July 15, 1981

********** ("Company") sells solar and wind-powered energy systems. Under Massachusetts General Laws Chapter 62, Section 6(d), any owner of residential property located in Massachusetts who is not a dependent of another taxpayer and who occupies the property as his principal residence is allowed an income tax credit ("residential energy credit") equal to 35 per cent of his net expenditure for "renewable energy source property" or $1,000, whichever is less. Subject to the limitations set forth in Section 6(d), solar and wind-powered residential energy systems qualify for the credit.

You inquire whether a taxpayer's "net expenditure" for renewable energy source property includes (1) the amount of interest paid by the taxpayer on indebtedness incurred for the purpose of purchasing qualifying property; and (2) the amount of the taxpayer's expenses incurred to secure financing for qualifying property (for example, the amount paid by a taxpayer to establish that he has clear title to realty mortgaged to finance a qualifying system).

Chapter 62, Section 6(d) and the Department of Revenue's Residential Energy Credit Income Tax Regulation (830 CMR 62.50) provide that "net expenditure" means the total of the purchase price for any renewable energy source property plus installation cost, less any credits received under the Internal Revenue Code for Massachusetts qualifying expenditures and grants or rebates received from the United States Department of Housing and Urban Development for Massachusetts qualifying expenditures.

Based on the foregoing, it is ruled that the "net expenditure" on which the Massachusetts residential energy credit is based does not include the amount of interest or other expenses of financing the purchase of qualifying property.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers

Commissioner of Revenue

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LR 81-60