How to handle SRECs?
in [Quicken]
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From: Bartt on 5 May 2010 09:10 On May 2, 9:07 pm, "R. C. White" <r...(a)grandecom.net> wrote: > Hi, Ken. > > Assets come in many "flavors". ;<} > > There are tangible assets, such as your house and car. And there are > intangible assets, such as bank accounts, stocks and bonds - and your SRECs. > In most cases, we acquire assets by paying cash for them. But there are > other ways; we can acquire an asset by gift or inheritance, or by winning in > Las Vegas, for example. The most common way to acquire the most common > asset - cash - is by earning it with our labor. > > In your case, it sounds like you should account for your solar production > income by first reducing your energy expense category by the amount of > credit earned. When the earnings exceed your energy expense, create an > appropriate income category for it. > > In accountant-speak, we normally record the acquisition of an asset by: > Debit Asset > Credit Cash (another asset) > > But for your new situation, once the credits exceed expenses, the entry > would be: > Debit Asset (SREC) > Credit Income (Solar Energy Credits Earned) > > Since I'm not familiar with provisions of the New Jersey laws (or US laws) > that provide for these credits - or any of the Federal rules, either, I'll > stop here. I don't know if the credits are taxable or not. Maybe they > should be treated as reducing the cost of the solar energy system you > installed. (You DID record that large expenditure as purchase of an asset, > didn't you? And reduce your cost by the large credits you received for > installation?) But the Internal Revenue Code starts with the "general > definition" that "gross income means all income from whatever source > derived" is taxable - then creates a bewildering array of exceptions to that > rule. > > I've been retired for nearly 20 years, Ken, and many accounting practices > and tax rules have changed in that time. Please discuss this with your own > CPA for competent guidance on how to handle your investment in the system > and credits you received for the installation, as well as for the continuing > credits you will receive for energy you provide to the grid. > > RC > -- > R. C. White, CPA > San Marcos, TX > (Retired. No longer licensed to practice public accounting.) > r...(a)grandecom.net > Microsoft Windows MVP > (Using Quicken Deluxe 2010 and Windows Live Mail in Win7 x64) > > "Ken" <jkbec...(a)no.spam.opt.opline.net> wrote in message > > news:4bddd93e$0$31262$607ed4bc(a)cv.net... > > > > > On 5/1/2010 7:18 PM, CSM1 wrote: > > >>> This is kinda like having a spring on one's property where people show > >>> up with gallon jugs and you charge them a buck a gallon. Selling SRECs > >>> is income, all right, but I'm not actually paying for anything like I > >>> would, say, if I went out and bought and sold a stock. The > >> certificates > >>> have numbers; if one actually doesn't want to sell one's certificates, > >>> one can ask for them to be sent (!), at which point they could be used > >>> to paper the wall. > > >>> I'd like to track the certificates in Quicken, especially if the Feds > >>> come calling in a few years. But how? > > >>> Finally, it's one thing to be playing around with these blame SRECs, > >> but > >>> at some point the local utility is going to settle with me for the > >>> excess electricity I've been generating. Everything I've managed to > >> dig > >>> out so far seems to indicate that this>is< taxable income, just like > >> if > >>> I had a Nuclear Power Plant in the back yard. (Which, in a bizarre > >> kind > >>> of way, I do, in the sense that the Sun is such a beast, and is the > >>> source of the energy...). So, how does one handle this? > > >>> Any thoughts on the subject would be greatly appreciated. > > >>> K. Becker > > >> What would be wrong with creating an Asset account and putting the SRECs > >> in that? > > > This is probably because I don't quite understand how Quicken handles > > Asset accounts. I use an asset account to handle the value of, say, my > > house or maybe my car. So: One asset, one account. Is that right? When I > > created an asset account there wasn't any "buy" or "sell" stuff, it looked > > basically like a check book. > > > Since these SRECs are showing up sometimes once a month, twice a month, or > > none a month, do I need to have an asset account for each SREC that shows > > up? > > > On the other hand there's the investment account method. Each one of these > > could be treated like a share in a stock or something with an initial > > value of zero, and, when