Renewable energy backers: Sun could go down on tax credits without state action

Solar power supporters are asking state lawmakers to improve and extend a state tax credit program. (Photo by PublicDomainPictures.net via Pixabay)

Iowa’s tax credits for businesses and homeowners who install solar panels could disappear next year unless state lawmakers approve legislation extending them. 

House File 221 would extend state tax credits on 15% of project costs for 10 years. It also would clear a backlog of tax credit applications totaling approximately $9 million and double the annual credits available in the future, to $10 million per year.

The tax credits in the bill would expire in 2031, lawmakers voted to extend them. As it is, the state credits expire next year. 

A legislative subcommittee this week sent the measure to the full House Ways and Means Committee.     

Lewis Butler, president of the Iowa Solar Trade Association and sales director at Fairfield-based solar company Simpleray, said the bill could be a first step in bolstering state support for solar energy. As it stands, neighboring states have stronger incentives, he added.

“Iowa’s done a very good job on solar,” Butler said. “This tax credit has been around for almost a decade.”

“This is a very good first step, but it’s not the end,” Butler said of the new legislation. 

In other Midwestern states, including Illinois, Minnesota, Wisconsin and Missouri, solar-panel buyers often get cash rebates. That opens the benefits to nonprofit organizations, including churches, that don’t pay taxes and don’t qualify for the tax credits Iowa offers, Butler said.

“The importance of (House File 221) is to provide certainty on what’s going on with the tax credit and to clear out the waiting list,” Butler said. Iowans who have bought systems have had to wait for two years to get their credits, and in some cases wondered if they would be available, he added.

The trade association says the state has provided $36.6 million in tax credits since 2012, backing 6,213 projects and a combined $291 million in investments. Iowa’s solar industry jobs grew to nearly 900 in 2019 from 350 in 2015. Now, 85 companies are involved in the industry, from manufacturing to installing panels to engineering projects.

The legislation also would take away language that tied Iowa’s tax credit to the federal ones. That led to a bureaucratic snag in which Iowa’s credits were not automatically extended for two years by recent federal action because they were technically part of the 2016 tax code. 

The new law would offer buyers a 15% state tax credit on their solar project, regardless of whether the federal government continues to offer credits, Butler said. 

Solar has been increasing its share of Iowa’s energy mix. The newer, more-efficient panels have caught the attention of MidAmerican Energy and Alliant Energy, both pursuing aggressive renewable energy portfolios. Environmental groups have pushed for expansion of both the wind energy and solar power industries in Iowa as a way to control climate change and to create jobs.

A survey of 660 Iowa voters conducted for Iowa Business for Clean Energy by Nexus Polling, the Yale Program on Climate Change and the George Mason University Center for Climate Change Communication found that 82% favored state tax credits for solar panel installation. A similar percentage (80%) supported tax credits for wind energy.

“Iowa voters want to farm solar and wind energy across the state, including in their own communities,” Anthony Leiserowitz, director of the Yale Program on Climate Change Communication, said in a statement. “They strongly support policies to make it easier for individuals and businesses to install solar panels and wind turbines and contribute to Iowa’s clean energy future.”

Key lawmakers did not immediately return calls Friday.