DUAL-USE EQUIPMENT Sample Clauses

DUAL-USE EQUIPMENT. Certain auxiliary equipment will only qualify as specified energy property to the extent it uses solar energy as an input, and then, only if at least 75% of its energy inputs are from solar energy (the “75% rule”). The 75% rule first appeared in the IRS regulations from a former energy tax credit for installing equipment “which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure.” See Treas. Reg. § 1.48-9(d). Application of the rule was illustrated by an example in those regulations. In the example, the owner of an apartment building installs a solar hot water heating system as the primary source of hot water for the building but also installs an oil-fired water heater as a backup system. The same pipes serve both. The pipes are “dual use equipment.” The solar hot water heater qualifies for a credit. The oil-fired heater does not. The pipes qualify only if at least 75% of the water they carry in the year they go into service is to or from the solar water heater and only to the extent of that use. Treas. Reg. § 1.48-9(d)(8). In applying the 75% rule, energy use is allocated between the solar and nonsolar portions of dual-use equipment by comparing the overall input of BTUs of energy from each source during a year. See Treas. Reg. §1.48-9(d)(6). Our discussions with the IRS national office have suggested that the same principle should be used for the cash grant program. The cash grant program is supposed to mimic the investment credit. See Joint Explanatory Statement of the Committee Conference, to ARRA, at pg. 115. Treasury has not stated whether it plans to adopt the 75% rule. There are other precedents the Treasury might apply to allow a full credit as long as the primary energy source is sunlight. The equipment that uses solely natural gas does not qualify for the cash grant. Equipment that uses solely solar energy exclusively does. The 75% rule is relevant for equipment that uses both. Cash Grant Opinion - Ivanpah 14 April 5, 2011 Gas used as a preheater for the Ivanpah projects provides heat that reduces the amount of heat a project needs to generate from solar energy. Thus, because gas is used to preheat the boiler may cause certain equipment that uses both solar and nonsolar energy to be disqualified in whole or in part from qualifying for the cash grant if the Treasury applies the 75% rule.