sold, the final value. I'm trying this right now. > > It shows the cost basis being equal to the selling value. Umm... Which, I > > guess, may be right, seeing as they might not be taxable. > > > Comments? > > > K. Becker- Hide quoted text - > > - Show quoted text - Ken, as R.C. points out, you should probably seek some tax advice. Your situation could turn out to be simple, but with the money you've already paid to install the equipment, it could also end up getting complex, with revenue (SREC certificate income + utility bill savings?), depreciation, yadda-yadda. But, your immediate question, I think, is "how do I track SRECs in Quicken?". Until you get potential tax implications resolved, you probably want to keep it corralled. I'm using Q2008 H&B. I would recommend that you model this w/ one investment account & a fictitious security, e.g. "SREC". As the SRECs come in, you can "Add - Shares Added" (Alt + Z). That transaction allows you to assign a cost basis (& may allow you to change that cost basis down the road, if you need). You can also monitor your Sells & keep track of how many you have available to sell. Even if you have to change it, it's at least a start. HTH, Bartt
From: Ken on 5 May 2010 21:36 On 5/5/2010 9:10 AM, Bartt wrote: > On May 2, 9:07 pm, "R. C. White"<r...(a)grandecom.net> wrote: >> Hi, Ken. >> >> Assets come in many "flavors". ;<} >> >> There are tangible assets, such as your house and car. And there are >> intangible assets, such as bank accounts, stocks and bonds - and your SRECs. >> In most cases, we acquire assets by paying cash for them. But there are >> other ways; we can acquire an asset by gift or inheritance, or by winning in >> Las Vegas, for example. The most common way to acquire the most common >> asset - cash - is by earning it with our labor. >> >> In your case, it sounds like you should account for your solar production >> income by first reducing your energy expense category by the amount of >> credit earned. When the earnings exceed your energy expense, create an >> appropriate income category for it. >> >> In accountant-speak, we normally record the acquisition of an asset by: >> Debit Asset >> Credit Cash (another asset) >> >> But for your new situation, once the credits exceed expenses, the entry >> would be: >> Debit Asset (SREC) >> Credit Income (Solar Energy Credits Earned) >> >> Since I'm not familiar with provisions of the New Jersey laws (or US laws) >> that provide for these credits - or any of the Federal rules, either, I'll >> stop here. I don't know if the credits are taxable or not. Maybe they >> should be treated as reducing the cost of the solar energy system you >> installed. (You DID record that large expenditure as purchase of an asset, >> didn't you? And reduce your cost by the large credits you received for >> installation?) But the Internal Revenue Code starts with the "general >> definition" that "gross income means all income from whatever source >> derived" is taxable - then creates a bewildering array of exceptions to that >> rule. >> >> I've been retired for nearly 20 years, Ken, and many accounting practices >> and tax rules have changed in that time. Please discuss this with your own >> CPA for competent guidance on how to handle your investment in the system >> and credits you received for the installation, as well as for the continuing >> credits you will receive for energy you provide to the grid. >> >> RC >> -- >> R. C. White, CPA >> San Marcos, TX >> (Retired. No longer licensed to practice public accounting.) >> r...(a)grandecom.net >> Microsoft Windows MVP >> (Using Quicken Deluxe 2010 and Windows Live Mail in Win7 x64) >> >> "Ken"<jkbec...(a)no.spam.opt.opline.net> wrote in message >> >> news:4bddd93e$0$31262$607ed4bc(a)cv.net... >> >> >> >>> On 5/1/2010 7:18 PM, CSM1 wrote: >> >>>>> This is kinda like having a spring on one's property where people show >>>>> up with gallon jugs and you charge them a buck a gallon. Selling SRECs >>>>> is income, all right, but I'm not actually paying for anything like I >>>>> would, say, if I went out and bought and sold a stock. The >>>> certificates >>>>> have numbers; if one actually doesn't want to sell one's certificates, >>>>> one can ask for them to be sent (!), at which point they could be used >>>>> to paper the wall. >> >>>>> I'd like to track the certificates in Quicken, especially if the Feds >>>>> come calling in a few years. But how? >> >>>>> Finally, it's one thing to be playing around with these blame SRECs, >>>> but >>>>> at some point the local utility is going to settle with me for the >>>>> excess electricity I've been