Annoyed

electrofelon

electrofelon

Senior Member
Location
Cherry Valley NY, Seattle, WA
Occupation
Electrician
So apparently there is scheme where companies can still get residential solar the 30% tax credit. Has anyone heard of this? Basically its on paper owned by the company and there is "loan" that you can pay off after 6 months with no penalties and then you own the system and the bank gets the tax credit or something like that. Whats annoying is you kinda have to in practice be a larger company and in kahoots with the banks to make it work. So essentially all the small solar guys cant do but these large scumbag companies can. Great. Thanks.
 
Most regulations and subsidies hurt small business and favor large businesses. For example workman's comp saves large corporations millions, maybe billions, but for small companies it's effectively just another tax that they will never benefit from but are required to pay anyway. I'm sure others will chime in with more.

It's not a bad thing if you are never the most successful company because there is always somebody else who is willing to lie cheat and steal more than you. Some things are worth more than dollars.
 
Setting the sale up as a "solar lease" on paper makes it a commercial PV installation which still qualifies for the 30% tax credit. I have not known anyone doing these, I've just read about them. As far as I can tell there is nothing technically illegal about this, but I'm not a tax lawyer. Could be the IRS comes back in a few years and yanks these tax credits back from these installs.
 
Since to make this work the installer has the carry the cost of the system components and installation and the customer pays only a monthly lease fee for the term of the lease before the customer buyout the installer capital cost is high. It takes a lot of capital and probably access to capital through a bank, so only larger PV installers can take advantage of this. I can speculate that the secret of all this is deciding what the minimum "lease" term can be before the customer buyout that makes it a legitimate solar lease and not a standard sale that would stand up to an IRS challenge.
 
pv_n00b said:
Since to make this work the installer has the carry the cost of the system components and installation and the customer pays only a monthly lease fee for the term of the lease before the customer buyout the installer capital cost is high. It takes a lot of capital and probably access to capital through a bank, so only larger PV installers can take advantage of this. I can speculate that the secret of all this is deciding what the minimum "lease" term can be before the customer buyout that makes it a legitimate solar lease and not a standard sale that would stand up to an IRS challenge.
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I think it was a 6 month lease. I mean its nice to have defacto access to the tax credit, but essentially all smaller installers are shut out. Also I would guess what is happening is the price is getting inflated for more tax credit money, which is needed to cover these middle men.
 
electrofelon said:
I think it was a 6 month lease. I mean its nice to have defacto access to the tax credit, but essentially all smaller installers are shut out. Also I would guess what is happening is the price is getting inflated for more tax credit money, which is needed to cover these middle men.
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The overall cost will be more just for the capital financing. In this case the installer would get the 30% tax credit on their taxes and not the customer, but that is not right away and it could take up to a year to get that money back. For that period the installer is financing that 30% tax credit. The installer is the one taking the risk that the IRS smells a rat and comes back later to claw back the tax credit. Seems to me like a lot of work and cost to weigh against the 30% tax credit.
 
pv_n00b said:
The overall cost will be more just for the capital financing. In this case the installer would get the 30% tax credit on their taxes and not the customer, but that is not right away and it could take up to a year to get that money back. For that period the installer is financing that 30% tax credit. The installer is the one taking the risk that the IRS smells a rat and comes back later to claw back the tax credit. Seems to me like a lot of work and cost to weigh against the 30% tax credit.
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There is a bank involved that finances the tax credit. Im just saying no one is going to do this for free and just pass on the full tax credit to the client out of the goodness of their hearts. The banks, the solar integrator need to make money so like I said they just must be inflating the cost of the system to cover all this.
 
This thread had gotten off to a bad start as far is giving good information...

As a small installer there are several companies that you can sign up with who will 'own' the system. It's called TPO for third party ownership. There's paperwork and they have 'approved vendor lists' of which equipment they will allow in part of their deals. Each is going to have their own specific types of deals and processes. In some cases the process involves 'direct pay' from the TPO company to your equipment dealer, so you do NOT have to front the cost of equipment. In other cases the homeowner still pays you and then you get paid a portion of the deal after installation.

Message me if you want a list, I don't want to be seen as advertising anyone in particular publicly.
 
In some of these deals the homeowner can pay off the lease or loan right away without penalty or interest so they don't really pay for financing or it's up to them how much.
 
jaggedben said:
This thread had gotten off to a bad start as far is giving good information...
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I don't see that there's been any bad information. Okay an accountant or lawyer might nitpick what has been said and the terms that have been used. "Tax equity partnership" is the correct word, at least for the company we got a quote from. Those details are irrelevant to the purpose of the thread IMO.
 
electrofelon said:
I don't see that there's been any bad information. Okay an accountant or lawyer might nitpick what has been said and the terms that have been used. "Tax equity partnership" is the correct word, at least for the company we got a quote from. Those details are irrelevant to the purpose of the thread IMO.
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Some not so accurate stuff that has been said:
Small installers are shut out
Banks involved
Monthly payment
Costs more to homeowner
Installer has to front the cost

With some of those assertions it's just not true and in others it's not necessarily true.
 
