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Case Study: Reducing C Corporation Taxes With Solar Sales Leaseback Purchases

Operating as a C corporation has particular tax implications and understanding the intricacies of taxation is crucial for optimizing your company’s financial outcomes. Fortunately, there is a solution that can help mitigate these taxes and optimize financial gains: purchasing solar projects. 

As the world pivots towards sustainable energy solutions, corporations have significant financial advantages to participate in this transition. Solar asset purchases provide not just environmental benefits but also attractive tax incentives. With US corporate tax rates averaging 21%, these incentives can play a pivotal role in tax planning strategies.

In this article, we will look into how you could reduce a C Corporations income taxes through buying solar projects and in particular a structure called a Sales-Leasback which provides an opportunity to reduce taxable income and generate extra income at the same time. By incorporating solar asset purchases into their portfolio, C Corporations can optimize their tax position, while simultaneously contributing to sustainability.

Let’s get started!

What Are The Financial Benefits of Buying Solar Projects? 

Buying qualified solar projects can substantially reduce the taxes from C corporation income. The basic benefits of buying qualified solar infrastructure projects are massive, and we explain them in detail in this article

In summary, the financial benefits you receive are:

  • Depreciation: the amount of value that a physical asset loses over time. From a tax standpoint, depreciation is relevant because you can take a deduction for some or all of the amount of the value an asset loses over the first 5 years and primarily in year 1 due to bonus depreciation, reducing your taxable income and saving money on your state and federal taxes.
  • Tax credits: a dollar-for-dollar reduction in the amount of taxes you owe. The government lets you deduct a certain percentage of the solar project costs from your federal taxes. 
  • Income stream: solar projects that qualify for advantaged tax treatment also typically include 15-25 year income streams tied to the sale of energy produced by the project. 

You can read more about depreciation here and the benefits of solar project purchases here.  In the meantime, let’s jump into a case study to illustrate the potential financial benefits from a sale leaseback solar project.

C-Corporation Sales Leaseback Case Study

Epic Industries is a C Corporation established in Delaware that expects to have an income of $10,000,000 in 2023. As a result, it will have a substantial tax bill: $2,100,000 in income taxes or 21% of its total income. 

Buying a qualifying solar project, however, could earn the C-corp significant tax credits, depreciation deductions, and ongoing income to mitigate its high tax burden. Below, we’ll walk through how this corporation can start a solar business to reduce its taxes in 2023.

Specifically, imagine that they chose to buy a $1,495,000 sale leaseback solar project. As a result, Epic Industries could reduce the tax bill in 2023 from $2,100,000 to up to $1,291,026, reduce it by up to $40,186 more in the following 5 years and earn $1,495,000 in income over the next 20 years.

Situation Overview:

  • Income: $10,000,000
  • Expected taxes without solar benefit: $2,100,000

Solar impact:

  • Investment: $1,495,000
  • Tax savings: up to $ 849,160
  • Income: $1,495,000


  • Total tax savings: Reduce taxes by up to $849,760 (57% of the $1,495,000 investment). This is money the corporation otherwise would have lost to taxes.
    • Depreciation: $251,160 in tax savings, or 17% of the initial investment over the first six years with $210,974 of those tax savings coming in year one.
    • Tax Credits: $598,000 in tax savings in the first year, or 40% of the initial investment for this particular project

Total Income: $1,495,000 (5% of initial investment per year for 20 years). Solar projects that qualify for advantaged tax treatment under the IRA typically include 20 year income streams tied to the solar energy produced by the project. These returns depend on the location of the project and local energy rates among other factors but typically will generate around 5% income annually on your investment.

Year by year tax savings and income: Below, you can see the year-by-year tax savings from tax credits and Federal and State depreciation taking into account their particular situation. You can also play with our online calculator to customize it with your own numbers and see your potential savings here

These tax credits and revenue distributions for 20 years add up to $2,344,160, none of which the C-corp would have received without their solar project purchase.

What If They Chose Not To Purchase A Solar Project?

This is, of course, a common question: How would Epic Industries do if they simply paid taxes and invested the remaining money? This is a pretty simple comparison. If they don’t buy the solar project, they’’ll be sending most of that money to the IRS.

