MTC's Case for Tax Deductibility

The Massachusetts Technology Collaborative (MTC) requested that the United States Internal Revenue Service (IRS) issue an opinion regarding the tax deductibility of premium payments for clean power. We reasoned that tax deductibility was justified because:

There is a longstanding provision of the Internal Revenue Code, Section 170(c)(1), that provides that a contribution "to or for the use of a State" is a "charitable contribution" under IRC 170(a) and deductible by the donor "but only if the contribution or gift is made for exclusively public purposes."

Under this provision, the Federal government essentially defers to the states as to what is a particular qualifying public purpose.

MTC suggested that the Commonwealth of Massachusetts had determined as a matter of law through the 1997 legislation that established the Renewable Energy Trust and the Renewable Portfolio Standard that the payment of premiums for clean electricity furthers such a "public purpose." MTC also posited that a taxpayer who pays a premium for clean power generally receives no differentiated benefit in return.

The IRS found the case made by MTC persuasive and issued a Private Letter Ruling to that effect.