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Massachusetts SMART and Connected Solutions Tax Implications?

Discussion in 'Tesla Energy' started by TORQU3, Oct 30, 2020.

  1. TORQU3

    TORQU3 Member

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    I'm starting to look into adding solar and possibly power walls to my house. Does anyone who is participating in SMART and or connected solutions know what sort of tax forms you get at the end of the year related to the per kWh compensation you get paid for solar production and participation in connected solutions?

    In my financial modeling I completely left any taxation of these payments out, but I can't seem to find an answer if this is considered income and then taxed.
     
  2. TORQU3

    TORQU3 Member

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  3. wjgjr

    wjgjr Member

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    That blog cites https://www.irs.gov/pub/irs-wd/1035003.pdf, which, as far as I have seen, is still (despite being a decade old) the most recent (only?) time the IRS has addressed this issue, and it is a private letter ruling, so officially has no precedential value.

    However, I believe the general consensus is that SREC sales are taxable, for the reasons outlined in the blog and the IRS ruling. I have seen the argument that it would not be income until it covers the net cost of solar (so, if you paid $10k and got $3k back from the IRS from the ITC, you could use it to offset the $7k) or unless it exceeds your remaining electric payments, but I'm not sure there is much actual support for either of these regarding residential systems (and the former seems to be pretty directly contradicted by the IRS ruling.)

    It is also possible that individual states have their own rules that could make the payments non-taxable for state purposes. I am also not familiar with the MA program - I know they have different programs depending on when the system was installed - but if they are all similar in concept to the SREC, they are probably taxed the same way at the federal level.
     
  4. TORQU3

    TORQU3 Member

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    Thanks for the input. If it is taxable, it would likely be quite a while before the system actually turns a profit and creates a tax liability. I'm going to figure no additional tax burden in the near future, but I will be tracking initial system cost and then any and all rebates, incentives, etc. I wasn't sure if either of the state incentive programs (SMART and connected solutions) issue a 1099 or similar for the payments made to the system owner.
     
  5. solarAddict

    solarAddict Member

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    I just had my system installed few weeks ago. Here is a fragment from email I've got from my installer's office:


    "I can now wrap up your SMART application and submit your claim.
    ....
    Once I start the submission process National Grid will be sending you a few documents to sign, please keep an eye out for them:
    • Renewable Energy Certificate Assignment & Aggregation Agreement Form (Per the SMART incentive program, utilities now own the RECs generated by your system and will pay you SMART credit incentives)
    • Payment Credit Transfer Form (This verifies the payment information I inputted and asks you to confirm)
    • W-9 (Information on the W9 should match the requested Payee.) This email will come after you've signed the two above, so it will be a separate email.
    Let me know how you would like to proceed and I will get your Claim started.
    Once the claim is approved, National Grid will retroactively pay you for production during this waiting period.
    ..."

    Based on this I assume they gonna send us 1098
     
  6. TORQU3

    TORQU3 Member

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    Yea most likely will be issued a 1098, although you should be able to count the cost of the system against the income. You had to spend significant money on equipment to generate that income. Talk to a tax professional and keep good records.
     
  7. TORQU3

    TORQU3 Member

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    What SMART rate did you get? Did you do a power wall?
     
  8. solarAddict

    solarAddict Member

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    I was expecting to be in Block 4 (NG) but paper work were delayed (we were thinking about getting PWs) and I got into Block 5. And yes I got PWs and subscribed for that pick load program (dont remember name).

    Yes, keeping all the papers. Including roof replacement and electric service upgrade.
     
  9. TORQU3

    TORQU3 Member

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    So with the storage adder what’s the SMART compensation rate?
     
  10. solarAddict

    solarAddict Member

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    I'm awaiting the paperworks, so far preliminary is $0.10792/kWh, not sure how she came up with it though
    " Solar system 7.6 kW (AC), SMART reservation at Block 4 and your Energy Storage Adder in Tranche 7" .
     
  11. TORQU3

    TORQU3 Member

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    Thanks, that’s about what I figured mine would be. Hope mine gets locked in soon.
     
  12. ScoGold

    ScoGold Member

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    Where are you able to see your rate and what block you are in? Is there any sort of SMART portal or is it just statements you receive in the post or email?

    I have only submitted documents but I don’t believe I have received anything back from SMART/Eversource with the rates.
     
  13. solarAddict

    solarAddict Member

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    #13 solarAddict, Mar 5, 2021 at 9:33 AM
    Last edited: Mar 5, 2021 at 10:18 AM
    It was in the email from my installer's office manager.

    When we started the process I was told I would be in block 4 for SMART program, but it was filling faster and I thought we would be in Block 5, but we still ended up in Block 4. And I even didn't know that storage adder varies based on tranche as well.

    When my application was approved, I received the legal document (email) from MA Dept of Energy Resources including all related info including name, address, installer (listed as representative) , my generation unit ID, and compensation rates including:

    - base rate .027538 (it was mentioned "Block 4")
    - energy storage adder 0.04285
    - value of energy rate -0.21031

    total SMART incentive rate .0.10792


    You could find more info here MA-Smart Solar , including email for questions, The current state of program could be find under "updates" . there are separate links for rates and energy adders there.
    Solar Massachusetts Renewable Target (SMART) Program

    so theoretically if you know the confirmed dates of filing (or acceptance) of your application you should be able to figure out your block and tranche.
     

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