Situation Overview

  • Tax bill: $2,100,000
  • Amount not invested in solar: $1,495,000
  • Missed Tax Savings & Income from Solar: up to $2,344,760

Return On investment

If the corporation chose to pay taxes instead of buying solar assets, it would owe that full tax bill of $2,100,000. Compare that to the additional $849,760 it would gain in tax savings from the solar sale leaseback plus the $1,495,000 they would gain from income from the solar project purchase.

This is a 2.31x return on investment. Here is how we get there:

  1. Consider $7,119,048 of Epic Industries income. The tax bill on that amount without a solar asset purchase would have been about $1,495,000.
  2. If they didn’t buy a solar project solar, they’d have had $5,624,078 left come next April.
  3. Instead, they took the $1,495,000 that they would have paid to the government and bought a solar project that yields up to $849,760 in tax savings. They paid $1,495,000 for the solar project, and they’ll still owe $645,240 in taxes. As a result, at the end of the year, out of the original $7,119,048 million, they’ll have $4,978,808 left (as compared to $5,624,078 after taxes, if they had not done the solar purchase)
  4. Accordingly, Epic Industries has $645,270 “at risk” — the difference between what they would have had in their bank account had they just paid their taxes ($5,624,048) and what they have in their account after the solar purchase + tax savings ($4,978,808).
  5. Now consider the future benefits of the corporation’s solar project: $1,495,000  in total revenue over the life of the project (20 years). That is more than a 2.3x return on their at-risk capital. Not bad for a pot of money that would otherwise have gone to the tax collector.

(Epic Industries also could have earned a different type of return from a solar business, focused more on up-front tax savings and less on ongoing income, via a “flip partnership.” You can read more about the various solar structures here.)

Hopefully, the benefits from buying solar projects are now clear, but there are a couple of qualifications and limitations that should be taken into account and you can read more about the mechanics (including “active participation” and other regulatory requirements) here.

What are the Depreciation and Tax Credit Constraints?

If you have C Corporation business income, there is no limit to your depreciation write-off, so there is no depreciation cap in the example above. 

In addition, you can only write-off 75% of your remaining federal tax liability with tax credits (after applying the depreciation tax savings) and if you have excess tax credits for the current tax year, you can apply them to your taxes from the past 3 years or roll them forward and apply them over the next 22 years. For this example, their federal taxable income would be $8,995,362, which is the net value between their $10,000,000 income and their $1,004,638 savings from depreciation (taking into account $210,974 tax savings from depreciation and a 21% federal tax bracket, the corporation’s savings from depreciation would then be $1,004,638 in year 1). So their their federal income taxes would be $1,889,026 and Epic industries could write-off up to $1,416,760  in year 1 from tax credits (75% of the $1,889,026 tax liability for the current tax year, so in this case, they could write-off all $598,000 of their tax credits from the sales leaseback project and could invest more to increase their tax savings and return!).

Active Participation Requirement

Critically, a C Corporation by definition is active in any business it participates in, so a C Corporation doesn’t need to to actively participate in the solar business to get the tax savings! The tax benefits of solar are easier to attain for C Corporations.

For both, individuals with active business income and individuals with non-business income, they will need to materially participate in the solar business. However, good news is there are a couple of features that make the requirement less onerous and you can read more about them here.

You can also read our Active Participation article to understand all the requirements, regulations and activities involved.


Buying solar projects can help C corporations to mitigate taxes and offset a large part of the tax they would otherwise owe. If you have any accounting questions, we have put together an overview of the most common technical doubts accountants have for us and you can read them here.

So, how can you go about buying qualified projects? It’s relatively simple: Valur has partnered with nationally recognized accounting and investment firms to facilitate the purchase of solar projects. We will help you identify the opportunity and choose between different solar project opportunities, visualize the potential benefits, and calculate how much you need to invest to capture the right sized tax credits. From there, we and our partners will help you seamlessly finalize your investment and keep track of the relevant data for ongoing tax purposes. To learn more you can schedule a call with us here.

About Valur

We’ve built a platform to give everyone access to the tax and wealth building tools typically reserved for wealthy individuals with a team of accountants and lawyers. We make it simple and seamless for our customers to take advantage of these hard-to-access tax-advantaged structures so you can build your wealth more efficiently at less than half the cost of competitors. From picking the best strategy to taking care of all the setup and ongoing overhead, we make things simple. The results are real: We have helped create more than $1.1 billion in additional wealth for our customers.

If you would like to learn more, please feel free to explore our Learning Center, check out your potential tax savings with our online calculators, or schedule a time to chat with us!