% % HG- LC Ha [C5/Z; V15}; M £3?’ /;.,,g 761 251 .n2s.. r: := 3" Li V ' ~‘ ' A W 3: ‘,7 FT--_.-_.-1 ; -«V; /\,:'.'~‘~ .-,"::$;z«,,>_;"‘?F" ‘ ‘£2’ {gig 1;. i; W1 3 1 TC 1V6 _ NOV 16 1989 0 t ssue r16 j CONGRESSIONAL RESEARCH T UniveE§it oiLiliTi"§s“%6i{r*i‘I SERVICE . I/III/IIIIIIIIII/IIINHI!!!III!/I/II/I/IIIIIIIIWWIII O10-103939348 TAX INCENTIVES FOR SOLAR EQUIPMENT: A SURVEY or STATE LAws (ARCHIVED--07/28/80) MINI BRIEF NUMBER MB79231 AUTHOR: Nelson, Richard A. Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE ORIGINATED Qgggggzg DATE UPDATED Qggzzggg FOR ADDITIONAL INFORMATION CALL 287-5700 0729 CRS- 1 HB79231 UPDATE-06/27/30 1 1.5.5.» 9'" -D..1:-‘FI.1.LI._lQ.11 This mini—hrief lists, by state, major state laws that provide tax incentives for the purchase or use of solar energy systems or equipment. Currently, 40 states provide some form of tax incentive for the use of solar energy. most states have opted for a combination of property tax exemptions (31 states), income tax credits (22 states), or sales and use tax exemptions or credits. some provisions allow for the amortization of the value of the solar equipment over specified time intervals. It appears as though most states wish to encourage the use of solar energy not only in residences, but for commercial and industrial applications as well. Texas appears to have gone one step further than most in exempting from state francise taxes those corporations engaged exclusively in the manufacture, sales, or installation of solar equipment. Three states (Montana, Texas, and Washington), explicitly exclude passive solar energy .devices such as insulation, double-pane or thermal windows, and speciallyedesigned roofs from their incentive systems. One state, Ohio, provides special incentives for "hydrothermal" energy applications. ___ __ ___________ Sources for this survey include the National Conference or State Legislatures, ‘Energy Report to the States, Special Edition - State Solar Legislation, 1974-77, vol. 4, no. 28, April 28, 1979; "ational Solar Heating and Cooling Information Center, State Solar legislation, Rockville, Hd, March 1979; the Solar Law Reporter, various issues, Solar Energy Research Institute, Golden, Colo; and personal contact with the appropriate State agencies. (Chap. 94, Laws of 1977) Alaska allows for a residential income tax credit of 10% (limit $200) for solar equipment. The credit extends from Jan. 1, 1977 through 1982. The bill also allows the 10% credit for insulation expenses. ' ARIZONA (Chap. 165, Laws of 197a) Arizona allows a property tax exemption in the amount of the price paid for any solar device installed. These provisions expire at the close of (Chap. 93, Laws of 1975, as amended by Chap. 129, Laws of 1976, as amended Chap. 112, Laws of 1978) When solar energy devices are added to business or investment property, the taxpayer may elect to depreciate, to amortize over 36 months, or to claim an income tax credit. This credit, during 1979, may equal 35% of the cost of CRS- 2 HB79231 UPDATE—0&/27/80 the solar energy system- There is a 3-year carry-over provision, no limit to the credit, and an expiration date of Dec. 31, 1983. Credit is available + individual taxpayers at the same rate, but is limited to $1,000. At the en“ of 1983, the residential credit declines by 5% per year until it expires in 1989. (Chap. 02, Laws of 1977) Solar energy devices are exempt from transaction and use taxes. (Chap. 112, Laws of 1978) A 25% credit is allowed pfor residential insulation and ventilation devices, such as insulating doors and windows. The maximum credit is $100. The credit expires in December 1980. ARKANSAS (Act 535, SB 53, Laws of 1977) Arkansas allows for the.deduction from gross income of the entire cost of acquiring and installing residential solar heating and cooling equipment. This deduction is restricted to the year of purchase. CALIFORNIA (Chap. 168, Laws of 1976, Chap. 1082, Laws of 1977, Chap. 1154, Laws or 1973) California provides for an income tax credit of 55% of the cost incurred by any taxpayer (limit $3,000) for the purchase and installation of a solar energy system on premises owned and controlled by the taxpayer. It also allows the owner of premises other than single-family dwellings for which the cost of a solar installation exceeds $12,000 a credit of 25% of the cost of purchase and installation. If a federal income tax credit is claimed for purchase and installation of solar energy systems, the allowable California {credit will be reduced so that the combined credit shall not exceed 55% of the solar system costs. The credit may be carried over until it expires at the end of December 1980. Energy conservation measures installed in conjunction with a solar energy system which reduce the system's total cost or backup energy reguirements are eligible for the tax credit. COLORADO (Chap. 340, Laws of 1975) This law establishes the property tax valuation for solar equipment attached to or part of a building to be 5% of the actual value of the device. (chap.