The state’s solar tax credit is set to begin phasing out
next year, but a massive tax bill passed by the state Senate last week would
end the program on July 1.
A tax credit that’s helped motivate many fiscally conscious
Iowa farmers to install solar panels would see an early demise under a sweeping
tax reform bill that cleared a major legislative hurdle last week.
Iowa is the only state in the Midwest and one of just a
dozen nationally that still offers a state solar tax credit. The Iowa
Legislature created the 15 percent tax credit in 2012. Since then it’s provided
a total of $21.6 million in incentives for nearly 4,000 projects.
“The majority of customers we work with do know about it,”
said Jason Egli, a farmer and solar installer in southeast Iowa. He estimates
that about half of his customers wouldn’t have committed without the state tax
credit.
The tax credit is scheduled to start sunsetting next year,
with smaller incentives in 2020 and 2021 and only commercial tax credits
remaining after 2022. But the program would end July 1 under a bill (SF2383)
that passed the Senate on Wednesday by a 29-21 vote.
The $1.2
billion tax cut bill slashes tax rates and eliminates
most state tax credits, including those for solar. The bill is scheduled
for a hearing Monday in the House Ways and Means Committee.
Combined with the 30 percent federal solar tax credit, the
state incentive eliminated nearly half the cost of solar installations and
reduced payback time to as little as five years in some cases.
The tax credit is capped at $5 million per year and has had
a waiting list of applicants every year. As of the end of 2017, the program had
provided $21.6 million to 3,395 solar projects valued at $166 million in total.
“This tax incentive has opened access to renewable energy
for businesses, farmers, and homeowners, led to significant solar growth and
helps support over 700 Iowa jobs in the solar industry,” said Nathaniel Baer,
who directs the energy program for the Iowa Environmental Council.
The program has been particularly popular with farmers, who
are constantly assessing where they should invest their funds, Egli said,
noting that projects have to compete with investments in land and
animal-confinement buildings.
“Those are the things we’re competing against,” Egli said.
At their peak almost a decade ago, about half of states
offered solar tax credits, according to Chelsea Barnes, director of policy
services for EQ Research in North Carolina. Today they are becoming less
common.
“Either the politics of the state has changed and there
isn’t the same interest in renewing the credit, or the solar industry has
really grown in the state and installation prices have decreased, so state
policymakers feel a tax credit is no longer necessary,” Barnes said.
Iowa state Sen. Randy Feenstra, chairman of the Senate Ways
and Means Committee and the bill’s author, could not be reached for comment.
The solar credit termination is one line in a 130-page package of proposed
changes to laws regarding taxes and tax credits.
Sen. Joe Bolkcom, also a member of that committee, said the
solar credit repeal “is in the bill as part of the Senate Republicans tax plan
to kill jobs in Iowa. It makes no sense. The credit has been a job creation
machine and has helped Iowa farmers save money.”
Meanwhile, a House panel endorsed a
competing tax reform bill Thursday by Republican Gov. Kim Reynolds
that does not propose eliminating the solar tax credit. The governor’s office
said in a statement Friday that “the governor has not proposed eliminating the
solar tax credit and remains supportive of Iowa’s leadership in renewable
energy.”
Iowa Environmental Council lobbyist Kerri Johannsen, who has
been following the bill’s trajectory for weeks, doesn’t expect the solar
measure to go away anytime time soon and said, “We’ll likely be fighting cuts
to this credit for the rest of the session.”
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