IRS written determination 201444025

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201444025
Release Date: 10/31/2014
Index Number: 48.00-00
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[Third Party Communication:
Date of Communication: Month DD, YYYY]
Person To Contact:
----------------------, ID No. -----------
Telephone Number:
--------------------
Refer Reply To:
PLR-149379-13
Date:
May 05, 2014
LEGEND:
Taxpayer:-----------------------
--------------------
Year 1:------
Year 2:------
Dear -------------:
This is in response to your request for a ruling, submitted by your authorized
representative, concerning the federal income tax consequences of the transaction
described below:
FACTS
Taxpayer designs and produces for sale to customers systems that convert solar
energy into electricity. These systems are designed to be placed -----------------------------
-------------------------------------------. The electricity generated from these systems is used
to power devices such as ----------------------------------------------------------------------------------
--------------------------------------------------------------. Some of the solar energy systems
Taxpayer produces generate power that can be sent to the grid while others are self-
sufficient unconnected units.
Taxpayer also owns and operates some of the systems it produces. Taxpayer
has placed in service during Year 1 and prior taxable years, and intends to place in
service in Year 2 and future taxable years, a number of solar energy systems
substantially described. These include solar energy systems with all of the variable
features and characteristics described in the Ruling Request--i.e., -----------------------------
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PLR-149379-13
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Every component required to produce solar energy is attached to or housed in a -
----------------------------------------------------------------. These --------are custom designed
and are built specifically for the purposes of the solar energy systems. They come in
varying heights, specific to the solar access needs of each location. Each ------- has a
similar -----------------------------. The broad bases house the major system operational
components including wiring, conversion equipment, control equipment, and energy
storage batteries. These customized bases prevent the --------, some of which have
solar collection panels attached to the top, from blowing over in inclement weather. The
bases also include special locking doors, both for security purposes, and so that solar
energy-producing equipment can be readily maintained.
-----------------------------------sized to maximize solar energy collection. The ---------
and systems incorporate various methods of collecting solar energy. For example, on
some systems, a thin-film solar collector is attached to the surface -----------by means of
riveted retaining strips and a strong heat-tolerant adhesive (an ethylene propylene
copolymer adhesive-sealant with microbial inhibitor). On --------------with this type of
solar collector, the thin-film solar collector ---------------------------. -------------------collect
energy with a flat, rotating, solar panel projecting above the top -----------------. Finally, --
--------------collect energy through both the thin-film solar collector and a flat panel.
------------that Taxpayer produces are not suitable to be used for purposes other
than supporting the solar electricity generation equipment. Instead, as described
above, each ------is specifically suited to meet the solar energy collection, conversion,
and production needs of the attached device and, in some cases, send energy to the
grid. The cost to produce these -- is much greater than the cost to produce ordinary ----
-------. None of the equipment uses a source of power other than solar.
Taxpayer does not produce, sell, or install separate components of the solar
energy systems. For example, it does not produce or sell --- separately from the rest of
the equipment that makes up the solar energy system. Rather, it produces and sells the
solar energy production component and the custom ------component as a single solar
energy system.
Taxpayer requests a ruling that the solar energy systems described above,
including the ---------------------------------------------------, constitute energy property for
purposes of the investment tax credit under § 48 of the Internal Revenue Code (Code).
LAW AND ANALYSIS

PLR-149379-13
3
Section 48(a) of the Code provides for an energy credit equal to 30 percent of the
cost basis of qualifying energy property placed in service before January 1, 2017.
Section 48(a)(3)(A)(i) of the Code provides that energy property includes
equipment which uses solar energy to generate electricity, to heat or cool (or provide
hot water for use in) a structure, or to provide solar process heat, excepting property
used to generateenergy for the purposes of heating a swimming pool.
Federal Income Tax Regulations § 1.48-9(a)(2) provides that in order to qualify
as “energy property” under § 48 of the Code, property must be depreciable property
with an estimated useful life when placed in service of at least three years and
constructed after certain dates.
Section 1.48-9(d)(1) of the regulations provides as follows:
(d) Solar energy property--(1) In general.Energy property includes solar
energy property. The term “solar energy property” includes equipment and materials
(and parts related to the functioning of such equipment) that use solar energy directly to
(i) generate electricity, (ii) heat or cool a building or structure, or (iii) provide hot water
for use within a building or structure. Generally, those functions are accomplished
through the use of equipment such as collectors (to absorb sunlight and create hot
liquids or air), storage tanks (to store hot liquids), rockbeds (to store hot air),
thermostats (to activate pumps or fans which circulate the hot liquids or air), and heat
exchangers (to utilize hot liquids or air to create hot air or water). Property that uses, as
an energy source, fuel or energy derived indirectly from solar energy, such as ocean
thermal energy, fossil fuel, or wood, is not considered solar energy property.
Section 1.48-9(d)(3) of the regulations provides, in part, that solar energy
property includes equipment that uses solar energy to generate electricity, and includes
storage devices, power conditioning equipment, transfer equipment, and parts related to
the functioning of those items. Such property, however, does not include any
equipment that transmits or uses the electricity generated.
Apart from ----------itself, all of the components of the solar energy systems use
solar energy directly to generate electricity. The energy conversion components,
energy storage battery, collection panels, control equipment and wiring are all energy
property within the meaning of Treas. Reg. §§ 1.48-9(d)(1) and (3). Furthermore,
Treas. Reg. § 1.48-9(d)(1) provides, in part, that solar energy property includes
equipment and materials and parts related to the functioning of equipment that uses
solar energy to generate electricity. Accordingly, we conclude that the solar collection
panels, storage batteries, wiring, conversion equipment and control equipment
constitute energy property under § 48(a)(3) of the Code. In this case, ------------are

PLR-149379-13
4
essential to the functioning ofthis equipment. Accordingly, we further conclude that -----
-------upon which the solar panels are mounted constitute energy property under
§ 48(a) as well.
However, although the -------provide structural support for the solar collectors, ---
------------may also provide structural support for lights, surveillance equipment, motion
detectors, two way transmission systems and other attachments not used for the
generation of electricity from solar energy and will also protect the equipment from
damaging weather and general degradation. Therefore,Taxpayer should allocate
some portion of the basis of ----------(to the extent that it performs another function) to
non-energy property. Further, other systems including the lights, surveillance
equipment, motion detectors, two way transmission systems or other attachments not
used for the generation of electricity from solar energy will not constitute energy
property within the meaning of IRC § 48.
Except as specifically determined above, no opinion is expressed or implied
concerning the Federal income tax consequences of the transaction described above.
This ruling is directed only to the Taxpayer who requested it. Section 6110(k)(3)
of the Code provides it may not be used or cited as precedent. We are sending a copy
of this letter ruling to the Industry Director.
Sincerely,
Peter C. Friedman
Senior Technician Reviewer, Branch 6
Office of Associate Chief Counsel (Passthroughs
& Special Industries)
cc: