Safe Harbor

[arf88]

Any experts here with Safe Harbor rules for ITC. My project was started in 2019 part of the invoice was paid, the only thing left is PTO and final sign off by City which won't happen till Jan 2020. Can I file for the 30% rebate in Feb 2020 when doing taxes? Is there any additional forms needed to use Safe Harbor and must the full invoice be paid in 2019 or can part of it be paid in 2019 and other in 2020?

Thanks

[J.P.M.]

See IRS notice 2018-59.

[arf88]

It appears the Safe Harbor does not even apply to residential, it is for commercial.

https://www.seia.org/sites/default/files/2019-10/SEIA-ITC-Phasedown-Factsheet.pdf

[blueman2]

But SEIA.org also has this:

If a homeowner buys the solar energy system outright (either paying cash or financing with a loan), they cannot use any commence construction safe harbor provisions. To receive the full 30% residential solar tax credit, the system must be “placed in service” before the end of the day December 31, 2019. It is not enough to have signed a contract, or to have made a down payment or even to have begun construction. There is no bright-line test from the IRS on what constitutes “placed in service,” but the IRS has equated this with completed installation in a Private Letter Ruling. The residential credit is claimed on the tax return for the year in which the qualifying expenditures are incurred, and the tax rules say the costs are incurred when the system installation has been completed. The 25D tax credit will step down to 26% in 2020, 22% in 2021, and 0% starting in 2022.

So I would definitely take an aggressive stance and use the Private Letter Ruling to say that your system is completed. You can even do a screen capture showing you have it turned on and that it is producing. Yes, it is a bit aggressive, but certainly not out of line with the Private Letter Ruling.

[arf88]

Ya I saw that, the issues is two parts, I let the solar company owner know safe harbor was not an option after one of their reps tried to push that. So the City final inspection and the Utilities PTO are remaining. The owner made a call and the city will come tomorrow to do final inspection and they will submit the final inspection to Edison. The system has been in place for a month now and this if for Batteries not Solar as I already have solar. I'm going to go by the fact if the City final inspection occurs tomorrow and Edison has a copy of the approval that should be sufficient for filing the taxes in 2020 for 2019 completion even if Edison takes a few days internally to complete the interconnection request. I hope that is not taking an unnecessary risk.

[arf88]

Also my CPA made it very clear the safe harbor does not apply in my case b/c I'm residential and he said the same thing he told me back a few years ago when I got Solar. You must have PTO by the end of the year and at that time Edison granted PTO before year end. In this case it's kind of a grey area b/c Edison will pass technical approval when the city inspection is submitted to them but I don't believe that means PTO is granted for the interconnect request.

[blueman2]

Sounds like a very defensible position. You are never 100% safe with any position with the IRS, but this is one worth taking. Worst case, they will hit you with repayment of the 4% plus interest, but unlikely to be any penalty. And given how understaffed the IRS these days, this is very unlikely to be challenged at all.

[arf88]

Thanks for the feedback