Tax Type
Individual Income Tax
Description
Renewable energy source credit; Subsidized energy financing
Topic
Credits
Date Issued
10-31-1984
October 31, 1984
Re: Individual Income Tax: Renewable Energy Source Credit
Subsidized Energy Financing
Dear ********
This will reply to your telephone conversation of October 22, 1984 with a member of my staff regarding the applicability of the state individual income tax credit for renewable energy source expenditures to expenditures financed in part by subsidized government financing.
FACTS
As I understand the situation, the Commonwealth, via its "Solar Bank" program, provides financing for certain solar energy expenditures. The grant is limited to $5,000, but actual expenditures may exceed this amount, in which case the purchaser must pay for the excess. You have asked whether the excess amount of the expenditure not covered by the Solar Bank grant qualifies for the state individual income tax credit.
RULING
The individual income tax credit for renewable energy source expenditures, set forth in Va. Code § 58-151.014:2, provides a credit for "renewable energy source expenditures as defined in 44C of the Internal Revenue Code and the regulation adopted thereto." IRC § 44C(10)(A) provides that:
For purposes of determining the amount of . . . renewable energy source expenditures made by any individual with respect to any dwelling unit, there shall not be taken into account expenditures which are made from subsidized energy financing.
In explaining this provision, Treasury Regulation 1.44C-3(3)(c) provides that:
Qualified expenditures financed with Federal, State, or other grants shall be taken into account for purposes of computing the residential energy credit only if such amounts are taxable as gross income under [IRC] § 61 . . . and the regulations thereunder.
Therefore, based upon these two provisions of federal law, which Virginia is band to follow by virtue of § 358-151.014:2, it is clear that nontaxable state grants cannot be included as an "expenditure" for purposes of computing the credit. However, any amount of an expenditure which is not so financed because it exceeds the grant limitation or otherwise, does constitute an "expenditure" which is subject to the state credit. This is clearly described in the instructions accompanying Federal Form 5695 Residential Energy Credit, a copy of which is enclosed.
If you have any additional questions, please let us know.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner