Depreciation & Sec 179 for Solar Electric

[CraigSeverance]

This is a Hot Tax Topic as many utilities nationwide are now paying half the cost of solar electric systems, plus there is a 30% Investment Tax Credit for businesses that do this.

All the popular tax discussion and even RIA's Checkpoint (my research subscription) only point to the 30% Tax Credit.

I have however found no references other than the Tax Book (p. 9-8 lists "certain.. solar" without specifying which solar projects as "5-Year Property" for MACRS) specifying the depreciation treatment for the Remaining Basis that a business would have after the utility rebates and the 30%ITC. In other words, how do we depreciate what the client actually had to pay for?

I especially need any references regarding:

o Is this for certain "tangible personal property" and NOT a structural building component (I am speaking of normal detachable solar systems, not the roof tile style).
o Is it eligible for the Section 179 deduction?
o Tax Book responded to my "content" question saying they got the solar information from p. 9-8 from an IRS publication 946, How to Depreciate Property, but that Publication was non-specific as to what types of solar are meant by "certain". Does anyone have a reference more specific, that would spell out what IRS means by "certain" solar projects, does that include solar electric, solar water heating, solar space heating, etc. that do qualify as 5 Year MACRS personal property?

As I said I have already searched through the RIA Checkpoint Search Engine with no luck, does anyone have any other sources that may help answer these. I have at least 2 and possibly 3 clients that are proceeding this year to install these systems & this is clearly a hot tax break topic that Checkpoint and Tax Book have NOT covered adequately.

Thank You!

[Bees Knees]

TTB, page 9-8 under 5-year property says: “Certain geothermal, solar, and wind energy property.”

Using my WebCD and clicking on the header at the top of the page, it takes me to IRS Pub 946. When I do a word search in IRS Pub 946 on the word “Solar,” it takes me to page 17 with the following discussion:

Property used for lodging. Generally, you cannot claim
a section 179 deduction for property used predominantly to
furnish lodging or in connection with the furnishing of
lodging. However, this does not apply to the following
types of property.
•Nonlodging commercial facilities that are available to
those not using the lodging facilities on the same
basis as they are available to those using the lodg-
ing facilities.
• Property used by a hotel or motel in connection with the
trade or business of furnishing lodging where the
predominant portion of the accommodations is used
by transients.
• Any certified historic structure to the extent its basis
is due to qualified rehabilitation expenditures.
• Any energy property.
Energy property. Energy property is property that
meets the following requirements.
1. It is one of the following types of property.
a. Equipment that uses solar energy to generate
electricity, to heat or cool a structure, to provide
hot water for use in a structure, or to provide solar
process heat.
b. Equipment acquired after December 31, 2005,
that uses solar energy to illuminate the inside of a
structure using fiberoptic distributed sunlight.
c. Equipment used to produce, distribute, or use en-
ergy derived from a geothermal deposit. For elec-
tricity generated by geothermal power, this
includes equipment up to (but not including) the
electrical transmission stage.
d. Qualified fuel cell property or qualified
microturbine property acquired after December
31, 2005.
2. The construction, reconstruction, or erection of the
property must be completed by you.
3. For property you acquire, the original use of the
property must begin with you.
4. The property must meet the performance and quality
standards, if any, prescribed by Income Tax Regula-
tions in effect at the time you get the property.
Energy property does not include any property that is
public utility property as defined by section 46(f)(5)…

From the above cited IRS Pub, I would conclude that solar power, as described above under Energy Property, even if it is otherwise considered a structural component of a commercial building, would qualify for the Section 179 deduction.

IRS Pub 946, page 31 also confirms the statement in TTB that solar property is in the 5 year MACRS class life.