[RE-wrenches] Taxability of REC payments to homeowners in New Mexico??

[Randy]

Hi Wrenches,
I have what i feel is a serious tax issue in New Mexico that just recently
came to my attention. Any help on this would be appreciated.  Here are the
facts.
 
The major utilities in New Mexico have instituted programs that buy the
Solar REC (Renewable Energy Certificates) from the system owner at a fixed
rate over a fixed term. THis is in addition to net metering. In our region
the REC is 13 cents per kWh for all of the solar production.  A separate
utility grade meter tracks the system production and once a month your
normal utility bill is offset by this credit and if the balance is less than
zero then you get a check.  
 
The major utility has decided that for homeowners or businesses that
generate REC credits totalling $600 or more, a 1099 tax form is issue
reporting the earnings to the IRS as miscellaneous income.  The utility is
asking for a IRS ruling on this.
 
In my opinion, any income producing property that generates income that is
taxed should correspondingly allow that asset to be treated as a business
asset that can be depreciated. For businesses, this is not an issue because
the asset is normally depreciated, but for homeowners, it is unfair to tax
the income without allowing depreciation on the asset. Implicitly, the way
the federal tax credit form works, it is not treated as a business asset
since the form is different that the form used for businesses claiming the
tax credit. 
 
I would expect this to become a bigger issue as more utilties offer this
program to meet their RPS requirement. Can anyone shed light on this issue?
THanks,
Randy

Randy Sadewic

randy at positiveenergysolar.com

NABCEP Certified PV Installer

Positive Energy, Inc.

Phone 505 424-1112

Cell 505 570-0137

Fax     505 424-1113

 

Enjoy the Sun!

 

 
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