When is solar energy equipment considered 'placed in service' for New York's residential solar energy credit if the equipment is installed while a new home is still under construction?

Plain-English summary

New York's personal income tax law, Tax Law § 606(g-1), gives taxpayers a credit equal to 25% of their "qualified solar energy system equipment expenditures." To qualify, the solar equipment must be installed at residential property in New York and used by the taxpayer as his or her principal residence "at the time" the equipment is placed in service, and the credit is claimed for the taxable year in which the equipment is placed in service.

The Petitioner, a tax professional, had several clients building new homes who were purchasing and installing solar energy systems during construction. Some of these clients were still living in their existing home - which they considered their principal residence - while the new home was being built, and they intended to move into the new home and make it their principal residence once construction finished. The Petitioner asked the Department to clarify what "at the time" means in this new-construction scenario: does the principal-residence requirement have to be met the moment the solar equipment is physically installed (while the home is still under construction and not yet occupied), or at some later point?

Because the Tax Law does not define "placed in service," the Department looked to the federal tax definition of that term for guidance - specifically the federal regulations addressing "placed in service" for the investment tax credit and for depreciation, under which property is placed in service when it is in a condition or state of readiness and availability for its assigned function. Applying that concept to new construction, the Department concluded that solar equipment is placed in service when the solar installation itself is complete and the new home is ready for occupancy - not merely when the panels or system components are physically installed during the construction process.

The practical consequence is that the "at the time" language in Tax Law § 606(g-1)(2)(A) refers to the point when installation is finished and the home is occupancy-ready, and the taxpayer bears the burden of demonstrating that the home is his or her principal residence at that point in order to claim the credit.

What this means for you

Homeowners building a new home with solar equipment

If you install solar energy system equipment while your new home is still under construction, the equipment isn't treated as "placed in service" until the installation is complete and the home is ready for occupancy. You need to be able to show that the home is your principal residence at that point - not at the earlier moment the panels went up - to claim the 25% credit under Tax Law § 606(g-1).

Accountants and tax professionals advising clients on the timing of the claim

When a client is building a new home and installing solar equipment before moving in, don't treat the credit as available for the tax year the equipment was physically installed if that predates occupancy. Instead, tie the "placed in service" date - and therefore the year the credit is claimed - to when construction and installation are both complete and the client has begun using the new home as a principal residence, and be ready to document that timeline if the Department asks.

Common questions

Q: What does "at the time" mean in Tax Law § 606(g-1)(2)(A) for a newly constructed home?
A: It refers to the point when the solar energy system equipment installation is complete and the new home is ready for occupancy as the taxpayer's principal residence - not the moment the equipment is physically installed during construction.

Q: My client installs solar panels midway through building a new home but doesn't move in until later - which year's credit applies?
A: The credit is claimed for the taxable year in which the equipment is placed in service, which for new construction is when installation is finished and the home is ready for occupancy, per Tax Law § 606(g-1)(7).

Q: Why did the Department look at federal tax rules to answer a New York income tax question?
A: Because "placed in service" isn't defined in the Tax Law, the Department looked for guidance to the federal definition used for the investment tax credit and for depreciation, which ties "placed in service" to a state of readiness and availability for the equipment's assigned function.

Q: Does the taxpayer have to prove anything to get the credit?
A: Yes. The taxpayer bears the burden of demonstrating that the new home is his or her principal residence at the time the solar equipment is considered placed in service.

Citations and references

• Tax Law § 606(g-1) - personal income tax credit equal to 25% of qualified solar energy system equipment expenditures
• Tax Law § 606(g-1)(2)(A) - defines qualified solar energy system equipment expenditures and requires the property be used as the taxpayer's principal residence "at the time" the equipment is placed in service
• Tax Law § 606(g-1)(7) - the credit is claimed in the taxable year in which the solar energy system equipment is placed in service
• 26 CFR 1.46-3 - federal regulation defining "placed in service" for purposes of the investment tax credit
• 26 CFR 1.167(a)-11(e)(1)(i) - federal regulation defining "placed in service" for purposes of depreciation

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2013.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a13_8i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-13(8)I
Income Tax
September 9, 2013

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I120607A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted (Petitioner). Petitioner asks for clarification of the phrase “at the
time” contained in Tax Law § 606(g-1)(2)(A) pertaining to the definition of qualified solar
energy system equipment expenditures when taxpayer is constructing a new residence with
qualified solar energy system equipment. We conclude that the language “at the time” is
referring to when the installation of the qualified solar energy system equipment is complete and
the taxpayer has begun to use the residence as his or her principal residence.
Facts
Petitioner has several clients that are currently building new homes and are purchasing
and installing qualified eligible solar energy systems for these homes at the time of construction.
During home construction, some of the clients continue to live in their current home, which they
consider their principal residence. These clients intend that the newly constructed home will be
their principal residence when construction is complete.
Analysis
Tax Law § 606(g-1) provides that a taxpayer shall be allowed a credit against personal
income taxes in an amount equal to 25% of qualified solar energy system equipment
expenditures.
The term “qualified solar energy system equipment expenditures”
means expenditures for the purchase of solar energy system equipment that is installed in
connection with residential property located in New York and is used by the taxpayer as his or
her principal residence at the time the solar energy system equipment is placed in service. Tax
Law § 606(g-1)(2)(A). The credit is allowed to be claimed in the taxable year in which the solar
energy system equipment is placed in service. See Tax Law 606(g-1)(7).
The term “placed in service” is not defined in the Tax Law. However, for federal tax
purposes, the term “placed in service” refers to the time in which the property is placed in a
condition or state of readiness and availability for a specifically assigned function, whether in a
trade or business, in the production of income, in a tax-exempt activity, or in a personal activity.1
Looking to the federal definition of “placed in service” for guidance as to when solar energy
equipment qualifies for the credit under Tax Law § 606(g-1)(2)(A) in the case of new
1

See federal regulation §§ 1.46-3 regarding the definition of placed in service with respect to the investment tax
credit and 167(a)-11(e)(1)(i) regarding the definition of placed in service for purposes of depreciation .

-2-

TSB-A-13(8)I
Income Tax
September 9, 2013

construction, it is determined that the qualified solar energy system equipment will be considered
to be placed in service when the solar energy equipment installation in the new home is complete
and the new home construction is ready for occupancy. Your client, the taxpayer, would bear
the burden of demonstrating that the house is his or her primary residence at that time in order to
qualify for the credit.

DATED: September 9, 2013

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.