State tax filing

I am grateful for a civilized thread with calm, reasoned responses. But as a tax professional, I feel that I have to make one last (everyone hopes 😉 ) attempt to explain why we think the way we do.

It is difficult to understand tax law, indeed, all law seems to relish being inaccessible to the non-legal professional. This is because the law requires for more consistency in words and sentences than ordinary conversation, which is all too often vague, imprecise, and even contradictory. Thus the law may be expressed in contorted sentences which are precise in meaning but difficult to understand for the non-tax and non-legal professional. Should it be this way? I wish not, but it is this way for the same reason that characters in television shows always ask the medical professional to “speak English”. Just like lawyers, doctors have to use terminology and phrasing to make precise communications.  

So how do we parse legal terminology so that the non-tax and non-legal professional can understand it? We can use the same principles that we used in high school algebra: substitution of terms. That is:

If A = 1 and

B = A then

B must be equal to 1.

Let’s apply this method to understand Section 25D of Title 26 of the Internal Revenue Code (https://www.law.cornell.edu/uscode/text/26/25D).

(1) 25D(a)(2) states: “In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the applicable percentages of…the qualified solar electric property expenditures…"

(2) What are “qualified solar electric property expenditures”?

(3) 25D(d)(2) is in the Definitions section that applies to 25D: “For purposes of this section…(t)he term “qualified solar electric property expenditure” means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer.”

(4) So let’s rearrange the previous sentence in paragraph 3 - “qualified solar electric property” means a property which uses solar energy to generate electricity…

(5) Now, let’s look at (e)(2), which is the confusing sentence that started this discussion.

“No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d) solely because it constitutes a structural component of the structure on which it is installed.”

(6) We know from paragraph 1 above that the only property that gets the tax credit is “qualified solar electric property”. Therefore, we can substitute the word “property” in paragraph 5 with “qualified solar electric property”. And we know from paragraph 4 that “qualified solar electric property” means a property which uses solar energy to generate electricity.

(7) By substitution, then, we see that (e)(2) should read as “No expenditure relating to a solar panel or other property which uses solar energy to generate electricity installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d) solely because it constitutes a structural component of the structure on which it is installed.”

(8) Now we understand the purpose of (e)(2). As pointed out above by other participants in the thread, solar panels and other electricity-generating properties like solar photovoltaic shingles can be installed as a “roof” for the structure. But because Congress did not want property like solar shingles to be disallowed for the credit solely because they were also “structural components” of the house (as the roof is, per the IRS elsewhere), (e)(2) was written to create a “clarification” (yes, I realize the humor of this statement) for the proper treatment of property that was both part of the solar energy system AND part of the house.

From this, we have to conclude that the law was not intended to apply to ordinary roof components (like shingles) because such items do not satisfy the definition of "qualified solar electric property" as implied in (d)(2). (last sentence edited 7/31/2019 to replace missing text).