generating. Everything I've managed to >>>> dig >>>>> out so far seems to indicate that this>is< taxable income, just like >>>> if >>>>> I had a Nuclear Power Plant in the back yard. (Which, in a bizarre >>>> kind >>>>> of way, I do, in the sense that the Sun is such a beast, and is the >>>>> source of the energy...). So, how does one handle this? >> >>>>> Any thoughts on the subject would be greatly appreciated. >> >>>>> K. Becker >> >>>> What would be wrong with creating an Asset account and putting the SRECs >>>> in that? >> >>> This is probably because I don't quite understand how Quicken handles >>> Asset accounts. I use an asset account to handle the value of, say, my >>> house or maybe my car. So: One asset, one account. Is that right? When I >>> created an asset account there wasn't any "buy" or "sell" stuff, it looked >>> basically like a check book. >> >>> Since these SRECs are showing up sometimes once a month, twice a month, or >>> none a month, do I need to have an asset account for each SREC that shows >>> up? >> >>> On the other hand there's the investment account method. Each one of these >>> could be treated like a share in a stock or something with an initial >>> value of zero, and, when sold, the final value. I'm trying this right now. >>> It shows the cost basis being equal to the selling value. Umm... Which, I >>> guess, may be right, seeing as they might not be taxable. >> >>> Comments? >> >>> K. Becker- Hide quoted text - >> >> - Show quoted text - > > Ken, as R.C. points out, you should probably seek some tax advice. > Your situation could turn out to be simple, but with the money you've > already paid to install the equipment, it could also end up getting > complex, with revenue (SREC certificate income + utility bill > savings?), depreciation, yadda-yadda. > > But, your immediate question, I think, is "how do I track SRECs in > Quicken?". Until you get potential tax implications resolved, you > probably want to keep it corralled. > > I'm using Q2008 H&B. > I would recommend that you model this w/ one investment account& a > fictitious security, e.g. "SREC". As the SRECs come in, you can "Add > - Shares Added" (Alt + Z). That transaction allows you to assign a > cost basis (& may allow you to change that cost basis down the road, > if you need). You can also monitor your Sells& keep track of how > many you have available to sell. > > Even if you have to change it, it's at least a start. > > HTH, > Bartt Bartt, Mr. White, Thanks so much for the advice! Well, I've been trying it using Bartt's method. Every time an SREC shows up I do a "shares added" with a cost basis of zero. When I sell it, it goes in as "shares sold" with the appropriate price. That gives me a capital gain with cash, and the cash can be "transferred" into the checking account when the check comes through. Mr. White, the interesting thing about the SRECs and the energy situation is that between the two of them I'm (a) not paying any energy costs at all and (b) the money from the SRECs are about three times larger than any hypothetical energy bill, anyway. The first is because, with the solar system hooked to the grid, the meter runs further backwards than forwards. So far, over the past twelve months, I'm about a megawatt-hour or so ahead of the game. The electric bill shows that. In a month or so I expect to get a check from the power company, at which point we'll be settled up for this year. From what I've been able to glean from the user community, this check will count as taxable income. The second is that, irrespective of how much energy I put back into the grid, the amount of energy generated, period, determines how many SRECs I get. And, with SREC's hovering in the mid $600's right now, and with me getting roughly one per month, well, it's income, but it's strange. I think at some point I'm going to bite the bullet and, for the first time ever, go find a CPA. I just hope getting an answer to the issue won't cost me the $5000 that some forum-poster was told it would take to answer the question (!). Thanks for your help. Ken
