Master Thread: Energy products and Tax discussions

[af88]

I contacted 2 other CPA and both said "great question" I'll have to research this and get back to you. So I'm expecting a call from 2 more CPA to give a definitive answer based on IRS guidelines.

One, her initial response was yes the other was no. Both actually seemed very interested to find the answer themselves.

 

[Ampster]

Based on the feedback here and the responses on the other forum where you asked this question, I am still comfortable with my decision to have taken the ITC multiple times during the past six years.

 

[af88]

I only asked the question on this TMC forum, what other forum did you see this question being asked?

I'm agreeing with you, but would like to know if the IRS agrees with us.

 

[af88]

So I just got a call back from one of the CPA he was very clear and stated that you can only get the credit one time for one address.

again it's his opinion he's one CPA It seems to be a mixed response so far.

But he was very sure of himself I can even provide the phone number if you guys want to have a chat with him.

 

[wjgjr]

So I just got a call back from one of the CPA he was very clear and stated that you can only get the credit one time for one address.

again it's his opinion he's one CPA It seems to be a mixed response so far.

But he was very sure of himself I can even provide the phone number if you guys want to have a chat with him.

Certainly no reason for any of us to have a chat with him. As you have clearly found, the ITC is likely still a bit of a niche topic, and even CPAs aren't always right (given you have gotten multiple answers) and/or there has been some confusion over the exact items up for debate (noting, in particular, that not all CPAs are tax experts.) All I can say is if I was in the position of adding solar and my tax expert was thinking it was limited, I would ask for a citation in the tax code, or even in the forms and instructions, that indicates the IRS is placing a limit on this. I have seen nothing.

This private letter ruling has been cited multiple times, and I will cite it again (noting it does not establish precedent.) It states, in part (bottom of page 4) "Earlier installations of qualifying property do not affect the availability of the credit for qualifying property in later years." This is in regards to adding a battery to an existing system, but the logic in the ruling and the conclusion are in no way specific to just adding battery storage.

 

[af88]

Valid points.

It would just seem prudent on the IRS part to be more clear about this. Reading some of the publications it does not specifically indicate one way or another. This was the sentiment by one of the CPA as well who I spoke with. It was just odd this CPA had strong conviction about it.

The private letter ruling certainly is helpful in some respect.

Thanks

 

[Ampster]

what other forum did you see this question being asked?

solarpaneltalk.com

I'm agreeing with you, but would like to know if the IRS agrees with us.

We would all like the IRS to agree with us. However in the real world I am just happy if they don't disagree or better yet, if I don't hear from them at all.

 

[af88]

Agree with you there

cheers

 

[Ampster]

Agree with you there

cheers

Sorry if my responses seemed cryptic. I know this is a first for you but I have been seeing posts like this for years with the same variety of interpretations.

 

[af88]

All good, we are on the same page

 

[solarAddict]

Also I was gonna pass on powerwall for now since it’s not a necessity for us at the moment. But I started thinking about purchasing 1 or 2 powerwalls from someone selling their referral award powerwall. I was wondering if anyone had any experience with how Tesla handles the install of these? Do they just charge the same install fee and allow it? And does anyone know if you can claim the tax credits on powerwalls bought secondhand?

Thanks in advance for any insight.

From my experience Tesla's Powerwall price would be better that those I saw on ebay.

 

[cpa]

@cpa would you be able to provide your opinion on this?

Many others have mentioned above that they believe the ITC can be taken with each new solar system install. I believe this is correct and claimed it on my original 16.5 kW install in 2018 as well as on my additional 4 kW install in 2019.

That is my understanding. That is what I did personally.

 

[Ampster]

I don't know if this is relevant to the OP's question but if there are additional facts such a SGIP rebate then that discussion somewhere on this forum might want to be reviewed. It has been thoroughly discussed but I do not recall the conclusion.

 

[holeydonut]

Wow, I'm dialed into the SGIP webinar today ... even this group of people who spend a lot of their working time on the SGIP program are having a tough time figuring out the SGIP incentive as it pertains to tax credits.

Technically the investment tax credit is supposed to be calculated on a net basis after all other incentives.

So (using fake numbers) if you have a $20,000 PV+ESS system and get a $5,000 SGIP rebate, then the ITC should be 26% of the remaining $15,000 or $3,900 of ITC.

But, as we've seen with just about every contract executed so far... homeowners are claiming $20,000 x 26% for the ITC of $5,200. Then they're getting the $5,000 SGIP rebate later.

The SGIP folks seem to think it's on the homeowner to do the netting out when they submit their taxes. A homeowner isn't supposed to type in $20,000 gross for their federal taxes.

Taken to an extreme, if a homeowner is getting a $8,000 Powerwall as an Equity resilience customer, their Powerwall is "free" because SGIP is paying for it 100%. A homeowner couldn't also claim the $8,000 Powerwall on their federal side and get 26% again since that's a double-dip.

But, since SGIP is somewhat unreliable, a homeowner may be remiss booking the SGIP as if it were a 100% guaranteed item. The Federal government won't let you amend your previous ITC credit simply because a rebate didn't show up. The IRS is going to tell you to go seek recourse with the organization running the rebate.

