Ask and Expert for the week of November 3rd, 2014

Here is a sample of some of the submitted Ask an Expert questions for the week of November 3rd, 2014:

Please keep in mind when reviewing these responses that it is not the role of the Solar Outreach Partnership to provide legal or tax advice, and nothing herein should be construed as such. These responses are provided for educational purposes only, and should be verified by experienced legal counsel before any decisions or actions are taken.

Q. How does one explain why contractors all estimate solar PV installs at different levels of offsetting the customers electricity demand (i.e. we see variations between 80%-100%+ assumptions for the same property in quotes sometimes)?

A. If the contractor is using historical electrical bills from the customer in order to make the estimate than the difference is likely due to using solar PV modules of different capacity or different efficiency. If the contractor does not have access to historical electrical bill data then the estimates likely vary because the contractor is using average or median usage data for their estimate. It is always worth asking questions of a prospective installer in order to see what their assumptions are and run your own numbers for comparison.


Q. I am considering installing a rooftop solar PV system on my residence. My local utility offers an incentive of $0.15/kWh for five years.  This is not buying the electricity; I keep the electricity with net metering.  Will this incentive affect my 30% federal tax credit or be taxable income? If the incentives are taxable, would I be able to take depreciation on my investment?

A. Thanks for your questions. If I understand you correctly, you are asking if 1) whether the utility incentive you would receive considered taxable income, 2) whether the incentive will affect your federal investment tax credit, and 3) whether you can benefit from accelerated depreciation on your investment.

Here are my answers to those three – if I missed a question in there, please let me know.

1. Yes, your utility incentive is considered taxable income, because it’s an increase in your adjusted gross income (AGI). Thus, you will have to pay taxes on it.

2. No, your incentive will not affect your investment tax credit, because the incentive itself is not a tax credit. The only time when a tax credit can be reduced is when you apply a state tax credit to the project as well, and since the state tax credit is considered a form of income for your federal taxes, the amount you can claim on your federal taxes is thus reduced.

3. No. The Modified Accelerated Cost Recovery System (MACRS) depreciation (also known as “accelerated depreciation” only applies to business energy property, and thus is only applicable to one’s corporate tax burden. Thus, you cannot take depreciation on the investment. On the other hand, it is possible you might benefit from the solar installer’s taking of accelerated depreciation if the system is third-party owned, but you will not benefit from it yourself unless it is considered the property of a business, and thus pays federal corporate taxes.


Q. Where can I go to find out if a particular company is reputable?

A. One of the first steps in selecting a reputable solar installer is to ask them a series of questions including (from the Massachusetts Clean Energy Center):

  • Can you provide references from previous customers with similar systems?
  • How many similar systems have you installed?
  • When would you be able to perform the work?
  • How long will the project take?
  • Please describe the warranty that you provide on the system.
  • Have you worked with local building officials and utility representatives when installing similar systems in the past?
  • Do you have a local licensed electrician as part of the project team?
  • Will you hire subcontractors to complete portions of the project? What firms will you hire and what will they do?
  • What kind of training will you provide me with so that I can better operate and maintain my system?
  • Do you offer solar leasing or a third-party ownership option?
  • Will you take of the paper work for any rebates, or incentives (such as renewable energy certificates)?

Publicly traded solar installers will have to disclose various pieces of information for their investors and in the form of SEC filings. This information will be available on those company’s websites.