From: R. C. White on 5 May 2010 23:46 Hi, Ken. > I think at some point I'm going to bite the bullet and, for the first time > ever, go find a CPA. I just hope getting an answer to the issue won't cost > me the $5000 that some forum-poster was told it would take to answer the > question (!). WOW! There must have been SOME inflation in fees since I retired! ;^{ If this were a novel issue that required many hours of specialized research, the fee might reach that range. But, even though it's a new provision, it should be well-known to CPAs in your state by now, so it should require only a few hours at normal rates to apply the new rules to your specific situation. My guess would be well under a thousand dollars - but that is a very UNinformed guess, so don't take it as an expert opinion. Most CPA firms would be glad to offer a preliminary consultation at little or no charge. While I'm not familiar with these SRECs, as I said earlier, the tax issues remind me of the royalties that many taxpayers get for oil and gas wells or coal mines or timber harvested from their properties - and I have prepared many tax returns involving that kind of income. Those types of income are fully taxable, after deductions for any operating expenses required to produce the income, including depletion and depreciation. Your expenses probably would include depreciation deductions for your costs of buying and installing the equipment. But I'd better stop here and let your own CPA apply the actual rules to your actual facts. If it were my home, I probably would continue to have an expense category for the cost of energy used - at normal rates. And I would also have a income category for energy credits earned. That way, at the end of the year, I could see that, for example, I earned $10,000 in credits, but used $4,000 worth of energy, so I received $6,000 in SRECs. Of course, the IRS might say that the $10,000 is fully taxable income - minus the few deductions allowed - while the $4,000 energy usage cost is simply non-deductible personal living expenses, just like the non-deductible electric bills I pay on my home here in Texas. :>( If the credits are taxable, they might be considered income at the time you receive the SRECs, not later, when you sell the SRECs and receive cash. When you get some good advice on this subject, please post back to inform the rest of us. RC -- R. C. White, CPA San Marcos, TX (Retired. No longer licensed to practice public accounting.) rc(a)grandecom.net Microsoft Windows MVP (Using Quicken Deluxe 2010 and Windows Live Mail in Win7 x64) "Ken" <jkbecker(a)no.spam.opt.opline.net> wrote in message news:4be21d38$0$4985$607ed4bc(a)cv.net... > On 5/5/2010 9:10 AM, Bartt wrote: >> On May 2, 9:07 pm, "R. C. White"<r...(a)grandecom.net> wrote: >>> Hi, Ken. >>> >>> Assets come in many "flavors". ;<} >>> >>> There are tangible assets, such as your house and car. And there are >>> intangible assets, such as bank accounts, stocks and bonds - and your >>> SRECs. >>> In most cases, we acquire assets by paying cash for them. But there are >>> other ways; we can acquire an asset by gift or inheritance, or by >>> winning in >>> Las Vegas, for example. The most common way to acquire the most common >>> asset - cash - is by earning it with our labor. >>> >>> In your case, it sounds like you should account for your solar >>> production >>> income by first reducing your energy expense category by the amount of >>> credit earned. When the earnings exceed your energy expense, create an >>> appropriate income category for it. >>> >>> In accountant-speak, we normally record the acquisition of an asset by: >>> Debit Asset >>> Credit Cash (another asset) >>> >>> But for your new situation, once the credits exceed expenses, the entry >>> would be: >>> Debit Asset (SREC) >>> Credit Income (Solar Energy Credits Earned) >>> >>> Since I'm not familiar with provisions of the New Jersey laws (or US >>> laws) >>> that provide for these credits - or any of the Federal rules, either, >>> I'll >>> stop here. I don't know if the credits are taxable or not. Maybe they >>> should be treated as reducing the cost of the solar energy system you >>> installed. (You DID record that large expenditure as purchase of an >>> asset, >>> didn't you? And reduce your cost by the large credits you received for >>> installation?) But the Internal Revenue Code starts with the "general >>> definition" that "gross income means all income from whatever source >>> derived" is taxable - then creates a bewildering array of exceptions to >>> that >>> rule. >>> >>> I've been retired for nearly 20 years, Ken, and many accounting >>> practices >>> and tax rules have changed in that time. Please discuss this with your >>> own >>> CPA for competent guidance on how to handle your investment in the >>> system >>> and credits you received for the installation, as well as for the >>> continuing >>> credits you will receive for energy you provide to the grid. >>> >>> RC >>> >>> "Ken"<jkbec...