The IRS recently provided some much needed guidance on the Section 48 investment tax credit regarding the scope of what is qualifying energy property. Section 48 generally allows for an investment tax credit for qualified energy property, which includes equipment that uses solar energy to generate electricity. Currently, this credit may also be converted into a 1603 grant in lieu of a credit, a key element in many successful solar energy deals.
Treas. Reg. Section 1.48-1(e), however, limits the equipment that qualifies for the credit by providing that structural components are not included. The term structural components is defined as parts of buildings such as walls and windows, among other items. Technological innovations have raised questions as to when energy property serves a dual purpose and whether the equipment will be considered qualifying energy property for purposes of the Section 48 credit. PLR 201043023 (Oct. 29, 2010) addresses this by allowing dual purpose equipment to qualify, As discussed in the ruling, the taxpayer installed a PhotoVoltaic (PV) curtain wall on a commercial building. A PV curtain wall system substitutes some or all glass on a building with PV panes that can produce electricity from solar sources. These panes can also serve as tinted glass in the building’s structure. Developing technology enables virtually 100% of the surface area of the side of a building to generate electricity without impairing the occupants’ view to the outside or the basic configuration of the building space. Since the PV curtain wall was specifically designed and engineered for the taxpayer’s building, PLR 201043023 concluded that the elements of the purchase price of the PV curtain wall constitute energy property for purposes of Section 48. A private letter ruling may not be cited as authority by a taxpayer, but it does evidence an IRS position on the matter.
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