on their taxes and will sell its one billionth dollar of energy products in 2026.

Everyone at our solar development firm employs this strategy for their families, and the founding members of Balcony Advantage began employing this strategy in 2025.