On this Tax Day, when your federal, state and local taxes are due, the time has come to address the taxes on the solar industry. I’m perplexed why some states, including California (CALIFORNIA, for crying out loud), seem to be hellbent on throttling the nascent solar industry in its crib.
(I apologize in advance for my rant. It is Tax Day, after all, and I just wrote a huge check to the Regional Income Tax Agency here in Ohio, an organization that apparently determines the taxes you owe through some sort of sorcery and typically hands you an enormous bill, so I’m particularly sensitive about taxes at the moment. But I digress.)
Let’s start in California, which has one of the strongest infrastructures to promote the solar industry. The San Jose Mercury-News carried an opinion piece by Peter Hanely and Steve Rogers, two board of trustee members for the San Mateo Union High School District, discussing two bills before the California Assembly. One would allow school districts to install larger systems to lower their utility bills (right now, the law limits installations to 1 MW; the new law would increase that to 5 MW). That’s the good news.
The bad news was there has also been a bill introduced that would implement a “solar tax” that would apply to school districts (something that would harm a growing solar market in the state). From the piece:
The new one is a proposal by utilities to have the Legislature pass a “solar tax” that would apply to school districts. Not only does it threaten the financial viability of our solar investment, it also severely erodes the value of taxpayer investment in these systems. When the savings we projected do not materialize, we have even less money for our classrooms.
We undertook our project with local taxpayers’ trust. The utilities’ proposed changes are akin to changing contract terms after a deal has been consummated. The “solar tax” would immediately reduce the value of not just our system, but that of billions of dollars worth of renewable energy infrastructure installed across the state.
This law, according to the piece, has been proposed by the utilities in the state. To me, this is an attempt to squelch the growth of distributed generation, which in my opinion is the ultimate future of the solar industry. This is an attempt by the utilitiesto protect their turf — and I think that’s dangerous for the future of the industry.
Another state that is pushing a rise in taxes on the solar industry is Tennessee. This battle has been all over the news in the past week (The Nashville Tennseean has done some spectacular reporting on the issue, including a great editorial on the subject, coming out in support of the solar industry. Hats off to the Nashville Business Journal for their reporting as well.)
In a nutshell, here’s the issue, courtesy of The Tennesseean:
The Republican-sponsored legislation would increase the taxable value of solar equipment from 0.5 percent of the purchase price to 33.33 percent of the installed cost. According to a summary written by John Nevel, an accountant specializing in renewable energy financing, that would raise the property tax on a $1 million solar installation from $97.90 a year to $6,526.01 — a 6,566 percent jump.
I’ll let that number sink in for a moment: a 6,566% increase in taxes on the solar industry. It makes no sense to do that to an industry that has, according to the paper, employs 6,400 people in the state — and, as Nashville Public Radio reported, the state is preparing to unveil a state-owned solar farm outside of Memphis. Tennessee Transportation Commissioner John Schroer had this to say about the farm:
We have major solar industry in the state and we really felt this solar-farm park tells everybody we’re a solar-farm state and here’s what we’re doing.
As I read the stories, I kept hearing legislators say that the original tax break that they’re trying to “fix” is unconstitutional, but they don’t go on to explain why they think that. They appear to be trying to fix a problem that doesn’t currently exist, to the detriment of one of the fastest-growing industries in the state. It makes absolutely no sense. If you want to hear more about this, go to the TenneSEIA website for more information on this issue (and, I know I sound like a broken record, but for all of you in Tennessee, make sure you contact your representatives.
And lastly, we have Massachusetts (in many minds, the most liberal place on earth — one that you’d think would be a hotbed for solar power, right?). But at the moment, what is essentially a territorial spat has developed that could hurt the growth of the industry there.
From our friends at The MetroWest Daily News:
A sweeping green energy bill passed by the [Massachusetts] Senate this month tackles a problem puzzling MetroWest assessors for months: how to tax solar farms.
The bill would exempt large commercial solar and wind projects from local property tax and instead require a payment in lieu of taxes, or PILOT, of 5 percent of the project’s income from electricity sales.
The taxation section aims to provide uniformity, but some cities and towns have negotiated deals that bring more revenue than would the 5 percent PILOT.
It seems that some towns and counties have negotiated themselves better deals on solar projects that will net them more money than the proposed deal would give them. Good for them. That makes smart business sense.
We need a uniform solution to the taxes that will make things more predictable. It’s town by town, city by city, it’s a negotiation.
To force solar energy developers to negotiate their taxes with municipalities on a case-by-case basis is categorically insane. As I’ve argued for a national energy policy at the federal level, it strikes me that Massachusetts needs the kind of legislation the Senate has proposed (as do most other states in the country, for that matter).
To bring about this resolution (and heaven forbid I tell the Massachusetts legislature how to do their job), I would grandfather in the existing deals to keep the representatives of these small towns happy — and then make any project going forward operate under the new rules. That fixes the problem and makes everyone happy across the board.
This is why those of us in the solar industry need to be ever-vigilant for policies like these, and get active in the political process to prevent them. If we don’t defend the industry, no one else will.