Solar owners face income tax

LIHUE — Renato Medeiros Sobrinho went from paying $225 a month on his energy bill to paying $180. 

His secret. Solar. 

After he completes a seven-year loan payment, his energy bill will be close to nothing. 

“The truth is this, most of us living here, we love the aina and we want what’s best for Kauai. Burning diesel is not helping the aina,” he said. “I got my bill today, which is averaged about $5 a month.” 

Sobrinho, Haleakala Solar Kauai sales manager, is among the thousands of homeowners on the island who switched to solar. 

For him, the switch is about saving — not making — money. 

“Either I could be paying KIUC for 20 years or I could be paying this loan for seven years,” he said. “After that there’s no more loan payments.” 

There are customers who not only save money, but make money and are subject to income tax. 

Last year, the Kauai Island Utility Cooperative issued 358 checks for $100 or more to customers who exported excess energy to KIUC’s grid — 105 of those checks were for $600 or more. 

“Every month, what you export to the grid we look at how much electricity you used, how much you exported,” said Jim Kelly, KIUC spokesman. “Whatever the difference is, you either get a credit on your bill or you end up writing us a check for that month.” 

Kelly said, starting in 2016, KIUC plans to issue IRS Form 1099s to customers who the co-op paid $600 or more for their exported energy. 

“KIUC has also asked for guidance on whether all exported energy for which a customer received a check or bill credit is income for which KIUC should be issuing a Form 1099,” he said. 

The State of Hawaii Department of Taxation said the form 1099-MISC payment information is reported to the Internal Revenue Service, the Hawaii State Tax Office and the person or business receiving the payment. 

“All payments received by KIUC customers for the value of excess electricity generated by the customer’s solar system must be reported as income on the customer’s income tax return, regardless of whether the customer received a Form 1099-MISC to report the payment made to the customer,” the department wrote in an email. 

Kelly said “it is up to each customer to determine their tax liability” when they receive checks. He recommended they consult with a tax professional. 

Customers of Hawaii Electric Co. aren’t as lucky. Excess energy produced by them goes straight to HECO. They don’t see a dime. Two years ago, solar users relinquished $1.7 million. HECO serves Oahu, Maui and the Big Island. 

KIUC pays customers for solar energy under three different programs: Net Energy Metering, NEM pilot and Schedule Q. 

For the NEM program, customers purchase energy at the retail rate and are credited for their exported energy at the retail rate. The customer’s exported energy offsets their purchases from KIUC for the calendar year. 

Customers for the NEM pilot program purchase energy at the retail rate and are credited for their exported energy at 20 cents/ kWh. 

At year end, if the customer’s billing account has a credit balance of $100 or more, they are issued a check for that amount, Kelly wrote in an email. 

The Schedule Q program allows customers to be credited for exporting excess energy for their month’s “avoided cost rate.” 

“KIUC pays you what we would have had to pay to generate the power if we didn’t buy it from your rooftop solar system,” Kelly said. “At year end, if the customer’s billing account has a credit balance of $100 or more, they are issued a check for that amount. 

Kelly said the majority of customers — 2,616 as of June 30, 2015 — are under Schedule Q. 


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