Power Company Comments on Property Definitions for Energy Credit
Power Company Comments on Property Definitions for Energy Credit
- AuthorsDe May, Stephen G.
- Institutional AuthorsDuke Energy Corp.
- Cross-ReferenceNotice 2015-70
. - Code Sections
- Subject Area/Tax Topics
- Industry GroupsEnergy
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2016-3357
- Tax Analysts Electronic Citation2016 TNT 32-21
February 11, 2016
Internal Revenue Service
CC:PA:LPD:PR (Notice 2015-70)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Dear Sir or Madam:
Duke Energy Corporation ("Duke Energy") is responding to the request for comments in Notice 2015-70, Request for Comments on Definitions of Section 48 Property.
Duke Energy is the largest electric power holding company in the United States. Its Regulated Utility operations serve approximately 7.3 million electric customers located in six states in the Southeast and Midwest, representing a population of approximately 23 million people. Its Commercial Portfolio and International business segments own and operate diverse power generation assets in North America and Latin America, including a growing portfolio of commercial renewable assets with 18 wind farms and 35 solar farms in operation in 12 states, totaling about 2,500 megawatts in electric-generating capacity. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 250 company traded on the New York Stock Exchange under the symbol DUK.
With a focus on definitions most relevant to our business, we are pleased to have the opportunity to provide the comments below on issues we feel should be addressed in the anticipated regulations under Section 48.
Solar Electric Generation Equipment
We recommend that the anticipated regulations under Section 48 define "equipment which uses solar energy to generate electricity" (as used in Section 48(a)(3)(A)(i)), by incorporating the definition of "electric generation equipment" contained in Section 1.48-9(d)(3) of the Income Tax Regulations, but with the following modifications made thereto:
1. In addition to storage devices, power conditioning equipment, and transfer equipment, add "conversion equipment" (or some other term that captures all of the items that make up a photovoltaic array) as one of the specifically mentioned items that constitute energy property. Also, in addition to parts related to the functioning of these items, indicate that parts related to the protection of such items constitute energy property, as well.
2. Add definitions (with nonexclusive examples) of the terms '"conversion equipment", "storage devices", "power conditioning equipment", and "transfer equipment", and provide illustrative examples of parts related to the functioning or protection of such items. We offer the following suggestions for defining these terms and providing examples of parts related to the functioning or protection of such items:
a. Conversion equipment, such as solar cells, converts sunlight into electricity. Parts related to the functioning or protection of conversion equipment may include items such as the modules on which conversion equipment is assembled, the racking or tracking system on which the modules are mounted, the structures that support the racking or tracking system, and the hardware and software used to monitor, operate, and protect conversion equipment.
b. Storage devices, such as battery cells and capacitors, store electricity. Parts related to the functioning or protection of storage devices may include items such as inverters, switches, fuses, circuit breakers, relays, equipment used to regulate reactive power output, and hardware and software used to monitor, operate, and protect storage devices.
c. Power conditioning equipment, such as transformers, inverters, and converters, modifies the characteristics of electricity into a form suitable for subsequent use. Parts related to the functioning or protection of power conditioning equipment may include items such as switches, circuit breakers, arrestors, equipment used to regulate reactive power output, and hardware and software used to monitor, operate, and protect power conditioning equipment.
d. Transfer equipment, such as wires, cables, and combiner boxes, conducts electricity. Parts related to the functioning or protection of transfer equipment may include items such as current transformers used for metering, electrical interrupters (such as circuit breakers, fuses, and other switches), and hardware and software used to monitor, operate, and protect transfer equipment.
3. Reword the last sentence of Section 1.48-9(d)(3) to clarify that property located beyond the point at which the voltage of the electricity is increased to the voltage of the transmission line is energy property if its use is primarily related to the functioning or protection of energy property located at or before such point.
Substation Property
We recommend that the anticipated regulations under Section 48 incorporate the principles applied in Chief Counsel Advice 201122018 to specify the items used in an electric substation that constitute "energy property" (as used in Section 48(a)(3)(A)). Specifically, we recommend including language to stipulate that "low-side substation property" is energy property if used at a substation to transform, from low to high, electricity generated exclusively by energy property (or a specific lower threshold), and defining such term (with nonexclusive examples) to include both of the following:
1. Property located at or before the point at which the voltage of the electricity is increased to the voltage of the transmission line (separation point), such as step-up transformers, dead end structures, switches, switch gear buildings, voltage regulators, and hardware and software used to monitor, operate, and protect such property.
2. Property located beyond the separation point, such as switches, circuit breakers, lighting or surge arrestors, and metering equipment, if the use of such property is primarily related to the functioning or protection of property located at or before the separation point.
Thank you for considering our comments. If you have any questions or would like to discuss these comments further, please do not hesitate to contact me at (704) 382-2620 or Stephen.DeMay@duke-energy.com.
By: Stephen G. De May,
SVP, Tax and Treasury
Duke Energy Corporation
Charlotte, NC
- AuthorsDe May, Stephen G.
- Institutional AuthorsDuke Energy Corp.
- Cross-ReferenceNotice 2015-70.
- Code Sections
- Subject Area/Tax Topics
- Industry GroupsEnergy
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2016-3357
- Tax Analysts Electronic Citation2016 TNT 32-21
