IRS Ruling Allows Community Solar to Claim 30% Federal Tax Credit

IRS Community Solar Tax Credit
Matthew G. Bisanz (http://www.gnu.org/copyleft/fdl.html), CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0), GPL (http://www.gnu.org/licenses/gpl.html), LGPL (http://www.gnu.org/licenses/lgpl.html), FAL or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

The IRS has ruled that an owner of solar panels in a community-shared array is eligible for the 30 percent federal residential income tax credit known as the “residential ITC.” The IRS ruling applies only to a specific solar panel owner in Vermont, but it is a positive development for community-shared solar participants and project developers.

Community solar allows electric customers to buy an interest in an offsite solar array and receive credit on their electricity bills. Stakeholders in Massachusetts and Vermont, and attorneys with Boston law firm Foley Hoag, LLP and the Clean Energy States Alliance (CESA) arranged the Private Letter Ruling request to the Internal Revenue Service to help clarify shared solar owners’ eligibility for the residential ITC. Foley Hoag attorneys Nicola Lemay and Adam Wade provided legal services and facilitated discussions with the IRS.

“This new Private Letter Ruling represents the first instance in which the IRS has publicly weighed in on the applicability of the residential ITC to an owner of solar panels in a shared, offsite array,” said Warren Leon, the Executive Director of CESA. “The ruling suggests that the IRS may be receptive to claims for the residential ITC when a project mirrors the structure used in this case.”

The Private Letter Ruling is available at: http://www.cesa.org/about-us/member-news/newsitem/IRS-Community-Shared-Solar-PLR.

Taxpayers should bear in mind that this tax credit is set to expire on December 31st, 2016 unless Congress extends it.  It is possible that taxpayers could amend a prior year’s tax return to claim the credit if the community solar project that they are a part of is structured similar to the one above.  You should consult your tax professional and give them the above link to the ruling.

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This post was prepared by Solar Thermal Magazine staff.

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