Interesting. Does the credit exist for off grid systems? Where does it specify "placed into service" with regards to the rebate for residential systems?
Will I lose the full 26% if permission to operate comes after 12/31?
- Thread starter sorka
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Interesting. Does the credit exist for off grid systems? Where does it specify "placed into service" with regards to the rebate for residential systems?
Uncle Paul
Well-Known Member
Believe it would also apply to off grid. If you had a cabin in the woods, and installed Solar, you might still qualify for the credit. (not sure on this though)
Just don't believe your agreement with your utility is the trigger for the Placed Into Service term.
In the case of vehicles, I believe the Placed Into Service would be when your rear bumper crosses over the dealerships driveway. Maybe with Ranger delivery it might be when the delivery person leaves your residence and reports it as delivered.
Probably not all that big a deal. If for all intents and purposes you have accepted installation and your system is capable of being energized, you can comfortably file for your Tax Credit. Believe that would be considered Good Faith on both parts.
Just don't believe your agreement with your utility is the trigger for the Placed Into Service term.
In the case of vehicles, I believe the Placed Into Service would be when your rear bumper crosses over the dealerships driveway. Maybe with Ranger delivery it might be when the delivery person leaves your residence and reports it as delivered.
Probably not all that big a deal. If for all intents and purposes you have accepted installation and your system is capable of being energized, you can comfortably file for your Tax Credit. Believe that would be considered Good Faith on both parts.
That's what I'm hoping for. My install is scheduled for 10/16 and that's assuming the service panel upgrade is able to happen well before that.
I think the reason people suggest this is because even though the system is installed and capable of running you can’t (officially) turn it on and operate it until you get PTO (permission to operate) from the utility. With a whole house solar and powerwall system it’s possible to operate off grid before you have PTO, but with a solar only system you really can’t operate it before PTO. So it’s not so much the agreement with the utility, but rather the fact that it can’t be turned on and operated until the utility gives their permission.
So it follows that it wouldn’t be placed into service until after it is turned on and operating. And that can’t happen (officially) until after PTO.
So does this mean having the power walls and being able to operate off grid might be the loophole that allows me to claim the credit based on when the final inspection happens vs after PTO?
I mean it’s my understanding that the problem is that all the tax code says is “placed into service” with no definition or clarification of exactly what “placed into service” actually means or at what point that happens. So different people interpret it in different ways. In the end, unless you get audited no one will be checking this anyway. Heck, you could have claimed that you installed the system last year and gotten the 30% credit and unless you happened to be audited no one would ever check it. Of course, that would be a whole lot harder to defend if you did get audited and instead of being a mistake made in good faith that would be downright tax fraud.
In the end it needs to come down to you (and/or your tax professional) being able to defend the decision that you made in the event of an audit. Absolute worst case is that you get audited, the auditor decides that you didn’t qualify for the credit in 2020 and they make you repay the credit and some interest. Even if that happens you will still be able to claim the 22% credit in 2021.
Like I said above, you aren’t supposed to operate the system before PTO, whether you have powerwalls and can operate off grid or not. But again, it’s really going to come down to what you (and/or your tax professional) would feel comfortable defending in the event of an audit.
holeydonut
Supporting Member
Ok I know you're the one other person on this forum that will appreciate this information. Are you ready for a fun time reading documents? Because I sure as hell am at 7pm... I urge you to reconsider reading this reply further since it could blow up the rest of your evening.
Anyway, NEM 3.0 is buried in the R1407002 Rulemaking that basically set the stage for all these increasingly crappy NEM's (well PG&E loves 'em so they gotta be crappy for us amirite?).
NET Energy Metering Rulemaking (R.)14-07-002
What you'll care about are the documents that are filed under R1407002 with the CPUC's public database here:
CPUC Proceeding Information::
As I understand it, there's no real restriction in any of the language that would prevent PG&E from just going willy nilly weird with their time of use rates and gouge the crap out of solar-only households once the sun goes down. The main gist of recent developments is that there's a push where the CPUC needs to provide a calculator to allow a PV-only consumer to reasonably calculate expected energy costs through the future time of use policies. The bad news is the calculation itself isn't being discussed.
My main take-away is all PV customers need to install batteries so they use their own clean energy. They cannot rely on NEM calculations to make their investment reasonable down the road.
