Cohousing-L Mailing List: Re: DYI solution for tax credits?

[Philip Semanchuk (philip]

> On Aug 13, 2022, at 9:50 PM, David Mandel <dlmandel [at] gmail.com> wrote:
> 
> We're looking at installing solar generation on some of our roofs, first on
> two carports where EV chargers will live, then if possible on more
> sun-favorable roofs throughout the community, in a way that we could all
> share the cost and the benefit.
> Federal tax credits are available for solar installation, and that works
> well enough for individual homeowners who have sufficient income to pay
> taxes. But as a homeowner association our income tax burden is negligible.
> The typical solution for tax-exempt entities that want to install solar
> (say, on the roof of a church or a school) is to contract with specialized
> investors who become the actual owners of the system, get the tax credits
> ... and sell the power to the nonprofit entity at a discount while
> retaining a tidy profit as long as the tax credits apply (typically five
> years, I'm told, maybe 10 under the new federal legislation that just
> passed).
> So I'm wondering if there's a way to avoid using such a middle person and
> losing out on some of the tax advantages. For instance, what if some or all
> of our residents form a partnership or LLC that would operate similarly but
> pass on a much larger part of the profit to the community? Has anyone tried
> or maybe succeeded with such a plan? Or even if not, do you have some
> financial expertise to opine on whether this would be viable?


Hi David,
We have a similar situation here at Pacifica in Carrboro, NC. Our Common House 
roof it was built with solar in mind. It’s a superb location (south facing, 
unobstructed, co-located w/electrical meter, preferred angle for our latitude), 
all it needs is panels. However, our HOA is a for-profit entity for tax 
purposes, and we pay something like $50 per year in taxes. Federal income tax 
credits wouldn’t work for us.

I talked with our accountant and a couple of solar installers, and was advised 
that the typical solution for folks in our situation is to set up an LLC that 
claims the credits. Ideally the LLC would be at arms length from the HOA (e.g. 
not the same members). As you can imagine, it’s non-trivial to set up the LLC 
correctly and make sure the money flows when and where it should. This isn’t an 
attractive option for us. 

I was also told that if one’s HOA is a non-profit, larger and less complicated 
credits are available. This sounded appealing, but reincorporating our HOA as a 
non-profit is not a mountain I want to try to move just to make it viable to 
install solar panels, so I didn’t research that option very much.

I’m intrigued by suggestions that the new federal legislation might change the 
situation for folks like us. I have an opportunity later this week to talk to 
some solar installers (the company that installed panels on my personal 
residence) and I'll ask them what they've heard about this.

Cheers
Philip