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Clean Power taxes

Published on August 26th, 2013 | by Zachary Shahan

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US Solar Feed-in Tariff & Value Of Solar Tariff Beneficiaries May Face More Taxes

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August 26th, 2013 by Zachary Shahan 

Originally published on Solar Love under the title, “Tax Threat To Solar Homeowners With Feed-in Tariffs or Value Of Solar Tariffs.”

Quite a big deal for US solar policy, solar companies, and even many current solar PV system owners, a solar advocacy organization that is defending net metering in Arizona has discovered that feed-in tariffs and value of solar tariffs come with some unwanted tax consequences for solar PV system owners (the beneficiaries of said tariffs).

taxes

A representative of Sunrun wrote to me, “A memo from the top national law firm (Skadden, Arps, Slate, Meagher & Flom LLP) reveals that solar Feed-in-Tariffs (FITs) and Value of Solar Tariffs (VOSTs) have major hidden tax implications for consumers.”

As I wrote in our previous article, Sunrun is firmly opposed to FiTs and VOSTs as opposed to net metering for other reasons. This clearly amplifies its opposition to those alternative policies.

Here are more details on the tax news from the Sunrun rep:

  • The memo explains:
    • FITs and VOSTs make residential solar customers ineligible for a 30% federal tax credit toward their rooftop installations
    • The payments a consumer receives for solar power generated under these arrangements will likely be considered taxable gross income.
    • This is true even when the compensation to the homeowner is a credit rather than a payment
  • This affects thousands of customers in FIT programs across the country, including ratepayers of the Los Angeles Department of Water and Power (LADWP), Sacramento Municipal Utilities District (SMUD), and the City of Palo Alto.
  • The memo was filed in Arizona by TASC (The Alliance for Solar Choice) in response to a proposal Arizona Public Service submitted with a suggested FIT arrangement for replacing net metering.


“We didn’t want to have to file, but felt it was imperative given the implications of these hidden taxes for consumers nationwide,” Bryan Miller, President of TASC and Vice President of Public Policy & Power Markets at Sunrun, states.

“Utility opposition to net metering and their efforts to shift away from NEM toward a FIT is not new. Utilities should be ashamed of pushing a policy that imposes more taxation on customers.”

Photo Credit: 401(K) 2013 / Foter / CC BY-SA

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About the Author

spends most of his time here on CleanTechnica as the director/chief editor. Otherwise, he's probably enthusiastically fulfilling his duties as the director/editor of Solar Love, EV Obsession, Planetsave, or Bikocity. Zach is recognized globally as a solar energy, electric car, and wind energy expert. If you would like him to speak at a related conference or event, connect with him via social media. You can connect with Zach on any popular social networking site you like. Links to all of his main social media profiles are on ZacharyShahan.com.



  • Karl Rabago

    I am not a tax attorney and this is not tax advice, but . . . Please read the memo carefully – it is not the NAME “net metering” or “FIT” or “VOST” that creates the potential tax problem. It is ultimately whether the customer SELLS their solar generation to the utility. The memo says that if on-site consumption is not at least 80% of the generation, the customer may have a SALE problem. A tariff configured as a credit, like Austin’s VOST, is better than one structured as a sale. There are other things you can do, like we did in Austin with the VOST. Also, if you lose the individual tax credit, you could apply for business investment tax credit. More complicated, but someone should look into it.

    So, I am disappointed with the memo not making these points more clear, for making it seem like the NAME of the rate is what is controlling, and for the way the story is being covered. (Exception – Herman Trabish at GTM has worked hard to get the facts out there.)

    • Bob_Wallace

      One would have to examine the current subsidy regulations in order to see if selling part of the produced electricity would cause the 30% tax credit to be pulled.

      That is not necessarily the case. What it would more likely do it to make it impossible to depreciate the cost as a business expense. Remember, the wind industry gets a choice between a 30% ITC or 2.2c/kWh PTC.

      “The payments a consumer receives for solar power generated under these
      arrangements will likely be considered taxable gross income.”

      And it makes sense that income would be treated as income for tax purposes.

  • Kiwiiano

    If the utilities make the cost of connection uneconomic by spurious taxes, surcharges, etc, people will just opt to go off-the-grid entirely. Or organise co-operative sale of surplus power to neighbours. There are more ways to kill a cat than stuffing its neck with canaries.

    • Bob_Wallace

      More likely we’d regulate distribution. Distribution is in a monopoly position which makes it a regulation target.

      Turn generation, storage and brokerage free to operate in a more free market mode. Let customers pick an electricity broker and have a standard distribution fee added to their bill.

      The brokers would purchase generation and storage as needed in order to keep power flowing to their customers at the agreed price.

  • Shiggity

    Well a FiT + 30% off a solar installation would be too strong. The growth would be…what’s faster than exponential?

    • driveby

      vertical?

  • http://MrEnergyCzar.com/ MrEnergyCzar

    Is this a joke? Who is funding the opposition to the FIT? Would be interesting to know.

    MrEnergyCzar

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