Because I'm a cynic, I think the language so far is more like an unraveling of the scant protections in NEM 2.0 rather than establishing something brand spanking new to help make sure consumers don't get hosed.
Anyway, if you pretend you're in PG&E's marketing team for a second, you'll say that this set of rules is "consumer friendly" since there are clear attempts to protect consumer interests.
But now pretend you're one of the high-ups at PG&E. I know, evil. Anyway your maggot-ridden-soul would compel you abuse the rules and continue to mess with TOU rates and funky fees as long as you disclosed a reasonable range up front. And, you'd be able to change policies at will without penalty anyway since you're not bound by any of those new estimates.
Interestingly enough, Sunrun and some other Solar companies are actually putting some muscle in there to fight for our rights to get residential solar. But most of their fight is just the up-front stuff to still make sure Sunrun can close a sale.
Tesla being cheap-ass haven't done jack all of anything to influence outcomes. You figure Elon could at least create a AI lawyer to argue in favor of consumers.
Oh, btw... feel free to leave a public comment for the CPUC to ignore.
I found this blog post to be a pretty good summary of where retail NEM came from and where it appears to be going (a la NEM 3.0): https://sustainableenergygroup.com/solar/the-future-of-solar-is-at-risk-california-nem-3/
According to the Instructions for 2019 Form 5695: "For purposes of both credits, costs are treated as being paid when the original installation of the item is completed...".
Since the installation is completed PRIOR to PTO, it should be possible to claim on this year's taxes if the installer has completed their work prior to the end of the year, even if PTO hasn't been achieved.
We installed our system at the end of last year, and I believe PTO came on Dec 30 or 31, so I was concerned about missing out on the 30% tax credit, and after searching the internet, I had concluded that we were OK, even if PTO wasn't done before the end of 2019...
Since the installation is completed PRIOR to PTO, it should be possible to claim on this year's taxes if the installer has completed their work prior to the end of the year, even if PTO hasn't been achieved.
We installed our system at the end of last year, and I believe PTO came on Dec 30 or 31, so I was concerned about missing out on the 30% tax credit, and after searching the internet, I had concluded that we were OK, even if PTO wasn't done before the end of 2019...
SoCal Dave
Member
I know we are going in circles and I think the general agreement is it probably wont matter either way.
However, would you argue then the installation is when the installer puts in the last screw? Or when the AHJ signs off on the installation? If it is when the AHJ signs off on the installation why would that be different than the PTO from the utility company? The PTO from the utility company is an inspection as well, thought typically not a site visit. But they are reviewing to ensure the system will behave as expected before turning it on. In theory, the utility company can deny the interconnection request or require changes.
In my opinion it is what " a reasonable person" would conclude the word "installation" means, which in a general sense is when something is on your property and physically able to be operated.
If someone purchased TV installation from bestbuy (for example) with wall mounting, that TV is "installed" when the technician completes mounting the wall mount onto the bracket, and then shows that the TV can physically be turned on. It would not be a requirement to actually have Cable TV service to "install" a TV or "place it into service".
If you had a new AC condenser unit Installed, you would consider that installed when the technican arrived, connected it to your home, and turned it on and proved to you it worked.
If you got a new water heater and wanted it re permitted, it still would be "installed" when you or the plumber finished connecting it to your home and turned it on, showing it could heat water.
I get what you are saying, but "installed" is actually pretty simple to me, its "paced into service" which is less cut and dried. "installed" would be when the last screw is turned, and the person has completed physical construction, and is able to turn the system on, showing it functions. That is the end of "installed". "placed into service", now that is where the discussion can happen.
"Placed into service" is something of an accounting term of art, which is I think part of the confusion here, because it does not necessarily mean the same thing as "started using." I looked it up to see what the IRS might say on the topic of "placed into service", and the best I could find was references to regulation 1.167(a)-(11)(e)(1)(i) (which tells you how screwed up the tax code is) - 26 CFR § 1.167(a)-11 - Depreciation based on class lives and asset depreciation ranges for property placed in service after December 31, 1970.
