When it comes to financing renewable energy projects, federal incentives such as the Investment Tax Credit (ITC), Production Tax Credit (PTC), and various other provisions under the Inflation Reduction Act (IRA) often take center stage. Additionally, state-level incentives can play an equally important role in shaping the financial structure of a project, particularly when they are planned in coordination with federal programs.

Understanding how to combine these incentives effectively is critical for sponsors, developers, as well as investors, looking to maximize returns and avoid costly delays.

How Federal and State Incentives Work Together

Federal renewable energy incentives are designed to provide broad support across the country. These credits typically reduce a taxpayer’s federal income tax liability on a dollar-for-dollar basis and can be transferred for cash under Section 6418.

State incentives vary widely by jurisdiction and may include:

• Refundable or transferable tax credits
• Production-based incentive payments
• Sales and property tax exemptions
• State-funded grants or rebates
• Utility-led performance or capacity payments
• Renewable portfolio standard (RPS) compliance credits

When layered properly, federal and state incentives can significantly enhance the financial viability of a project.

Why Alignment Matters

Some developers approach state and federal incentives as separate opportunities. In practice, the most successful projects treat them as complementary tools, which require thoughtful coordination. Aligning both levels of incentives can help:

• Increase net project returns by reducing capital outlay
• Attract stronger tax credit buyers by stacking value
• Shorten permitting and financing timelines through local support
• Preserve eligibility by aligning construction and application timing

Properly aligning these programs can often be the difference between a viable project and one that stalls before reaching financial close.

Optimizing Incentives Across Jurisdictions

To get the most out of both state and federal incentives, developers should consider the following strategies:

1. Understand the Credit Structure
   Determine whether each incentive is refundable, transferable, or non-refundable. Many states attach compliance conditions such as job creation thresholds or long-term ownership requirements.
2. Plan Application Timing Carefully
   Several programs require application or pre-approval before construction begins. Failing to meet those deadlines can disqualify the project entirely.
3. Leverage Transferability Where Possible
   While IRA-created federal credits are transferable, several state-level credits are as well. Work with a partner, like Fallbrook Financial Services, that understands both markets and can coordinate a compliant transfer process.
4. Engage Local Agencies Early
   Involving state and municipal agencies during the planning phase can improve permitting, community engagement, and access to location-based incentives.
5. Maintain Consistent Documentation
   Federal and state programs may have different compliance and recordkeeping requirements. Keeping a clear and consistent documentation trail across both helps avoid delays during credit certification and monetization.

The Role of an Experienced Advisor

The number and complexity of tax credit incentive programs continue to grow, making it difficult for even experienced developers to manage every detail alone. Partnering with a knowledgeable advisor, like Fallbrook Financial Services, can ensure you identify all available incentives, stay compliant, and execute a strategy that aligns with your capital goals.

At Fallbrook Financial Services, we work with clients to evaluate, structure, and monetize tax credits at both the federal and state level. Our team tracks more than 40 domestic incentive programs and has deep experience working with developers, institutional investors, and tax credit buyers across a wide range of sectors.

If you’re looking to align your project strategy across jurisdictions, reach out to us at team@fallbrookfinance.com.