Could five simultaneously installed photovoltaic arrays sharing two inverters count as five solar systems, and how was the former Louisiana credit calculated?

Plain-English summary

The Department treated five photovoltaic arrays installed at the same time and sharing two inverters as five separate systems under a new safe harbor. The separate solar thermal hot-water system was a sixth system.

Each system qualified for a refundable credit equal to 50% of its first $25,000 of purchase and installation cost. Receiving a federal credit under 26 U.S.C. § 25D did not disqualify or reduce the Louisiana credit.

Shared-inverter safe harbor

Ordinarily, a complete solar electric system needed all equipment necessary to connect, store, and process its electricity. Sharing an inverter could therefore leave one claimed system incomplete.

The Department immediately adopted a safe harbor for two or more systems installed simultaneously. The five arrays could share the two inverters and still be treated as five systems.

Equipment added later could not rely on existing components. A later addition needed every element of a complete system to qualify separately.

Taxpayers and installation facts

The taxpayers were Louisiana residents installing the systems at their Louisiana primary residence in 2009. A licensed solar contractor installed UL-listed, code-compliant, grid-connected photovoltaic systems and a certified, code-compliant solar thermal system.

Each system cost less than $25,000, though the combined cost exceeded that amount. The systems supplied less than all of the residence's energy needs.

Credit and refund

The ruling applied 50% to the first $25,000 of each of the five photovoltaic systems and the solar thermal system. Any credit exceeding the taxpayers' Louisiana income-tax liability for the placed-in-service year was treated as an overpayment and refunded under the cited provisions.

Common questions

Q: Did sharing an inverter collapse the arrays into fewer systems?

A: No, because they were installed together under the safe harbor.

Q: Could a later-added array share the old inverter and claim another system credit?

A: No. The ruling required a later addition to contain every element of a complete system.

Q: Did the federal residential energy credit reduce the Louisiana credit?

A: No.

Q: Was excess Louisiana credit refundable?

A: Yes, under the historical rule applied in the ruling.

Citations and references

• La. R.S. 47:6030 — former solar and wind energy systems credit
• La. R.S. 47:1621(A) and 47:1624 — overpayment refund and interest provisions cited in the ruling
• LAC 61:I.1907 — system definitions, credit amount, residence, and system-count rules
• 26 U.S.C. § 25D — federal credit discussed in the request and ruling
• LAC 61:III.101 — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 09-018

Original ruling text

Private Letter Ruling
Redacted Version
No. 09-018
Individual Income Tax and Corporation Income Tax
Qualification for the Solar Energy Systems Tax Credit
October 6, 2009
This is in reply to your request for a private letter ruling concerning whether the cost to purchase
and install five separate photovoltaic solar energy systems and a solar thermal hot water system
qualifies for the solar energy systems tax credit; and whether the amount of the solar energy
systems tax credit will equal fifty percent of the total cost to purchase and install the systems.
Factual Scenario
You provided these facts:
On October 5, 2008, Taxpayers and A Corporation signed a contract whereby A Corporation
agreed to provide and install three (3) separate 2.025 kW PV solar panel energy systems at a
contract price of approximately $52,000 in order to supply the energy needs of Taxpayers’
residence.
On November 15, 2008, Taxpayers and A Corporation signed a contract whereby A Corporation
agreed to provide and install two (2) separate 1.72 kW PV solar panel energy systems to supply
the energy needs of Taxpayers’ residence.
On November 15, 2008, Taxpayers and A Corporation signed a contract whereby A Corporation
agreed to provide and install one (1) eighty gallon two collector solar thermal system to supply
the hot water needs of Taxpayers’ residence.
The contract price to provide and install two (2) separate 1.72 kW PV solar panel energy systems
and one (1) eighty gallon two collector solar thermal system was approximately $34,000 as
described in the contract between Taxpayers and A Corporation signed on November 15, 2008.
The five (5) solar panel energy systems will share and be operated through one (1) SMA 5000
series inverter and one (1) SMA 3000 series inverter. The solar panel energy systems will not
otherwise be interconnected or share any components other than an inverter.
The cost to purchase and install each solar panel energy system will be less than $25,000.
The cost to purchase and install the solar thermal system will be less than $25,000.
The total cost to purchase and install the solar panel energy systems and the solar thermal system
will exceed $25,000.
A Corporation is a contractor duly licensed by and in good standing with the Louisiana
Contractors Licensing Board with a classification of Solar Energy Equipment.
617 North Third Street
P. O. Box 44098
Baton Rouge, Louisiana 70804-4098
225-219-2780 ‚ 225-219-2759 Fax
TDD# 225-219-2114 ‚ www.revenue.louisiana.gov

