Iowa legislators consider expansion of state solar tax credits program

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Iowa residents and businesses can expect more access to solar tax credits if lawmakers pass a bill, IA HF221, that would uncouple the state’s solar investments from federal tax credits investments, double the annual cap for the applicant pool from $5 million to $10 million, and extend the period of time the state will issue credits until 2030.

Rep. Brian Lohse, R-Bondurant, chaired the Ways and Means subcommittee that unanimously recommended on Feb. 2 the bill’s passage, with two amendments. One amendment addresses solar panels that are not purely commercial but rather “mixed use” while the other updates the bill’s language regarding the separation of the state program from the federal program since the U.S. Congress extended tax credits for solar power since the writing of the original Iowa bill.

“In my personal example, I have a constituent that has an auto body shop right next to his house; that’s his business,” Lohse told The Center Square in a phone interview. “If they were putting one solar array that serves both of those buildings, then they would be looking at that not as residential but as commercial, which allows a larger tax credit.”

Currently, Iowa provides individual and corporate tax credits equal to 50% of the federal residential energy efficient property credit, up to $5,000, plus 50% of the federal energy credit related to solar energy systems, up to $20,000.

Lohse said the bill helps address the waitlist of those interested in the existing tax credit program.

Fewer than five tax credits were awarded for solar energy system installations in 2020 “due to applications from the waitlist comprising nearly all of the available tax credit in 2020,” according to a December 2020 report from The Iowa Department of Revenue.

Starting in the 2021 tax year, the bill would increase the maximum cumulative value of tax credits that could be claimed from $4 million to $17 million, and $7 million would be reserved for claims placed on the waitlist before January 1, 2021. Taxpayers could claim more than one tax credit, but only one tax credit per solar energy system installation. As the bill currently reads, pending amendments, the residential solar energy system tax credit would be up to $5,000 while the commercial tax credit would be up to $20,000.

“The oversubscription and the resources that would go to pay that down would be just a one-time funding just to pay that down so that people won’t wait over a year to get their tax credit,” Senior Policy Advocate Steve Falck of the Environmental Law & Policy Center, which is pushing the bill, told The Center Square in a phone interview.

“Having that kind of money tied up into something certainly is a discussion that sometimes can take some wonky turns with certain people, so you just never know why a bill doesn’t quite get to the deadline,” Lohse said.

He said there seems to be significant interest in passing the bill this year, however, and the return on investment of the solar industry was a consideration.

“It’s my understanding that there are 85 companies in Iowa that are involved in the solar supply chain, such as parts manufacturers, installers, that type of thing,” Lohse said. “This investment is creating jobs. Those jobs certainly generate other taxes that are aimed at replacing what we’re paying.”

Through tax credit awards of $36.6 million for 6,213 projects between 2012 and 2020, the state of Iowa has made a total of $291.1 million in solar energy system investments, according to the Department of Revenue report.

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