I installed a photovoltaic solar panel system on my house in the summer of 2015. (It's not a lease arrangement or the like; I own the solar panels outright.) As part of the government incentives for deployment of solar power, I receive a quarterly payment due to the sale of Solar Renewable Energy Credits (SREC), which is administrated by a company called "SRECTrade". The first payment was deposited to my account in April 2016.
I had assumed that these payments were somewhat-normal taxable investment income of some sort (simply because most payments are), but hadn't dug into the details. Today I received an email from SRECTrade which states:
As tax season approaches, we'd like to remind our clients that SRECTrade, Inc. does not issue tax statements. This is due to the lack of a defined tax code regarding SRECs in the markets that we service. We recommend that our clients report their income by using the transactions statements found in their accounts on SRECTrade.com (in the Transactions tab). If there are any outstanding questions, it would be best to consult a tax professional.
I find it rather bizarre that there wouldn't be a defined policy for how to treat these payments, as while it's a market based system the market was largely defined by the government and they usually tend to be pretty clear whether income is taxable or not.
So, is income from sold SRECs taxable for United States and/or Massachusetts purposes, and if so how does one report it?
Research I've done
- The Commonwealth of Massachusetts pages on SRECs seem to focus mainly on the details of how they are generated, and also look to have a technical audience dealing with large-scale usage of the program, as opposed to the 4 credits I generated this year totaling approx $1000.
- A comment on Turbotax's site refers to a CPA's site that says that it should be included in income, but not the specifics of how, and also says that IRS guidance isn't clear.
- A search of the IRS's site for SREC doesn't give any results, and more generic searches for "solar" and the like give information on the direct federal solar tax credits available for installing systems (which I am in fact getting), but not on the taxability of these other specific incentive payments.
- I've done general Internet searches, but it seems to just be pretty murky and nobody wants to make a specific claim for fear of getting it wrong.
I'm inclined to just throw it in the "Other income" line of the tax forms, but I wanted to see if there was more recent specific guidance or rulings that I was missing.