PLR No. 09-018
Page 2 of 4
October 6, 2009
The solar panel energy systems will be UL listed and installed in compliance with manufacturer
specifications and all applicable building and electrical codes.
The solar panel energy systems and the solar thermal system will be installed by A Corporation
and placed in service at Taxpayers’ residence in 2009.
The solar panel energy systems will be grid connected net metering systems.
The solar thermal system will be certified by the Solar Rating and Certification Corporation and
installed in compliance with manufacturer specifications and all applicable building and
plumbing codes.
The solar panel energy systems and the solar thermal system will supply Taxpayers’ residence
with less than all of its energy needs.
Taxpayers intend to apply for any federal tax credits available to them on account of the
purchase and installation of the solar panel energy systems and the solar thermal system.
Taxpayers are married individuals and will file joint tax returns for 2009.
Ruling Request
You have asked for a ruling as follows:
As residents of Louisiana, whose primary residence is located in Louisiana, Taxpayers 1) are
eligible to earn income tax credits for solar energy systems under R.S. 47:6030; 2) will be
entitled to a tax credit equal to fifty percent of the total cost to purchase and install the solar
panel energy systems and solar thermal system; and 3) will receive a refund of any credit which
exceeds their Louisiana income tax liability for the year the solar panel energy systems and solar
thermal system are placed in service.
Taxpayers’ eligibility, application for, and receipt of federal income tax credits for the purchase
and installation of the solar panel energy systems and solar thermal system pursuant to 26 U.S.C.
25D 1) will not preclude them from receiving the solar energy systems tax credit; and 2) the
solar energy systems tax credit will be equal to fifty percent of the entire purchase and
installation cost of the solar panel energy systems and solar thermal system without reduction or
offset due to their application for the federal tax credit.
Discussion
Louisiana Revised Statute 47:6030(A) provides that “There shall be a credit against the income
tax for the cost of purchase and installation of a wind energy system or solar energy system, or
both, by a resident individual at his residence located in this state or by the owner of a residential
rental apartment project.” In addition, LAC 61:I.1907(B) defines residence to be “a single family
dwelling, one dwelling unit of a multi-family owner occupied complex (such as a condominium)
or one residential dwelling unit of a rental apartment complex. All eligible residences must be
located in Louisiana.” Taxpayers state that they are residents of Louisiana and that their primary
residence, for which the solar panel energy systems and solar thermal system are being
purchased and installed, is located in Louisiana.
Louisiana Revised Statute 47:6030(B)(1) provides that “The credit shall be equal to fifty percent
of the first twenty five thousand dollars of the cost of each wind energy system or solar energy
system, including installation costs, that is purchased and installed on or after January 1, 2008.”

