Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-12.5-05 - Multiple Properties and Mixed-use Property

Current through June, 2024
(a)
				Property will be considered residential or mixed-use if any portion of the
				property is being used as a residence. If at the time of installation and
				placing in service of the system the property is not occupied, then property
				will be considered residential or mixed-use if any portion of the property is
				intended for use as a residence.
(b) Allocation. Where a single system is
				installed and placed in service to serve more than one property or to service a
				mixed-use property the taxpayer shall apply a reasonable allocation method such
				as square footage or a measure of use as follows:
(1) For a system installed and placed in
				service to serve more than one property, the actual cost of a single system
				servicing multiple properties is allocated among the properties. The actual
				cost of other solar energy systems shall be allocated in a manner consistent
				with section 18-235-12.5-03. With multiple properties, the appropriate cap is
				applied for each separate property.
Example 1:
Assume Taxpayer installs and places
				  into service a wind farm that services one community of 50 single-family homes
				  and 10 separate commercial properties. Each property is equal in size and use,
				  the allocation of the actual cost would be made equally to each property.
				  Further assume that a $600,000 wind-powered system were installed and placed in
				  service for these properties, the credit would be calculated as follows:
				  Allocation of cost: The actual cost of $600,000 would be divided equally among
				  the properties, allocating $10,000 to each property. Single-family residential:
				  Each single-family residential property would be treated independently. In each
				  case, twenty percent of $10,000, or $2,000, would be compared against the
				  $1,500 single-family residential property cap. Under the facts of this example,
				  each single-family residential property would generate a $1,500 credit, for a
				  total of $75,000 (50 properties times $1,500). Commercial: Each commercial
				  property would be treated independently. In each case, twenty percent of
				  $10,000, or $2,000, would be compared against the $500,000 commercial property
				  cap. Under the facts of this example, each commercial property would generate a
				  $2,000 credit, for a total of $20,000 (10 properties times $2,000). The total
				  credit for the $600,000 wind-powered system is $1,500 for each single-family
				  residential property ($75,000) plus $2,000 for each commercial property
				  ($20,000) for a total credit of $95,000.
Example 2:
Taxpayer, an independent energy
				  provider installs and places into service a wind farm that does not service any
				  particular property, but is entirely directed into the energy grid of the local
				  electricity provider. The renewable energy technology system will be considered
				  to be servicing commercial property only; no allocation is necessary. However,
				  if an identifiable connection exists to customers situated on the property
				  where the power is produced in addition to a connection to the energy grid of
				  the local electricity provider, then the cost of the system must be allocated
				  among and between the particular property or properties being serviced and the
				  connection to the energy grid, which is treated as servicing a single
				  commercial property.
Example 3:
Taxpayer installs and places into
				  service solar energy equipment for a condominium that contains both residential
				  and commercial units. Each condominium unit has a separate title, so each unit
				  would be treated as a separate property. The taxpayer must reasonably allocate
				  the actual cost of the system between the residential and commercial
				  properties. The condominium contains 50 single-family units and 10 commercial
				  units of equal size and use, and a $600,000 photovoltaic energy system that has
				  a total output capacity of 60 kilowatts. The credit is calculated as follows:
				  Allocation of cost: The actual cost per kilowatt is $10,000 ($600,000 divided
				  by 60 kilowatts). Since there are 60 separate units that have equal energy use,
				  the actual cost of a 1 kilowatt portion of the installation must be allocated
				  to each unit. Thus, actual cost of $600,000 would be divided equally among the
				  60 properties, allocating $10,000 to each property. Single-family residential:
				  Although each system does not meet the total output capacity requirement,
				  subsection 18-235-12.5-03(b)(1) allows a credit to be claimed for each system
				  because only one system has installed and placed into service on each property.
				  Each single-family residential condo unit would be treated independently. In
				  each case, thirty-five percent of $10,000, or $3,500, would be compared against
				  the $5,000 single-family residential property cap. Under the facts of this
				  example, each single-family residential property would generate a $3,500
				  credit, for a total of $175,000 (50 units times $3,500). Commercial: Each
				  commercial condo unit would be treated independently. In each case, thirty-five
				  percent of $10,000, or $3,500, would be compared against the $500,000
				  commercial property cap. Each commercial property would generate a $3,500
				  credit, for a total of $35,000 (10 properties times $3,500). The total credit
				  for the $600,000 photovoltaic energy system is $3,500 for each single-family
				  condo unit ($175,000) plus $3,500 for each commercial condo unit ($35,000) for
				  a total credit of $210,000.
