(2) Definitions.

Internal Revenue Code. The Internal Revenue Code, as amended on January 1, 1998, and in effect for the taxable year. Net Expenditure. The total of the purchase price for any renewable energy source property, plus installation cost but less any credits received under the Internal Revenue Code and less grants or rebates received from the United States Department of Housing and Urban Development. Renewable Energy Source Property. Property, including materials and component parts thereof, separately purchased and assembled by the residential property owner or tenant which, when installed in connection with a dwelling, transmits or uses solar energy or other form of renewable energy for the purposes of heating or cooling such dwelling or providing hot water for use within such dwelling, or for producing electricity for such purposes; wind energy for nonbusiness residential purposes is also renewable energy source property. To qualify as renewable energy source property, the original use of the property must begin with the taxpayer, the property must reasonably be expected to remain in operation for at least five years, and the property must meet quality standards as prescribed by this regulation. Except as stated in this regulation, renewable energy source property does not include heating or cooling systems used to supplement renewable energy source equipment in heating or cooling a residence when such systems employ a form of energy other than solar or wind. For example, heat pumps or oil or gas furnaces used in connection with renewable energy source property are not renewable energy source property. Solar Energy Property. Property which, when installed in connection with a dwelling, transmits or uses solar energy directly to heat or cool a dwelling or to provide hot water for use within a dwelling, or to produce electricity for such purposes, and which otherwise meets the requirements of this regulation for renewable energy source property. Property which uses fuel or energy only indirectly derived from solar energy, such as fossil fuel or wood, is not solar energy property. Passive and active solar systems, and portions of the structure of the principal residence when the sole purpose of such portions is to transmit or use solar radiation or to enhance the collection and storage of solar energy by such systems, are solar energy property. For example, root ponds, roof collectors, freestanding thermal containers, and non-window glazing may qualify for the credit. However, portions of the structure of a principal residence, equipment, and materials which serve a dual purpose along with energy transmission (i.e., that serve as a structural component of the residence or that have a significant structural function) are not solar energy property. For example, roofs, windows, walls, and greenhouses are not solar energy property. Examples of items that may qualify as solar energy property include collectors used to absorb sunlight and create hot liquids or air, storage tanks to store hot liquids, rockbeds to store hot air, thermostats to activate pumps or fans which circulate hot liquid or air, and heat exchangers which use hot liquids or air to create hot air or water. Wind Energy Property. Property which, when installed in connection with a residential property, transmits or uses wind energy to produce energy in any form for nonbusiness residential purposes and which otherwise qualifies as renewable energy source property. Wind energy property generally uses wind to generate electricity, or mechanical forms of energy. Windmills and wind-driven generators are examples of wind energy property.