State tax credits for solar PV

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Kenneth SCCCL
Topic Author

17 Feb 2015 21:21 #3089 by Kenneth SCCCL

State tax credits for solar PV was created by Kenneth SCCCL

SAM seems to assume that state tax credits for solar PV are treated as taxable income for federal tax purposes. Is this correct, and if so, is there a good source that documents this rule (an IRS publication for example)?

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Paul Gilman

18 Feb 2015 19:52 #3090 by Paul Gilman

Replied by Paul Gilman on topic State tax credits for solar PV

Dear Kenneth,
You are correct that SAM treats state tax credits (investment tax credit or production tax credit) as part of the project's federal taxable income. This seems consistent with the description in IRS Publication 525 , under "Other Income, Recoveries," beginning on page 22 of the PDF document. SAM makes a simplification in assuming that the current year's state tax credit is taxable in the current federal tax year.
Best regards,

Paul.

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mhdraper

19 Feb 2015 16:35 #3091 by mhdraper

Replied by mhdraper on topic State tax credits for solar PV

Paul,

Thanks for providing link to IRS publication. I see where rebates from utilities for investments in energy conservation measure are not considered income. After a quick look at those sections in 525 you referenced, I do not see where rebates from utilities for investments in electrical generating equipment are taxable. Is this inferred from one of the examples? IRS reading .... always a page turner!

Mike -

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Paul Gilman

19 Feb 2015 17:05 #3092 by Paul Gilman

Replied by Paul Gilman on topic State tax credits for solar PV

Hi Mike,

I'm not a tax lawyer! We've done our best to keep SAM slightly less complicated than the IRS tax code.

Joking aside, in SAM, you can specify whether a given cash incentive is considered taxable income for state and federal tax purposes.

Best regards,
Paul.

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mhdraper

20 Feb 2015 00:24 #3093 by mhdraper

Replied by mhdraper on topic State tax credits for solar PV

Paul,

I've unchecked a number of items in the incentives section when running simulations.
That seems to work. FYI, in Washington state there is no sales tax on the purchase of PV equipment, no tax on the income stream from the production incentives or rebates and as of last spring there was no ruling on property taxes on PV equipment.

Mike -

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