New Yorkers who have installed geothermal systems, an energy efficient and increasingly common method of heating homes, will not be able to use Tax Law Section 606 g-1, a tax credit that covers expenditures made for the installation of qualifying equipment involved in solar energy systems. This decision was recently reached (and enforced) by New York’s tax appeals tribunal. Their reason, or explanation, for this ruling was that the geothermal system does not directly use solar radiation. Instead of producing energy, it uses ground source heat.
NY Solar Tax Credit Case
It has been reported that after dishing out thousands of dollars for a ground terminal heat pump, a Buffalo professor/surgeon wanted to cut $5000 from his personal income taxes. He was denied. A tax tribunal ruled that the costs of a geothermal energy system are not covered under the NY solar tax credit. The following discusses the highlights of the case.
Details of The Case
A professor and cardiothoracic surgeon claimed a tax credit worth $5000 on his 2010 personal NY state income tax return. A local company had installed a ground source heat pump system to the tune of $37,360. The surgeon attempted to use Tax Law Section 606 g-1 (which provides residents of New York a 25% tax reduction on expenditures up to $5000 on qualified equipment involving solar energy systems which were installed during September 2006 or later).
The tax return was reviewed, and information to support the credit was requested. The professor/surgeon submitted a receipt for installation of the ground source heat pump system. The tax agency inflicted a penalty of $1244 after being, apparently, unmoved.
The professor/surgeon did not stop there, however. He called for expert testimony from a fellow faculty member and geothermal designer. This person told an administrator law judge why he thought the heat pump qualified for the New York tax credit. Again, the tax agency decided not to agree because, as they put it: the system did not qualify as a solar energy system because it needed, in order to function, an electric pump. To support their decision, they quoted the recently vetoed legislative proposal that there be a separate tax credit for equipment used for geothermal energy systems because such systems were not covered under the original NY solar tax credit.
The Case Goes to Appeals
On appeal, the physician/surgeon explained that the system should not be disqualified from the tax credit simply because it contained an electricity component. The component only exists to assist in generating geothermal heating. Additionally, he countered the tax agency’s quote of the vetoed proposal reference with legislative history which he felt, allegedly, supported his tax law interpretation.
A Final Decision Is Reached
Six months after the oral arguments were held a final decision was handed down. A tribunal agreed with the first findings of the tax agency saying that the existing statutes must be narrowly and strictly construed, not in favor of the taxpayer. They did not agree with the petitioner’s contention that he was entitled to a tax credit through the use of Tax Law Section 606 g-1. They also found nothing in the legislative history that would allow for support of the professor/surgeon’s petition.
It should be noted that the professor/surgeon, though he obviously could have benefited from legal representation, had decided to represent himself. The state of New York, however, was represented by a team of lawyers. Possibly there is a lesson to be learned here (completely unrelated to solar or geothermal energy).