A ruling by the Internal Revenue Service over a Vermont man’s individual tax credit is raising hopes that it could promote group solar projects.
Community-shared solar arrays allow people who can't put solar panels on their property to join together to create a single group project. There is a federal 30 percent residential solar tax credit. Clean Energy States Alliance Project Manager Nate Hausman says there has been some confusion about whether the credit is applicable to community solar projects. “This was an area of legal uncertainty whether or not a community solar subscriber, someone who bought panels in a community solar array, was eligible to receive the residential income tax credit under section 25D. So we took it upon ourselves to try and shed some light on this and get some clarity on that issue.”
The Alliance, based in Montpelier Vermont, worked with Roland Marx on his petition to obtain the tax credit. The Mount Holly resident invested about $8,600 to obtain 3 kilowatts from the Boardman Hills Solar Farm in West Rutland. The tax credit would reduce his cost to about $6,000. Marx notes he already has hot water solar panels on his roof. “We knew very well that there was a federal 30 percent tax credit and that it applied to residences. The application on a community basis was I guess a little indistinct. The 30 percent tax credit makes all the difference.”
The IRS ruling allowing the credit applies only to Marx. But he and solar advocates hope it has implications for all investors in community-shared solar arrays. “The ruling that applies to one taxpayer has some influence on the other participants. And if other community solar projects mirrored the structure that exists within Boardman Hills then there could be a very strong likelihood that the IRS would look favorably on their application for federal tax credits.”
Hausman notes that community shared solar is a rapidly growing sector of the energy industry. “By some estimates about half of all households and businesses in the U.S. aren’t viable candidates for one reason or another to host a solar array on their property. And so community solar allows those folks to take advantage of the economic benefits of solar without necessarily having it sited directly there. This is the first that we know of of the IRS weighing in on whether or not owners of a solar panel in an off-site shared array are eligible for the 25D tax credit. And so while by law the ruling is only binding on Mr. Roland Marx it suggests that the IRS might be receptive to other claims for this credit.”
The 25D tax credit for residential solar arrays is scheduled to sunset at the end of 2016.