(a)no.spam.opt.opline.net> wrote in message >>> >>> news:4bddd93e$0$31262$607ed4bc(a)cv.net... >>> >>> >>> >>>> On 5/1/2010 7:18 PM, CSM1 wrote: >>> >>>>>> This is kinda like having a spring on one's property where people >>>>>> show >>>>>> up with gallon jugs and you charge them a buck a gallon. Selling >>>>>> SRECs >>>>>> is income, all right, but I'm not actually paying for anything like I >>>>>> would, say, if I went out and bought and sold a stock. The >>>>> certificates >>>>>> have numbers; if one actually doesn't want to sell one's >>>>>> certificates, >>>>>> one can ask for them to be sent (!), at which point they could be >>>>>> used >>>>>> to paper the wall. >>> >>>>>> I'd like to track the certificates in Quicken, especially if the Feds >>>>>> come calling in a few years. But how? >>> >>>>>> Finally, it's one thing to be playing around with these blame SRECs, >>>>> but >>>>>> at some point the local utility is going to settle with me for the >>>>>> excess electricity I've been generating. Everything I've managed to >>>>> dig >>>>>> out so far seems to indicate that this>is< taxable income, just >>>>>> like >>>>> if >>>>>> I had a Nuclear Power Plant in the back yard. (Which, in a bizarre >>>>> kind >>>>>> of way, I do, in the sense that the Sun is such a beast, and is the >>>>>> source of the energy...). So, how does one handle this? >>> >>>>>> Any thoughts on the subject would be greatly appreciated. >>> >>>>>> K. Becker >>> >>>>> What would be wrong with creating an Asset account and putting the >>>>> SRECs >>>>> in that? >>> >>>> This is probably because I don't quite understand how Quicken handles >>>> Asset accounts. I use an asset account to handle the value of, say, my >>>> house or maybe my car. So: One asset, one account. Is that right? When >>>> I >>>> created an asset account there wasn't any "buy" or "sell" stuff, it >>>> looked >>>> basically like a check book. >>> >>>> Since these SRECs are showing up sometimes once a month, twice a month, >>>> or >>>> none a month, do I need to have an asset account for each SREC that >>>> shows >>>> up? >>> >>>> On the other hand there's the investment account method. Each one of >>>> these >>>> could be treated like a share in a stock or something with an initial >>>> value of zero, and, when sold, the final value. I'm trying this right >>>> now. >>>> It shows the cost basis being equal to the selling value. Umm... Which, >>>> I >>>> guess, may be right, seeing as they might not be taxable. >>> >>>> Comments? >>> >>>> K. Becker- Hide quoted text - >>> >>> - Show quoted text - >> >> Ken, as R.C. points out, you should probably seek some tax advice. >> Your situation could turn out to be simple, but with the money you've >> already paid to install the equipment, it could also end up getting >> complex, with revenue (SREC certificate income + utility bill >> savings?), depreciation, yadda-yadda. >> >> But, your immediate question, I think, is "how do I track SRECs in >> Quicken?". Until you get potential tax implications resolved, you >> probably want to keep it corralled. >> >> I'm using Q2008 H&B. >> I would recommend that you model this w/ one investment account& a >> fictitious security, e.g. "SREC". As the SRECs come in, you can "Add >> - Shares Added" (Alt + Z). That transaction allows you to assign a >> cost basis (& may allow you to change that cost basis down the road, >> if you need). You can also monitor your Sells& keep track of how >> many you have available to sell. >> >> Even if you have to change it, it's at least a start. >> >> HTH, >> Bartt > Bartt, Mr. White, > > Thanks so much for the advice! > > Well, I've been trying it using Bartt's method. Every time an SREC shows > up I do a "shares added" with a cost basis of zero. When I sell it, it > goes in as "shares sold" with the appropriate price. That gives me a > capital gain with cash, and the cash can be "transferred" into the > checking account when the check comes through. > > Mr. White, the interesting thing about the SRECs and the energy situation > is that between the two of them I'm (a) not paying any energy costs at all > and (b) the money from the SRECs are about three times larger than any > hypothetical energy bill, anyway. > > The first is because, with the solar system hooked to the grid, the meter > runs further backwards than forwards. So far, over the past twelve months, > I'm about a megawatt-hour or so ahead of the game. The electric bill shows > that. In a month or so I expect to get a check from the power company, at > which point we'll be settled up for this year. > > From what I've been able to glean from the user community, this check will > count as taxable income. > > The second is that, irrespective of how much energy I put back into the > grid, the amount of energy generated, period, determines how many SRECs I > get. And, with SREC's hovering in the mid $600's right now, and with me > getting roughly one per month, well, it's income, but it's strange. > > I think at some point I'm going to bite the bullet and, for the first time > ever, go find a CPA. I just hope getting an answer to the issue won't cost > me the $5000 that some forum-poster was told it would take to answer the > question (!). > > Thanks for your help. > > Ken
