IRS Determines That Dual Purpose Photovoltaic Property Qualifies as Energy Property

By Tracy Watkins, J.D., LL.M., CPA

Editor: Greg Fairbanks, J.D., LL.M.

Credits Against Tax

Many taxpayers calculating the amount of the energy credit available under Sec. 48 face a hurdle in determining whether certain structural components that serve a dual purpose qualify as energy property. In Letter Ruling 201043023, the IRS addresses this issue in the context of a photovoltaic (PV) curtain wall and provides a valuable road map for taxpayers to analyze such issues.

As discussed in the ruling, a PV curtain wall is a glass exterior that is attached to the floor slabs of a building and encloses the structure. Some or all of the PV curtain wall’s glass panes are replaced with PV panes. The PV curtain wall is made up of various component parts, substantially all of which are directly involved in the production of electricity through the use of solar energy. Although the IRS does not provide a breakdown of the elements of the PV curtain wall’s purchase price, the IRS states that the PV curtain wall is sold as one complete product.

Sec. 48(a)(3)(A)(i) provides that energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, with an exception for property used to generate energy to heat a swimming pool. The PV curtain wall appears to qualify as energy property based on this definition, but the issue that many taxpayers face, and that the IRS addresses in the letter ruling, relates to the application of the Sec. 48 regulations.

Regs. Sec. 1.48-1(e) provides that buildings and structural components do not qualify as Sec. 38 property. (Sec. 38 property includes investment credits under Sec. 46, and Sec. 46 includes Sec. 48 energy credits.) Regs. Sec. 1.48-1(e) further provides that the term “structural components” includes parts of buildings such as walls and windows, among other items. Regs. Sec. 1.48-9(b), however, provides that structural components may qualify for the energy credit.

The letter ruling notes that Rev. Rul. 79-183 created an exception to Regs. Sec. 1.48-1(e). In Rev. Rul. 79-183, the IRS recognized that a structural component of a building qualifies as Sec. 38 property for purposes of the investment tax credit if it is so specifically engineered that it is in essence part of the machinery or equipment with which it functions.

Applying the regulations and the revenue ruling to the PV curtain wall, the IRS ruled that the elements of the purchase price of the PV curtain wall are energy property under Sec. 48. Although structural components of buildings are generally excluded from the definition of Sec. 38 property, the PV curtain wall was specifically designed and engineered for the taxpayer’s commercial building and is in and of itself machinery or equipment used to produce solar energy. Therefore, the PV wall serves dual purposes: to generate electricity through the use of solar energy and to enclose the building or structure. Because the PV curtain wall serves this dual purpose and the regulations specifically state that structural components may qualify as energy property, the IRS concludes that its various elements are energy property under Sec. 48.


Greg Fairbanks is a tax senior manager with Grant Thornton LLP in Washington, DC.

For additional information about these items, contact Mr. Fairbanks at (202) 521-1503 or

Unless otherwise noted, contributors are members of or associated with Grant Thornton LLP.

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