PLR No. 09-018
Page 3 of 4
October 6, 2009
In addition, LAC 61:I.1907(A) provides that “The amount of the credit is equal to 50 percent of
the first $25,000 of the cost of each wind or solar energy system.” Taxpayers state in their
rendition of the facts that the cost to purchase and install each solar panel energy system and
solar thermal system will be less than $25,000. However, an analysis of the facts shows that the
use of shared inverters creates a question as to the number of complete solar electric systems.
According to LAC 61:I.1907(B), a solar electric system is “a system consisting of photovoltaic
panels with the primary purpose of converting sunlight to electrical energy and all equipment and
apparatus necessary to connect, store and process the electrical energy for connection to and use
by an electrical load.” In other words, a system has all of the discrete elements of a system. The
use of a shared inverter in “two” systems causes one of the two to not have all the discrete
elements of a system with the result that one of the systems would not be eligible for the credit.
In considering this aspect examples are helpful.
Example 1: Taxpayer installs four (4) separate 2.378 kW PV solar energy systems with four
(4) SMA 3000 inverters for a total cost of approximately $92,000 or a per system cost of
$23,000. Each separate solar energy system would be eligible for a credit equal to fifty percent
of the cost of the system or $11,500 for a total credit of $46,000.
Example 2: Taxpayer installs three (3) separate 2.025 kW PV solar energy systems with a
shared SMA 5000 inverter and two (2) separate 1.72 kW PV solar energy systems with a shared
SMA 3000 inverter for a total cost of approximately $86,000 or a per system cost of $17,200. If
allowed to share components, each separate solar energy system would be eligible for a credit
equal to fifty percent of the cost of the system or $8,600 for a total credit of $43,000.
The purpose of the limitation on the cost of each wind energy system or solar energy system
found in La. R.S. 47:6030(B)(1) was to reduce overall programmatic costs. The examples
illustrate how this purpose would not be achieved absent the creation of a “safe harbor” allowing
shared inverters in the course of the simultaneous instillation of two or more systems. Currently,
there is one exception to the general rule allowing the credit only for complete systems. A “safe
harbor” provision would act as another exception to the general rule. By allowing a “safe
harbor”, the Department of Revenue would satisfy the purpose of the legislation by decreasing
the cost of the program to the state, decreasing the cost to the taxpayer, and increase the
efficiency of the installed systems. The “safe harbor” provision would allow the use of shared
inverters when two or more systems are being installed at the same time. In the examples above,
the savings to the state would equal the difference between $46,000 and $43,000 or $3,000.
However, any equipment added at a later date could not use existing system components and
would have to have every element of a complete system in order to qualify for the credit. The
Department intends to formally create a “safe harbor” allowing the use of shared inverters when
two or more systems are installed at the same time in upcoming amendments to the Rule LAC
61:I.1907, but will give effect to the “safe harbor” treatment immediately. Under the “safe
harbor” this ruling is based upon the existence of five solar panel energy systems.
According to LAC 61:I.1907(C)(1), “Each residence or apartment project in the state is eligible
for tax credits for the number of separate complete wind, solar electric, and solar thermal energy
systems necessary to ensure that the residence or apartment project is supplied with all of its
energy needs.”

PLR No. 09-018
Page 4 of 4
October 6, 2009
Louisiana Revised Statute 47:6030(C) provides that “Notwithstanding any other provision of law
to the contrary, any excess of allowable credit over the aggregate tax liabilities against which
such credit may be applied, as provided in this Section, shall constitute an overpayment, as
defined in R.S. 47:1621(A), and the secretary shall make a refund of such overpayment from the
current collections of the taxes imposed by Chapter 1 or Chapter 5 of Subtitle II of this Title,
together with interest as provided in R.S. 47:1624.”
Louisiana Revised Statute 47:6030(B)(1) provides that “The credit may be used in addition to
any federal tax credits earned for the same system.”
Ruling
Based on the facts provided, Taxpayers 1) are eligible to earn income tax credits for solar energy
systems under R.S. 47:6030; 2) are entitled to a tax credit equal to fifty percent of the first
$25,000 of the cost to purchase and install each of the five separate solar panel energy systems
and the solar thermal system; 3) will receive a refund, if the solar energy systems credits exceed
their Louisiana income tax liability for the year the solar panel energy systems and solar thermal
system are placed in service; and 4) are not precluded from receiving the solar energy systems
tax credit even if they receive a federal income tax credit for the purchase and installation of
solar panel energy systems and solar thermal system pursuant to 26 U.S.C. 25D.
If you have any questions or need additional information, please call Leonore Heavey, Revenue
Tax Assistant Director, or William E. Little, Attorney, Policy Services Division, at 219-2780.
Sincerely,

Cynthia Bridges
Secretary
By:
William E. Little
Attorney
Policy Services

This correspondence constitutes a private letter ruling (PLR) by the Louisiana Department of Revenue, as provided
for by section 61:III.101 of the Louisiana Administrative Code. A PLR provides guidance to a specific taxpayer at
the taxpayer's request. It is a written statement that applies principles of law to a specific set of facts or a particular
tax situation. A PLR does not have the force and effect of law, and is not binding on the person who requested it or
on any other taxpayer. This PLR is binding on the department only as to the taxpayer to whom it is addressed, and
only if the facts presented were truthful and complete and the transaction was carried out as proposed. It continues
as authority for the department's position unless a subsequent declaratory ruling, rule, court case, or statute
supersedes it.