Residential Energy Conservation Subsidy Exclusion (Personal) (Federal)

Summary

Last modified on February 12, 2015.

Financial Incentive Program

Place	United States
Name	Residential Energy Conservation Subsidy Exclusion (Personal)
Incentive Type	Personal Exemption
Applicable Sector	Residential, Multi-Family Residential
Eligible Technologies	Solar Water Heat, Solar Space Heat, Photovoltaics, Yes; specific technologies not identified
Active Incentive	Yes
Implementing Sector	Federal
Energy Category	Renewable Energy Incentive Programs, Energy Efficiency Incentive Programs
Amount	100% of subsidy
Program Administrator	U.S. Internal Revenue Service
Website	http://www.irs.gov/publications/p525/index.html
References	DSIREDatabase of State Incentives for Renewables and Efficiency

Summary

According to Section 136 of the U.S. Code, energy conservation subsidies provided (directly or indirectly) to customers by public utilities* are non-taxable. This exclusion does not apply to electricity-generating systems registered as "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978 (PURPA). If a taxpayer claims federal tax credits or deductions for the energy conservation property, the investment basis for the purpose of claiming the deduction or tax credit must be reduced by the value of the energy conservation subsidy (i.e., a taxpayer may not claim a tax credit for an expense that the taxpayer ultimately did not pay).

The term "energy conservation measure" includes installations or modifications primarily designed to reduce consumption of electricity or natural gas, or to improve the management of energy demand. Eligible dwelling units include houses, apartments, condominiums, mobile homes, boats and similar properties. If a building or structure contains both dwelling units and other units, any subsidy must be properly allocated.

The definition of "energy conservation measure" implies that utility rebates for residential solar-thermal projects and photovoltaic (PV) systems may be non-taxable. However, the IRS has not ruled definitively on this issue. Taxpayers considering using this provision for a renewable energy system should discuss the details of the project with a tax professional. Other types of utility subsidies that may come in the form of credits or reduced rates might also be non-taxable, according to IRS Publication 525.


* The term "public utility" is defined as an entity "engaged in the sale of electricity or natural gas to residential, commercial, or industrial customers for use by such customers." The term includes federal, state and local government entities.

Incentive Contact

Contact Name	Public Information - IRS
Department	U.S. Internal Revenue Service
Address	1111 Constitution Avenue, N.W.
Place	Washington, District of Columbia
Zip/Postal Code	20224
Phone	(800) 829-1040
Website	http://www.irs.gov

Authorities (Please contact the if there are any file problems.)

Authority 1:	26 USC § 136
Date Effective	1993-01-01
Date Enacted	10/24/1992 (subsequently amended)

• Incentive and policy data are reviewed and approved by the N.C. Solar Center's DSIRE project staff.