Flagged Bill: HB 23 – Utah Residential Solar Tax Credit Repeal – Rep. Jeremy Peterson

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Representative Jeremy Peterson (Republican – Ogden)

-By Elisabeth Luntz

Representative Jeremy Peterson‘s (Republican – Ogden), HB 23 – Income Tax Modifications successfully passed out of a Revenue and Tax Interim Committee hearing on November 16th with a vote of 12-5. The bill was originally presented to the committee with the working title, “Utah Solar Tax Credit Repeal Hearing,” which is more descriptive in its effect, because this bill seeks to amend, and ultimately phase-out, the personal state income tax credit for Utah residents who purchase rooftop solar.

To put a face on the cost of the incentive, Peterson said that $20 million translates to 400 teachers at $50,000…The bill does not mention education funding, however.

Peterson’s HB 23 would phase-out the state’s individual income tax credit for residential solar system purchasers and it would cap the maximum individual income tax credit allowed for residential solar rooftop energy systems installed within the state. From Peterson’s perspective, the goals of this legislation are to contain the budgetary impact to the state’s education fund and to promote the solar industry’s competitive independence by phasing out the solar tax credit over time. To contain the impact of the increasingly popular solar tax incentive, the bill creates a moratorium that limits the state’s budget impact to $20 – $30 million for 2017. According to Peterson’s own projections, (not yet calculated by the legislature’s fiscal analysts and currently challenged by opponents), that impact could be between $40 – $60 million in 2017 given current trends that show the adoption of solar on an exponential rise and the costs for the renewable technology plummeting.

To put a face on those numbers, Peterson said during the interim committee hearing that $20 million translates to 400 teachers at $50,000, plus benefits, or a nearly 1% increase in the statewide “weighted pupil unit,” (WPU). HB 23 also creates a $4 million cap for the credit in 2018 and would schedule a reduction by $1 million a year until the tax credit ends Dec 31, 2021. Peterson said, “In the last six weeks alone, another 2,300 households have applied for the rebate totaling $8.6 million.”

The bill does not mention education funding specifically and does not codify a set-aside for education funding.

Utah’s present solar tax incentive was designed in 2002 and provides a credit of $2,000 or 25 percent of cost of a specific system, (whichever is less) for new residential rooftop installations. As a tax credit, the amount reduces the individual’s entire state tax liability. Currently, there are no limits or caps to the program that has become increasingly popular in the state at a time of increasing social awareness. But because they are income tax credits, Peterson believes they directly impact the education fund which has his critics concerned. Representative Marie H. Poulson (Democrat – Salt Lake City), a retired educator, questioned why Representative Peterson chose education funding to target when in reality all tax incentives could be characterized as taking away from education funds.

The Utah Solar Energy Association opposed Peterson’s bill at the November 16 committee hearing where it was introduced. Ryan Evans, President of the Utah Energy Association, points out that this existing tax incentive is unique, “For every $20 million Utah invests in homeowners, it results in more than $300 million in economic activity for our state. For every $2,000 Utah credits residents on their income tax, it generates an immediate return of approximately $1,000 in sales taxes to the state and local economies. Add in sales and property taxes paid on equipment and tools to support thousands of employees, corporate income taxes paid by solar companies and income taxes from new jobs created, and it is apparent the state recoups its initial $2,000 back, perhaps even before Utah has spent a penny in tax credits, when residents claim the credit the following year.”  

According to Evans in 2016 there were between 12,000 and 16,000 solar installations in Utah which corresponds to $315 million total economic activity for residential solar installations alone with $800-$1,200 in sales and use taxes generated per system. Acknowledging that there is understandable concern over the ability for the total rebates to grow unchecked, Evans met with Peterson this month and concluded, “I think the legislature and industry are motivated so that this is done in the best way.”

In November of 2015, the Utah Public Services Commission required Rocky Mountain Power to study the costs and benefits of residential solar in Utah. The study Rocky Mountain Power completed only accounts for the monetary costs of residential solar in Utah, ignoring tangible benefits to the grid, such as grid resiliency and more efficient delivery of energy, and so-called “external benefits” to all ratepayers. The Utah Solar Energy Association maintains that Utah deserves a study with a long-term view of generational costs and benefits, especially the environmental benefits that are most important to Utahns.

In a similar move, Rocky Mountain Power’s Utah Solar Incentive Program will end this year.

Alan Naumann, Senior Partner for solar marketing company, Powur, says, “It’s foolish to stomp on the feet of this industry. It’s the fastest growing industry in the state and it is financed by outside money, bringing a tremendous amount of revenue to Utah.”

A poll conducted by Dan Jones & Associates found that most respondents surveyed (94%), do not currently have a solar energy system and would be less likely to benefit from the emerging cost shift. So it’s noteworthy that they believe improved air quality and a cleaner environment are the most important factors to be included when considering solar rates; suggesting that people perceive there are benefits to solar that outweigh its financial impact.

New analysis by GTM Research and the Solar Energy Industries Association (SEIA) indicates that nationally, over 4,000 megawatts of solar photovoltaic cells were installed between July and September of this year, at a rate of one megawatt every 32 minutes. 2016 marks the largest quarter for the US solar industry in history. Overall, GTM Research forecasts the US to install 14.1 gigawatts in 2016 alone, up 88 percent over 2015’s total. This explosion in growth is primarily due to utility scale installations which dwarf residential rooftop applications. Presently, US residential solar installation is experiencing a slowdown from its peak growth quarters; falling 10 percent from March to July, 2016’s total and growing just 2 percent year-over-year.

The reason for this set-back, according to industry representatives, is due to policy obstacles such as removing incentives and rate design reform proposed by utility monopolies like Rocky Mountain Power – resulting in the scaling back of net metering in some states, with its complete elimination in others. Proponents of net metering point to recent rate changes by utility NV Energy, also owned by Rocky Mountain Power’s parent company Berkshire Hathaway, that dramatically raised fees on residential solar. Citing a ~99 percent decrease in applications, a devastating impact on local solar jobs and diminished energy competition, residents fought back. After months of legal and regulatory battles, Nevada utility regulators have unanimously approved a motion to restore retail-rate net metering for the state’s 32,000 existing solar customers.

To contact Representative Peterson, click here or call 801-390-1480 (Cell).

You can track this, and all of our other flagged bills, by clicking here. Need an explanation of scores? Click Here.

Impact on Average Utahn 4
Need for Legislation 0
Lemon Score 0
Overall Grade F

2 comments for “Flagged Bill: HB 23 – Utah Residential Solar Tax Credit Repeal – Rep. Jeremy Peterson

  1. Kathy Van Dame
    December 20, 2016 at 1:23 pm

    Informative article I would grade the ‘need for legislation’ greater than 0. It is time to consider reducing the incentive. Slow & predictable will not kill the industry. Rather than cap the budget impact, the $2000 incentive could decline 10% [or some better % or $ amount] each year, with an end point a decade out.

  2. Elisabeth Luntz
    December 21, 2016 at 2:16 pm

    The comment by Ryan Evans of the Ut Solar Association clarifies that, yes, all parties agree the tax incentive cannot be allowed to grow out of control, but until the financial impacts are fully understood, the consequences could negatively impact industry growth as well as the State’s bottom line. This incentive stimulates the economy, critics of the legislation say.

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