Feed-in Tariff (FIT) Taxability

[cheffyj]

I've done extensive internet searching, and closest I could find was this article from 2015, which mentions the IRS hadn't ruled on the topic and that this sort of income is ambiguous: https://www.greentechmedia.com/articles/read/understanding-the-tax-implications-of-net-metering-succ... 

Is there anybody out there who has dealt with this and has strong opinions one way or another? The utility does NOT supply a 1099-MISC and tells me it's up to me whether I should report the income on my returns (won't provide tax advice). For years I've been reporting it as "Other Income" on my returns, paying the taxes. But I figured I'd ask again, since I'm moving back to preparing my taxes myself...

[tagteam]

See if @Mike9241 has an opinion on this

[Mike9241]

The general tax rule is that all income is taxable unless specifically excluded under the tax laws. Since the iRS has not issued a ruling it would seem to be taxable and that's the conclusion "Green Accountancy" arrives at.

However The Clean- Coalition.Org takes a different view. and that is while the income is taxable, you get deductions for depreciation and maintenance on the generator.  

https://www.clean-coalition.org/wp-content/uploads/2018/11/NEM-and-FIT-tax-treatment-analysis-28_jb-... 

My opinion, which can be wrong, would be to not report the income which would be the result if you were under net energy metering (NEM). I'm basing this on the fact the iRS ruled credit card rebates are not taxable income. 

[cheffyj]

Re: your opinion @Mike9241 , I actually have Net Metering in addition to the FIT. On the electrical bill I'm getting the net solar generation (~-$0.12/kwh). Separately, I get a check for the FIT (~$0.25/kwh). If I'm reading you right, you're saying that if I could effectively get the utility to show the FIT as a credit on the bill rather than sending me a check (I think this is an option I could elect), then I would need not call this income, as it's effectively a rebate for my electrical bill. Am I following you correctly?

The tricky part, I suppose, is that this is a 4-plex I live in and rent out. A former accountant had me call the solar array 100% personal in order to qualify it for the federal tax credit. So since I personally own the array (rather than the rental property), all the FIT income is personal by that logic. I do not depreciate the solar array, since it is not part of the rental.

A question: in looking at how I'm recording/accounting for my utility bills, I'm tracking the rental utilities (the rental units pay me back for utilities) as divided between personal and rental. I track my personal usage minus the solar production net metering credit as personal, resulting in a net negative personal electrical bill totaled over the year. The rental units are sub-metered, and I divvy those up and add them up for the rental utility expense total. I guess this is quickly becoming a more complicated question, but do you see any problems with how I've been doing it (with the accountant's blessing in the past; we've since parted ways)? And extrapolating into the future, if I some day move out and rent out my unit in the building, it would effectively become 100% rental. Would the solar array remain personal?

Thank you!

[Mike9241]

if I could effectively get the utility to show the FIT as a credit on the bill rather than sending me a check (I think this is an option I could elect), then I would need not call this income, as it's effectively a rebate for my electrical bill. Am I following you correctly

As stated the IRS has not ruled on FIT.  they could rule that it's like NEM or not. The tax laws do not always make sense.  For example, the NFL league office and management council were tax-exempt entities from 1942-2015 - voluntary revocation of tax-exempt status. Even the Tax Courts do not always agree on issues. You've established an accounting method for the utilities. You can not change that method without filing a 3115 - Change in accounting method.   As to your method for accounting for utilities what about utilities common to the entire property?

Use your judgment and possibly confer with a tax pro in your state. 

as to moving out, that question should be taken up with a tax pro when filing the tax return for the year of sale because tax laws are constantly changing.