The IRS has released a new guidance for off-site solar systems which may, under certain circumstances, allow residential subscribers to claim tax credits for panels they purchase in a solar garden. I am not a lawyer, and certainly not a tax lawyer, but let me give the lawyer's answer "it depends". Whether or not the tax credit is claimed may depend on whether the subscriber owns the panels (rather than leases or purchases power), and on the contractual structure between the utility, subscriber, and any third party involved (subscriber organization). It is possible there may need to be changes to contracts currently in use, and/or in legislation or PUC rules, in order for subscribers to realize these benefits.
Here is the relevant text:
Q-25: If a taxpayer installs solar electric property other than directly on the taxpayer’s home, may the taxpayer claim the § 25D credit?
A-25: Section 25D(d)(2) defines a qualified solar electric property expenditure, in part, as an expenditure for property that uses solar energy to generate electricity for use in a dwelling unit that is used as a residence by the taxpayer. Therefore, if solar panels that are not directly located on the taxpayer’s home use solar energy to generate electricity directly for the taxpayer’s home the taxpayer may claim the § 25D credit.
Q-26: A taxpayer purchases solar panels that are placed on an off-site solar array and connected to the local public utility’s electrical grid that supplies electricity to the taxpayer’s residence. The taxpayer enters into a direct contractual arrangement with the local public utility that supplies electricity to the taxpayer’s residence to allow the taxpayer to provide electricity to the grid using a net metering system that measures the amount of electricity produced by the taxpayer’s solar panels and transmitted to the grid and the amount of electricity used by the taxpayer’s residence and drawn from the grid. The contract states that the taxpayer owns the energy transmitted by the solar panels to the utility grid until drawn from the grid at his residence. Absent unusual circumstances, the panels will not generate electricity for a specified period in excess of the amount expected to be consumed at the taxpayer's residence during that specified period. Can the taxpayer claim the § 25D credit?
A-26: Yes. Section 25D(d)(2) defines a qualified solar electric property expenditure, in part, as an expenditure for property that uses solar energy to generate electricity for use in a dwelling unit used as a residence by the taxpayer. The taxpayer’s expenditure for off-site solar panels under this type of contractual arrangement with a local public utility that supplies electricity to the taxpayer’s residence meets the definition of qualified solar electric property expenditure.
Q-27: A taxpayer purchases and installs solar electric property to generate electricity for the taxpayer's own home and to allow the taxpayer to sell excess electricity to a utility. Unlike the taxpayer in Q-26, this taxpayer generates more than a minimal amount of excess electricity. Does this taxpayer qualify for the § 25D credit on the full amount of the solar electric property?
A-27: No. Under these facts, the taxpayer may not claim the § 25D credit for the full amount of the solar electric property expenditure because the property not only generates electricity for use in the taxpayer's home, but it also generates electricity for sale by the taxpayer. The taxpayer may only claim the § 25D credit for the portion of the solar electric property expenditure that relates to the electricity generated for use in the taxpayer’s home. In addition, the taxpayer may be able to claim the § 48 credit for a portion of the solar electric property expenditure if the requirements of § 48 are satisfied.
I've uploaded the full document to the SGI website at the link below:
Wow, how 'bout that!