The IRS in Private Letter Ruling 201607004 ruled that a particular state organization’s payments to subsidize residential solar photovoltaic systems was an energy conversion subsidy under IRC §136 that was excludable from income.

Under this program the organization will pay the consumer a subsidy to cover part of the cost of installing an approved photovoltaic system.  The organization is entitled to any credits and any other “tradable energy or environmental related commodity produced or created by the PV systems.”  The organization insures that the size of the unit installed is not larger than what would be expected to be necessary to provide for the customer’s use of electricity.