Jaggedben, I think you are misinterpreting the thread. It's not about how can small installers participate in a solar lease installation. It's about how some installers are dressing up a regular residential solar sale to make it look like a solar lease and therefore qualify for the commercial PV 30% tax credit.

If a small installer wants to get involved in solar leases there are companies they can partner with. The company owns the systems and the PV contractor just installs them. Similar to the old Sungevity model if anyone remembers that. Most small installers I talked to disliked that system.
 
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jaggedben said:
Some not so accurate stuff that has been said:
Small installers are shut out
Banks involved
Monthly payment
Costs more to homeowner
Installer has to front the cost

With some of those assertions it's just not true and in others it's not necessarily true.
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The more people you have involved in the deal the more people who add a markup to make a profit. Cost will aways go up and the homeowner will pay more. From least to most expensive way to install residential PV is: homeowner buys outright to solar lease. This has been known since solar leases were invented. You can't fight math.
 
pv_n00b said:
The more people you have involved in the deal the more people who add a markup to make a profit. Cost will aways go up and the homeowner will pay more.
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Pay more than if the residential solar tax credit were still available. But if these extra hoops allow the commercial tax credit to be taken, there's no reason the 30% savings couldn't be split between the new actors and the homeowner.

Cheers, Wayne
 
jaggedben said:
Some not so accurate stuff that has been said:
Small installers are shut out
Banks involved
Monthly payment
Costs more to homeowner
Installer has to front the cost

With some of those assertions it's just not true and in others it's not necessarily true.
Click to expand...
Small installers are definitely shut out. We asked the solar integrator if we could do the work, he said no they need to sub it out to contractors they are partners with.

Banks are definitely involved, at least for the scheme of the people we got a proposal from. Ill send you the proposal if you want.

Its a free country, but not sure why you are defending this. Yes its a good thing that essentially a homeowner can effectively get a system at about the same cost as when the residential ITC was in place, but its annoying that small installers are shut out, and that (presumably) they are jacking up the cost of the system to get more tax credit money to cover the extra costs and Middle men. As a tax payer i dont like that.
 
pv_n00b said:
Jaggedben, I think you are misinterpreting the thread. It's not about how can small installers participate in a solar lease installation. It's about how some installers are dressing up a regular residential solar sale to make it look like a solar lease and therefore qualify for the commercial PV 30% tax credit.

If a small installer wants to get involved in solar leases there are companies they can partner with. The company owns the systems and the PV contractor just installs them. Similar to the old Sungevity model if anyone remembers that. Most small installers I talked to disliked that system.
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I'm not misinterpretating the thread. We are in a new situation where homeowners can no longer get a tax credit for a cash purchase but can still get a reduced cost through a lease-type arrangement. TPO parters that were focussed commercial before (because that's where financing was truly needed) are now getting into helping out residential customers who would have paid cash before, but now need an arrangement if they want to take advantage of the available tax credit.

Also Sungevity did their own sales and design and subcontracted installation, whereas with these TPO partners you still develop the sale and design as an installer and set the same price you'd get paid for a cash sale. Not all of these business models are the same, and these TPO companies have learned what works where Sungevity's model didnt.

wwhitney said:
Pay more than if the residential solar tax credit were still available. But if these extra hoops allow the commercial tax credit to be taken, there's no reason the 30% savings couldn't be split between the new actors and the homeowner.

Cheers, Wayne
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Correct. The TPO company of course takes a cut of the tax credit. Plus with domestic content the commercial tax credit is higher than 30% so the TPO company can take their cut and still pass the homeowner a discount that is almost as much as the previous 30% residential credit. Homeowner can quickly pay off the loan (if that's how it’s codified) without incurring large finance costs, if they are able.
 
electrofelon said:
Small installers are definitely shut out. We asked the solar integrator if we could do the work, he said no they need to sub it out to contractors they are partners with.
...
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Not sure what kind of situation you're referring to, but there are companies where you can develop the customer and sale amd price as a contractor, like normal, and partner with them to get the customer a tax credit discount through a lease or loan type arrangement. There's no subcontract between construction firms. Doesn't sound like this would help in the situation you're talking about. But if you are competing directly at the customer level with other companies who are offering these deals, and you want to compete, feel free to message me for partner suggestions.

I'm not saying it's as nice as cash sales, it isn't. But it's not as bad as subcontracting to these larger install companies that do their own financing.
 
Gentlemen, this is known as a “prepaid PPA” / “Prepaid Lease”.

It’s not for 6 months, it’s for 6 years!

The system is owned by a corporation/TPO, not the HO, for 6-years so the business entity can capture the full federal tax credit and depreciation on their books in a 5-year period. That extra year is a buffer. By the end of the term the assets has been fully depreciated and then it’s sold to the homeowner for like a $1.

The homeowner either paid cash or took out a loan to pay for the system upfront. They TPO company can usually discount the system around 20% passing on some of the tax credit to the customer (it's not the full 30%) as an upfront discount. Now the TPO and installer could stack the system with adders like domestic content products, to increase the taxc credit up to 40%, so maybe the customer gets that 20% bumped up to 30%. There are other adders like energy community, but that's dependent on where the customer resides.

The TPO is suppose to maintain the system for those 6-years to make sure it works.


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