 

[willow_hiller]

Technically the investment tax credit is supposed to be calculated on a net basis after all other incentives.

I'm not an expert, but this will probably depend on how the incentive is paid, right?

In Maryland, our incentive is explicitly a "state grant," and the state issues a 1099G to you reporting the amount of the grant as income. If your incentive is technically a grant, I would imagine it would be taxable federal income instead of reducing the basis of the system for the purpose of calculating the ITC.

Usually the IRS only considers an incentive a "rebate" if it comes from the manufacturer; not from a third party like a utility company or a state/local government.

 

[holeydonut]

I'm not an expert, but this will probably depend on how the incentive is paid, right?

In Maryland, our incentive is explicitly a "state grant," and the state issues a 1099G to you reporting the amount of the grant as income. If your incentive is technically a grant, I would imagine it would be taxable federal income instead of reducing the basis of the system for the purpose of calculating the ITC.

Usually the IRS only considers an incentive a "rebate" if it comes from the manufacturer; not from a third party like a utility company or a state/local government.

The people hosting the SGIP call said they cannot opine on whether or not a recipient of the California SGIP money will have that amount reported on a 1099. They said for homeowners to ask their CPA for answers to tax matters.

Lol.

 

[RKCRLR]

The people hosting the SGIP call said they cannot opine on whether or not a recipient of the California SGIP money will have that amount reported on a 1099. They said for homeowners to ask their CPA for answers to tax matters.

Lol.

This link specifically states that an energy conservation subsidy is not taxable:
U.S.C. Title 26 - INTERNAL REVENUE CODE

"(a) Exclusion
Gross income shall not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure."

But it also says you can't double dip:
"(b) Denial of double benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure to the extent of the amount excluded under subsection (a) for any subsidy which was provided with respect to such expenditure. The adjusted basis of any property shall be reduced by the amount excluded under subsection (a) which was provided with respect to such property."

So you'd need to exclude it from your ITC or claim your incentive as income. Some people have said they'd be better off taking the higher rate of the ITC and them claiming the SGIP incentive as income but that seems a little shady to me since the link above specifically says it isn't income.

PG&E told me it depends on whether or not the SGIP application was filled out as tax exempt for getting a 1099 and Tesla told me they submitted the application as tax exempt.

 

[h2ofun]

The people hosting the SGIP call said they cannot opine on whether or not a recipient of the California SGIP money will have that amount reported on a 1099. They said for homeowners to ask their CPA for answers to tax matters.

Lol.

From what I know it depends on if the form is checked

This link specifically states that an energy conservation subsidy is not taxable:
U.S.C. Title 26 - INTERNAL REVENUE CODE

"(a) Exclusion
Gross income shall not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure."

But it also says you can't double dip:
"(b) Denial of double benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure to the extent of the amount excluded under subsection (a) for any subsidy which was provided with respect to such expenditure. The adjusted basis of any property shall be reduced by the amount excluded under subsection (a) which was provided with respect to such property."

So you'd need to exclude it from your ITC or claim your incentive as income. Some people have said they'd be better off taking the higher rate of the ITC and them claiming the SGIP incentive as income but that seems a little shady to me since the link above specifically says it isn't income.

PG&E told me it depends on whether or not the SGIP application was filled out as tax exempt for getting a 1099 and Tesla told me they submitted the application as tax exempt.

I believe it filled out as tax exempt, one will not get a 1099?

 

[RKCRLR]

From what I know it depends on if the form is checked

I believe it filled out as tax exempt, one will not get a 1099?

That is my understanding.

 

[wjgjr]

This link specifically states that an energy conservation subsidy is not taxable:
U.S.C. Title 26 - INTERNAL REVENUE CODE

"(a) Exclusion
Gross income shall not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure."

But it also says you can't double dip:
"(b) Denial of double benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure to the extent of the amount excluded under subsection (a) for any subsidy which was provided with respect to such expenditure. The adjusted basis of any property shall be reduced by the amount excluded under subsection (a) which was provided with respect to such property."

So you'd need to exclude it from your ITC or claim your incentive as income. Some people have said they'd be better off taking the higher rate of the ITC and them claiming the SGIP incentive as income but that seems a little shady to me since the link above specifically says it isn't income.

PG&E told me it depends on whether or not the SGIP application was filled out as tax exempt for getting a 1099 and Tesla told me they submitted the application as tax exempt.

The key phrase here is "by a public utility." As @willow_hiller mentioned, in MD, the grant/rebate is issued from the state, which means it is taxable but does not reduce the ITC credit amount. Interestingly, MD also has a tax credit (not a grant/rebate) for storage, which has yet different federal tax treatment. But, for SGIP, it seems like it would turn on whether the subsidy is really a state subsidy or a utility subsidy, and I do not know enough to say, since it sounds like a state program administered by the utilities. In any case, it does seem odd there is an option to file as tax exempt that would be applicable to anybody other than a non-profit - I would think it would either be taxable for every homeowner or none.

I guess the only other question is what is an "energy conservation measure" since I understand SGIP includes programs for people with medical needs, which might not really be an energy conservation measure, while other programs require recipients to conserve/support the grid. But, I would still think the specific program applied for would define the tax status and not an election by the customer.