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

[Cary Lane]

Hi Randy,

Here is the response from my accountant in New Mexico:

Cary,
I would agree that some portion of the PV system should be depreciable if the income it generates is taxable.  First, it might be that the credits are not taxable, since they are given to encourage energy efficiency.  You'll need to wait and see how IRS rules on it.  Second, if the credits are taxable, I haven't figured out what % of the PV system would be depreciable, since this whole arrangement is somewhat convoluted.
Ray

  ----- Original Message ----- 
  From: Randy 
  To: re-wrenches at lists.re-wrenches.org 
  Sent: Wednesday, February 25, 2009 12:13 PM
  Subject: [RE-wrenches] Taxability of REC payments to homeowners in New Mexico??


  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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