From: Mike Blake-Knox on 7 May 2010 06:43 In article <hric6i$pia$1(a)news.eternal-september.org>, Tim Conway wrote: > Wow! That's fascinating. We received an Earth Day mailing from Sam's Club. It had a $6000 grid tied solar panel system. Mike
From: Ken on 9 May 2010 00:10 On 5/7/2010 6:43 AM, Mike Blake-Knox wrote: > In article<hric6i$pia$1(a)news.eternal-september.org>, Tim Conway wrote: >> Wow! That's fascinating. > > We received an Earth Day mailing from Sam's Club. It had a $6000 grid > tied solar panel system. > > Mike > Hmm.. Well, in April last year, the general cost for a grid-tied solar panel system was $8000 per kilowatt on the roof. I imagine prices have dropped a bit, so that's probably for a 1 kW grid-tied. I happen to have a south-facing roof, tilted around 25 degrees or thereabouts, with no shade, all of which is perfect for this kind of system. The calculated SRECs for such a system, with 9 kW up there, was around 10 SRECs per year. Or, looking at it another way, about 10 MW-hours of energy for 9 kW off the roof. Therefore, a 1 kW roof system (don't know what they're actually advertising)would generate roughly 1.1 MW hours of energy. You'll have to find out what the electric rates are in your area to see how much that saves you, and you'll need to look at your last 12 months of electricity bills to see how many kW-hrs of energy you use per year. Now, with my system, I've got a couple of big honking boxes attached to the inside of the garage wall. What was coming, but wasn't really ready yet, were solar panels with inverters built right in, so one would get 220 VAC (or whatever) directly off the panel, no big box in the garage needed. However, I imagine Sam's club is also including installation. >That< gets interesting and requires somebody who's a licensed electrician, knows what they're doing, and probably requires an electrical building permit from your local municipality. If they're not including installation.. Well, unless you've worked, a lot, with household electrical panels, I'd suggest a decent electrician. With these systems, you need at minimum: 1. AC cutoff between the solar panels and the grid, on the outside of the house. This is for safety in case the electric company has to work on your system. No, you can't lock it. 2. AC cutoff between the solar panels and the grid, on the inside of the house. Safety again, but you get to turn off the power. 3. If you're running DC power to an inverter, one DC cut-off box per input to inverter box. Safety again, this time if somebody needs to work on the box. (Those panels put out anywhere from 100 to 300 VDC at an amp or so. Enough to fry somebody if you're not careful.) There exist grid-tied systems that also have integral batteries. The idea is that any excess power goes into charging the batteries first; when the solar is generating less power than the house is using (say, at night) then the batteries discharge first, then one takes power from the network. The plus side of this is even when the AC power to the house goes out, one still has power from the DC side, and one's electric bills get even lower. The negative side of this is, well, lots of expensive batteries that have to be paid for and don't have extraordinary long-term reliability. Finally, you'll probably need to contact your local electric company. In New Jersey, it's practically a requirement that the usual mechanical electrical meter be replaced with an electrical one. In this state, you pay retail when the electric comes your way; you get paid wholesale when the electric goes their other way, just like every other power generator. Without the electronic meter the local power company won't be able to figure it out and they'll give you grief. In my case, the people came down and quoted me the $8k/kW price, did a site survey, and figured that 9 kW on the roof would zero out the electric bill. When given the OK, they came down a few weeks later with a truck, five or six people, and installed the whole thing in three working days. A pretty job; the local electrical inspector was wandering around inspecting it a couple of weeks later with his jaw dropped, something to behold.
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