This concern is backed up by a 2013 legal memo from national law firm Skadden, Arps, Slate, Meagher & Flom, which says that tariffs create hidden taxes for solar homeowners. In addition, VOSTs also jeopardize a homeowner’s ability to claim the 30% federal investment tax credit (ITC).
Now, TASC is saying there’s a danger that these hidden taxes may materialize. Apparently, an Austin homeowner is taking action before going solar to elicit a statement on the matter from the IRS. The homeowner filed an Information Letter Request with the IRS this week to check on the tax implications of VOSTs. The IRS will now have to formally review VOSTs and their impact on taxpayers.
Austin implemented a VOST in October of 2012, and that policy is currently the only way homeowners there can receive compensation for the solar energy they provide to the grid.
Under a VOST, solar customers cannot use the power generated by their solar systems. Instead, they must sell all the power their solar systems produce to the utility at a price set by the utility (and often reevaluated on an annual basis). Meanwhile, they must continue to purchase all the electricity they need from the utility just like a homeowner without solar. Utilities support VOSTs over the widely effective net metering policy.
Not surprisingly, TASC does not agree with the utilities. The organization suggests that Austin reinstate net metering alongside the VOST to address the tax problem. Net metering allows solar customers to get credit on their utility bills at the retail rate for any excess power their rooftop solar installations send back to the grid.
“VOST schemes expose unassuming homeowners to thousands of dollars in additional taxes,” said Bryan Miller, co-Chairman of The Alliance for Solar Choice, in a statement. “Austin can resolve this tax burden quickly and easily by making the VOST optional and giving homeowners the choice to utilize net metering alongside it.”
Through the Information Letter Request, the IRS will make a determination on the impact of VOSTs on income taxes and ITC eligibility. This IRS review will not only affect Austin, but also influence discussions about potential VOSTs in major U.S. solar markets, including California and New York.