(2) For a system installed and placed in
				service to service a mixed-use property, the actual cost of the system is
				allocated between the residential use (which may be single-family use or
				multiple-family use) and the commercial use. For a photovoltaic energy system,
				thirty-five percent of the cost allocated to residential use is compared
				against either the single-family residential cap or the multiple-family
				residential cap; and thirty-five percent of the cost allocated to commercial
				use is compared against the commercial property cap.
Example 4:
Taxpayer is a farmer and has a
				  dwelling and barn on one of the lots which is considered to be a mixed-use
				  property. Taxpayer installs and places into service a renewable energy
				  technology system that only services the barn. Allocation by use results in the
				  system being subject only to the commercial property limitations. (Note: This
				  is not an example of the directed use exception; an allocation would still be
				  made, but it would be a 0% residential/100% commercial allocation based upon
				  use.)
Example 5:
Same facts as Example 4, but the
				  system services both the barn and the dwelling. A portion of the system's
				  actual cost would be subject to the commercial property limitations and the
				  rest would be subject to the single-family residential property
				  limitations.
Example 6:
Taxpayer installs and places into
				  service renewable energy technology equipment for an apartment complex that
				  contains both residential and commercial units. Each unit is not separately
				  titled, so each unit would not be treated as separate property. Instead, the
				  titled property is the entire apartment complex. Since the titled property is
				  mixed-use, the taxpayer will have to reasonably allocate the actual cost of the
				  system between the residential and commercial uses of the property. The complex
				  contains 50 single-family units and 10 commercial units of equal size and use,
				  and a $600,000 photovoltaic energy system that has a total output capacity of
				  60 kilowatts. The credit would be calculated as follows: Allocation of cost:
				  The actual cost per kilowatt is $10,000 ($600,000 divided by 60 kilowatts).
				  Since each of the units has an equal energy use, the actual cost of $600,000
				  would be divided between residential use of the property and the commercial use
				  of the property, allocating $500,000 ($10,000 times 50 units) to the
				  residential use and $100,000 ($10,000 times 10 units) to the commercial use.
				  Residential Use:
Since the property contains more than one residence, the
				  proper characterization of this use is multi-family residential. Because the
				  installation serves 50 residential units, the total output capacity of each
				  system must be at least 18 kilowatts (0.360 kilowatts times 50 units). The
				  total output capacity of the residential portion of the installation is 50
				  kilowatts. For the purpose of calculating the credit, two systems that meet the
				  total output capacity requirement and one system that fails to meet the
				  requirement have been installed and placed into service. The actual cost for
				  each of the two systems which meet the 18 kilowatt total output capacity
				  requirement is $180,000 ($10,000 times 18 kilowatts) each. Thirty-five percent
				  of $180,000, or $63,000, would be compared against the multi-family residential
				  property cap, or $17,500 ($350 times 50 units). Because the credit is capped at
				  $17,500 per system, the total credit for the two systems that meet the total
				  output capacity requirement is $35,000 ($17,500 plus $17,500). The third system
				  has an actual cost of $140,000 ($10,000 times 14 kilowatts). Although the
				  system does not meet the total output capacity requirement the credit may be
				  claimed under subsection 18-235-12.5-03(b)(2). Thirty-five percent of $140,000,
				  or $49,000, would be compared against the multi-family residential property
				  cap, or $17,500 ($350 times 50 units). The credit for the third system is
				  $17,500 due to the cap. The total credit for the three systems serving the
				  multi-family residential portion of the property is $52,500 ($17,500 times 3
				  systems). Commercial Use: Each system serving commercial property must have a
				  total output capacity of at least 1,000 kilowatts. The total output capacity of
				  the installation serving the commercial portion of the property is 10 kilowatts
				  and the actual cost is $100,000 ($10,000 times 10 kilowatts). Since the portion
				  of the installation serving commercial property fails to meet the total output
				  capacity requirement and the credit is already claimed for a system that does
				  not meet the applicable total output capacity requirement on a single property,
				  a credit may not be claimed for the installation that serves the commercial
				  portion of the property. The total credit for the entire $600,000 solar energy
				  installation is $52,500. Note: A credit for the commercial part of the
				  installation may have been claimed if the credit for the third multi-family
				  residential system had not been claimed.