Along with the notion that costs are considered paid when installed, I think the definition generally supports the idea that installed is good enough. I guess the only counter-argument would be whether, under that definition, it is "ready and available" if it works but the applicable authorities haven't authorized its use. To me, it still is, and I would also suggest that whether or not the system is run pre-PTO doesn't really matter to that question of "placed into service" if the IRS were to surprise everybody and require PTO, since I expect the tax law would not support doing things in contravention of state/local regulations in order to claim a tax break.
aesculus
Still Trying to Figure This All Out
I am with you. But, it just goes to show how different people are comfortable with different definitions. Tesla has 2 points they are "done". One when the system is commissioned and the second when the final inspection is done. When it is commissioned it is operational. When the final inspection is done it is billable for the work performed.
The IRS form instructions state "original installation of the item is completed" - doesn't say anything about placed into service.
According to those instructions, the costs are considered paid when the installation is completed - which could mean the actual payment could be made later (when PTO is received) - and the cost could still be applied in this calendar year if PTO is next year.
Of course, if you can get someone at the IRS on the phone, that would be the best way to get any questions answered...
According to those instructions, the costs are considered paid when the installation is completed - which could mean the actual payment could be made later (when PTO is received) - and the cost could still be applied in this calendar year if PTO is next year.
Of course, if you can get someone at the IRS on the phone, that would be the best way to get any questions answered...
It is a bit confusing. The form instructions (from 2019 - we will see about 2020 since the 30%/26% issue comes up) don't mention it, but the underlying regulations (26 U.S. Code § 25D - Residential energy efficient property) have this to say:
That is where there is potential confusion on the percentage, and whether "installed" and "placed in service" are supposed to mean the same thing or something different.
I think you would still need to pay for the system in the year the credit is claimed. So that implies passing final inspection, sending money to Tesla, and Tesla applying for PTO. But if these are is done, I would think when PTO was finally received from utility would not be a factor.
The 2019 residential energy credit form is 5695.
Using the Jan 13, 2020, version of the instructions, in the right column of the first page:
Because Form 5695 and the instructions for the form don't provide any detail on what qualifies for the residential solar tax credit (including details like prohibiting charging PowerWalls from the grid), that information is being provided elsewhere - which is not referenced by the IRS. The other documentation may provide a better definition of "original installation completed" - and what charges are allowed.
Since the IRS doesn't document the source of the solar tax credit policy, there's a gray area on what they would or would not expect...
Using the Jan 13, 2020, version of the instructions, in the right column of the first page:
Costs. For purposes of both credits, costs are treated as being paid when the original installation of the item is completed, or, in the case of costs connected with the reconstruction of your home, when your original use of the reconstructed home begins.
Because Form 5695 and the instructions for the form don't provide any detail on what qualifies for the residential solar tax credit (including details like prohibiting charging PowerWalls from the grid), that information is being provided elsewhere - which is not referenced by the IRS. The other documentation may provide a better definition of "original installation completed" - and what charges are allowed.
Since the IRS doesn't document the source of the solar tax credit policy, there's a gray area on what they would or would not expect...
I think the big takeaway from this is if you want the FTC, get your solar installation done early in the year. Give yourself months of leeway for contractor issues, viruses, power company slowness, etc. This is especially true with the FTC dropping every year and in a few years at 0%, depending upon the whims of the Government.
The quote you cite on the instructions is very much applicable to the discussion (and one I have cited as well.) I also agree there is some gray area. However, whether cited or not in the instructions, section 25D applies and controls that form in regards to the residential side (along with section 48 for commercial) since the code is the basis for the credit. The instructions are intended to be a bit more user-friendly than the code (sometimes I'm not sure they succeed) but that doesn't mean they supersede the code or are complete representations of all situations. So "placed into service" is still an applicable term in the discussion, even though it appears that "original installation ... is completed" and "placed into service" are synonymous here. (I also note that the definition in the instructions on costs comes from section 25D.)
The prohibition on PW charging from the grid is a more interesting issue, because I am also not aware of any official OMB guidance on the matter. The cite I have seen is a private letter ruling (which is not controlling, but there is a good chance one would get a similar result) here: https://www.irs.gov/pub/irs-wd/201809003.pdf
At its most extreme, this could suggest that even testing the PW with a grid charge or a single use of storm watch could void the ITC claim. While I think that seems unlikely, it is certainly not a boundary to push too far.
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