If one case is to set precedent, it appears that the IRS is ready to extend solar tax credits to battery systems added as retrofits to homes. In other words, you can get a tax credit not only for purchasing solar panels, but for purchasing solar batteries that allow you to store up power on sunny days.
From Green Tech Media
|IRS Letter on Home Batteries Could ‘Open Floodgates for Residential Storage Retrofits’|
The Internal Revenue Service has indicated that federal solar tax credits extend to battery systems added as retrofits — a policy that could “open the floodgates” for residential solar installers eager to add energy storage to their mass-market offerings.
That’s how GTM Research analyst Brett Simon summed up a letter from the IRS, released Friday (PDF), in reply to a query from an unnamed married couple. They claimed a federal Investment Tax Credit (ITC) for a battery, inverter, wiring and software they added to their existing rooftop PV system, set up so that it will only store energy from the solar panels, and otherwise be available day or night to respond to power outages or to reduce overall load.
The letter finds that, under these operating restrictions, the entire cost of the retrofit is subject to the 30 percent tax credit — as long as it only charges from the sun. Specifically, the letter states that the investment “meets the definition of a ‘qualified solar electric property expenditure’ under § 25D(d)(2) of the Code, and therefore, you may claim a tax credit on this Battery.”
It’s important to note that this letter concludes with a statement that it’s directed “only to the taxpayer who requested it,” and that “Section 6110(k)(3) of the Code provides it may not be used or cited as precedent.” It also notes that it hasn’t investigated the couple’s system logs or other records to see that it’s operating in 100 percent solar charging mode.
Still, for an industry hungry for some guidance on what could be a hot new market opportunity, Friday’s letter adds an important new piece to the record of such so-called “private letter” rulings, said Simon. Previous private letters have led to the legal understanding that new solar-storage systems were eligible for the ITC, but Friday’s letter is the first to specifically address retrofits.
“It’s just a single case,” he said, “but is nevertheless important because it reveals how the IRS views retrofits, and could lead to a future guidance that allows for all retrofits of storage to take the ITC. If that happened, the floodgates would open.”