Solar property used in U.S. not subject to ADS

Tax Hot Topics newsletter The IRS issued a private letter ruling (PLR 201943021) holding that certain solar property used predominantly in a possession of the United States will not be subject to the alternative depreciation system (ADS) rule.

Generally, under Section 168(g)(1)(A), property that is predominantly used outside the United States is required to use the ADS. However, Section 168(g)(4)(G) generally provides an exception for property used predominantly in a possession of the United States, if it is owned by a domestic corporation or by a United States citizen.

The taxpayer intends to place in service solar property that will be used predominantly in a possession of the United States. The taxpayer indicated that at the time the solar property will be placed in service, the business will be a domestic partnership for federal tax purposes. Furthermore, all of the interest in the partnership will be owned by domestic corporation(s) and/or citizens of the United States, as required in Section 168(g)(4)(G). The taxpayer requested the ruling that the solar property it plans to construct will meet the exception described in Section 168(g)(4)(G).

The literal language of Section 168(g)(4)(G) does not include domestic partnerships. However, because Section 7701(a)(30) defines the term “United States person” to include a “domestic partnership,” the IRS ruled that Section 168(g)(4)(G) applies to a domestic partnership if all of its partners are domestic corporations or are citizens of the United States..

Sharon Kay
Washington National Tax Office
T +1 202 861 4140

John Suttora
Managing Director
Washington National Tax Office
T +1 202 521 1523

Caleb Cordonnier
Washington National Tax Office
T +1 202 521 1555

Jason Seo
Senior Associate
Washington National Tax Office
T +1 202 521 1556

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