In a private letter ruling last week, which many observers suggest is evidence of the way the Internal Revenue Service (IRS) is leaning and may eventually become the norm, the IRS stated energy storage devices added to existing residential solar equipment are eligible for the 30 percent investment tax credit (ITC) that has been in place for solar installations for a number of years, provided that the storage system is being solely charged from the photovoltaic panels on the solar power system.

"It is a big day for the residential solar combined with storage industry," said Jason Burwen, vice president of policy for the Energy Storage Association.

Kelly Speakes-Backman, CEO of the ESA, said the ruling marks a milestone for the residential storage-plus-solar industry.

"The 30 percent credit is like jumping ahead five years on the cost curve for home battery systems," she said. "So, on that count, customers will be able to afford longer-duration systems sooner and have greater opportunity for self-reliance."

In a press release related to the ruling, the ESA notes that, "The determination that an energy storage retrofit of a residential solar PV project is eligible for a 30 percent investment tax credit under Section 25D is a step in the right direction toward a common-sense tax approach to storage. Reducing barriers for taxpayers is an important action this Administration can take to continue growing this industry and to create thousands of new jobs."

However, the release cautions, the IRS ruling does not constitute formal guidance at this point: "There is still significant uncertainty surrounding taxpayers' ability to access the ITC, which could limit investment and hamper industry growth."

As a result, the ESA announced that it will continue to advocate federal legislation designed to provide clarification in this matter.

"In particular, we encourage Congress to pass bipartisan, bicameral legislation (S. 1868 and H.R. 464) that clarifies eligibility of energy storage for both the Section 48 and 25D ITC, which would unlock storage to pair with all energy technologies—like gas power plants, wind turbines, and building HVAC systems—in addition to solar power."

The solar ITC for homes remains at 30 percent through 2019, then drops to 26 percent in 2020, and 22 percent in 2021, before expiring at the end of 2021.

For a copy of the letter, go to https://www.irs.gov/pub/irs-wd/201809003.pdf.