Q: Why does my utility company's residential renewable energy incentive program require a W-9?
A: When residential customers buy a renewable energy system and receive a renewable energy incentive, customers are actually selling renewable energy credits (RECs) to their utility. Leased systems are owned by the leasing company, which sells the RECs to utility.
Since June of 2010, the IRS has treated the exchange of utility incentives for RECs as a sale, and the incentive payment may be treated as income for the renewable system owner. The system owner reports the incentive payment amount on the IRS 1099-Misc (income) form. For the utility to provide the renewable energy system owner with a 1099-Misc (income) form, they must first have a W-9 on file.
Q: What is a Renewable Energy Credit (REC)?
A: "Renewable Energy Credits" (RECs) are the environmental attributes associated with the generation of power from a renewable energy resource, as well as the associated REC reporting rights. One REC represents the environmental attributes and REC reporting rights associated with one (1) kWh generated from one or more renewable energy sources.
Q: Who provides the utility a W-9?
A: The W-9 must be provided by the renewable energy system owner.
- If you are purchasing a renewable energy system you must provide a W-9 to your utility.
- If you are leasing a renewable energy system, the leasing company will own the system and must provide the utility with a W-9.
Q: What are the implications of the renewable energy incentive being treated as reportable income?
A: The implications vary by individual. We encourage you to seek the advice of a tax professional about how to treat the REC incentive payment.
Q: When is the 1099-Misc issued?
A: The 1099-Misc is issued for the tax year in which the renewable energy system owner received payment.
- If the system is placed into service and the incentive paid in 2013, then the 1099-Misc will be issued in 2014.
- If the system was placed into service in 2012 but the REC payment was issued in 2013, then the 1099-Misc will be sent in 2014.
Q: Am I issued a 1099-Misc if I assign my incentive payment to a 3rd party (e.g., system installer)?
A: The residential renewable energy system owner sells the RECs. When you purchase a renewable energy system, some utility company incentive program rules allow you to assign your REC payment to your installer for cash flow convenience. As system owner, you sell the RECs to the utility and permit the utility to issue the payment to your installer. Per the IRS, you the system owner sold the RECs, and therefore you must provide the W-9 and receive a 1099-Misc for the year in which the payment was issued.
If you are leasing the system, the leasing company owns the RECs and sells them to the utility. The lessor can choose to have the incentive payment assigned to a vendor for their cash flow convenience, but the lessor is the system owner and the party who sells the RECs, therefore, they should report the income.
Q: Where can I find more information?
A: Please see your tax advisor or the IRS about your unique tax circumstances.