Kauai solar owners face tax for payments

Now they’re taxing the sun.

Kauai solar owners, who are paid for the excess energy their systems send to the grid, will be liable for taxes.

Kauai Island Utility Cooperative writes a check to solar customers each year if they send more power into the grid than they use.

The Kauai utility recently realized its customers need to declare those solar payments as income and will be sending letters to inform customers of that in the coming months, said Jim Kelly, member services and communications manager for KIUC, on Tuesday.

KIUC, which has more than 32,000 customers, sent checks to 358 for solar power generated in 2014. Most checks were for between $100 and $200.

Solar owners that get checks for $600 or more will be receiving 1099 forms from KIUC. In 2014 there were 105 solar owners who earned more than $600 for their excess power.

"Basically, you become a vendor. We are buying electricity from you," Kelly said.

Customers who are cut a check for the excess energy their photovoltaic systems send back to KIUC will have to state the amount as income, said Ted Shi­ra­ishi, administrative rules officer for the state Department of Taxation.

"If the ratepayer receives money from the utility because the value of electricity consumed was less than what was produced, that amount received would be subject to income tax," Shi­ra­ishi said.

That’s not the case for customers of Hawaiian Electric Co., the company that operates utilities on Oahu, Maui and the Big island.

HECO solar customers do not receive money at the end of each 12-month period for the excess power their system generated. Instead the customers forfeit that power to the utility.

In 2013, HECO customers forfeited a total $1.7 million worth of excess energy generated by their rooftop solar systems.

"If you overproduce for HECO, it is just kind of lost. With us, at the end of the year, if you exported more than you use, we write you a check," Kelly said.

Since there is no cash payment from the utility, HECO solar customers are currently not subject to taxation.

"You can’t tax someone for the amount that they’re producing to offset their own use," Kelly said.