Brian and other PPA vs. ITC head-scratchers, RE: Seems like an awfully large chunk of potential market to ignore over tax credits. If you think so, then tell your all-too-smart Solar Lobby to repent for their historical insistence on rebates & incentives that have no accountability. This includes all forms of capacity-based incentives &/or tax credits, etc. Once they've repented, then drag their butts down to Capital Hill (not a mis-spelling) and have them remove the ITC from the Corporate Welfare Act of 2008 (This is the one that is now in place for how many more years? thereby preventing real advancement for distributed PV until it is removed!!!!). Once all forms of this are eradicated, then we need to insist on equitable compensation for clean energy generation via a comprehensive feed-in tariff structure at the national level. Yes, this means Certified Generation Meters and Data Acquisition Systems, Time:Load based pricing, No More Net Metering for new projects, National Interconnection Standard, and a National Right To Interconnect Clean Energy Sources policy that acknowledges the intrinsic "National Security" benefits of Distributed Renewable Generation. Since we're down there on Pennsyvania Avenue kicking in doors, let's make sure that a Carbon Tax becomes mandatory for all commercially produced sources, at the point of manufacture/production, and that any form of "Cap & Trade" for pollution of any kind is forever outlawed by the US Constitution. And, just one more... Mandate that trade with foreign nations which subscribe to "Cap & Trade" policies be phased out completely within 5 years unless & until they revert to actually cleaning up their mess and similarly outlawing Cap & Trade. Until then, HOAs (CIDs) and other "non-charitable non-profits" are gonna have to figure it out as it applies in their own specific case. Part of our job as Renewable Energy Professionals is to help them, where appropriate. For this treat, I'll stick to HOAs. There are certain common things to look for when talking with them that will help guide in shaping the best strategy. Among these are the legal structure of the HOA entity, whether or not the HOA "owns" assets, whether or not the HOA has a tax status, etc. The best ones are fairly common and look like this: An HOA (as a standalone entity) that is structured similarly to an LLC operating as a partnership for tax purposes. They may or may not call themselves an LLC or partnership. We are looking for the tax relationship of the individual homeowner as it relates to the "common property". Under this structure, the individual homeowners (via their real property title) each own and have responsibility for a proportional piece of the "common property and expenses". They are are prohibited by contract from "taking common property with them" when they sell, which equates to the common property being a "permanent fixture" from a legal and accounting standpoint, as it relates to the individual homeowners. Each property owner gets to take their proportionate share of the ITC off their personal taxes. From a tax accountant's standpoint, it works JUST LIKE A CONVENTIONAL PPA LLC STRUCTURE WORKS FOR THE INVESTORS BEHIND THE CURTAIN except there isn't any special energy billing required. There also isn't a 6:6:3:1 ratio... 6 Lawyers for every 6 Accountants for every 3 Engineers for every 1 Wrench. Basically, here's how it works: The HOA gets the proposal together for a purchase of the PV System. (Not a PPA!) The individual homeowners vote to use HOA funds for a Common Area Improvement. (Same thing they do when they have to re-roof, only this time it's Cap-Ex instead of maintenance.) This may or may not mean they have to shell out additional dues, either in lump sum or amortized. Either way, the money comes out of the collective pool that every property owner pays into. Essentially, this equates to an improvement of their individual property as well... One of those intrinsic things that draws people to condos and gates in the first place... When the system is completed, each homeowner is provided with a copy of all the necessary bills and a statement from the HOA secretary / accountant showing their portion. This should be all they need to take the deduction and prove the validity if challenged. Most HOAs do this end-of-year statement thing anyway. Shows contributions, expenses, balance. Some show the aggregate for the whole CID as well as the individual, others just the individual stats. The key is that the Solar system cost and homeowner portion needs to be indicated as a line-item on the statement. The logical question I think I hear a lot of you asking right now is: "How do I figure out if an HOA is setup like this?" The simplest way I know is to ask them. Only not really directly and sounding like a lawyer... Something more like this: "When the association needs to make a big improvement, do the inidividual homeowners get to deduct their portion from their taxes?" If you are talking with the right person, this should be the key qualifying question. If they look at you all puzzled or don't know, then ask them if you can see a copy of their end-of-year statement for a clue. (For the uninitiated: LLC = Limited Liability Company. This is NOT a corporation. Some HOAs are structured as corporations where each property represents a proportionate # of shares of ownership. Working with them is "similar" but these setups generally mean there is at least 1 resident lawyer and 1 resident CPA on the committee to deal with, which means... I don't want to deal with them. There's just not enough $ in the project to cover the PITA factor. Besides, lawyers who sit in this committee role are the types who have dreams about finding black mold in their attics. Contact me off list if you need a description of PITA.) Disclaimer: The foregoing is the opinion of a guy with a public high-school education and a hammock. The described method and strategy has been successfully implemented on numerous occassions in several regions of the US. It's not rocket science and it is ethical. This strategy does not require "sneaky" practices of any kind for successful implementation. It's a tragedy that more folks haven't figured it out yet. Your experience and situation may vary. So might those of your clients. You are hereby advised to advise your intended clients to seek the advice of competent tax professionals before deciding to pursue any investment path. By the time they get done finding a competent tax professional and that person gets done reviewing the proposal, the price of c-Si should be down to $2/watt-peak, +/- manufacturing tolerances of course. This savings should almost pay for the cost of a competent tax professional. Did I mention that the foregoing is an opinion? Pray for Sun! During the daytime hours only, please. Matt Lafferty [email protected]
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