“512, Laws of 1977) Colorado allows an income tax deduction equal to the total cost of the installation, construction, reconstruction, remodeling or acquisition of an alternative energy device for use in any building owned by the taxpayer. This law also permits corporations to take advantage of the tax but prohibits CBS“ 3 MB79231 UPDATE-O6/27/80 depreciation on the alternative energy system if the deduction is taken. (Title 39-22-127/512, Laws of 1979) Colorado grants a 30% solar tax credit to homeowners (available Jan. 1, 1980—Jan. 1, 1986) in addition to the Federal credit and allows a maximum credit of $3,500. The law also provides a 30% tax credit (available Jan. 1, 1981-Jan. 1, 1986) to businesses for solar, and wind energy installations, and a 10% credit for other alternative energy sources. The law contains a five—year, carry-forward provision. CONNECTICUT (PA 76-409, 77-490) Connecticut permits any municipality to exempt solar energy heating or cooling systems from property taxes. This exemption will be the difference between the assessed valuation of the real property with the solar system and with a conventional heating or cooling system. It will apply to any building or addition constructed on or after Oct. 1, 1976 and before Oct. 1, 1991 and will apply only to the first 15 assessment years. (pa 79-547) This law provides a sales tax exemption for solar energy systems through nSept. 30, 1939. DELAWARE (Chap. 512, Laws of 1978) This law provides an income tax credit of $200 for solar energy devices designed to produce domestic hot water. Systems must meet HUD Intermediate Minimum Property Standards Supplement for Solar Heating and (Domestic Hot Water Systems. Systems must be warranteed according to criteria set out in the Law. FLORIDA (Chap 78-309, Laws of 1978) Florida permits a waiver of the property tax assessment for solar energy systems. GEORGIA (Act 1030, Laws of 1976, as amended by Act 1309, Laws of 1978) Real estate owners may claim a refund of sales tax paid for the purchase or solar equipment. Expires July 1, 1986. (Georgia Constitution, Article VII, Section 1, Paragraph IV) 1cns- u uB79231 UPDATE-O6/27/80 Any county or municipality may exempt solar heating and cooling equipment and machinery used to manufacture solar equipment from property taxes. Th? expires July 1, 1986. HAWAII (Act 189, Laws of 1976) Hawaii exempts solar improvements installed between June 30, 1976 and Dec. 31, 1981 from property taxes. The law also provides an income tax credit of 10% of the cost of the solar equipment for personal and corporate taxpayers if the equipment is installed between Dec. 31, 197R and Dec. 31, 1981. The tax credit may also be carried over until exhausted. IDAHO (PA 79-943, 1975 as amended by EA 80-430, 1977) This law allows an income tax deduction for a solar energy system installed in taxpayer's residence. The deduction equals 40% of the cost in the first year and 20% of the cost in each of the next three years (limit $5,000 per year). ILLINOIS (PA 79-9&3, 1975, as amended by PL 80-830, 1977) A property owner may claim an alternate valuation for property taxes if a solar or wind energy system is installed. The property is assessed once with the alternate system, and once as though it has a conventional one. The lesser of the two assessments is used to compute the tax. INDIANA (P.L. 15, 197R, as amended by P.L. 58, 1977) The law permits the property owner ‘who installs a solar heating and cooling system to have his property assessment reduced by the difference between the assessment of the property with the system and the assessment of the property without the system. IOWA (Sec. 481.21, Code of 1979) The installation of a solar energy system will not increase the assessed, actual, or taxable values of any property from 1979 to 1985. KANSAS (Chap. 438, Laws of 1976, as amended by Chap. 3&6, Laws of 1977) CRS- 5 MB79231 UPDATE-O6/27/80 The individual taxpayer is allowed an income tax credit of 25% of th cost at a residential solar energy system (limit $1,000). A solar energy installation on a business or investment property receives a credit equal to 25% of the system cost; $3,000; or that year's tax bill, whichever is the least amount. The cost of an installation on a business or investment property may be amortized over 60 months. Wind energy systems are also covered by this law. The credit expires July 1, 1983. (Chap. 345, Laws of 1977, as amended by Chap. 419, Laws of 1978) If a solar energy system supplies 70% of the energy for heating and cooling, the property owner may be reimbursed for 35% of his property tax for up to five consecutive years (through 1985). LOUISIANA (Act 591, 1978) Louisiana allows property tax exemptions for residential solar equipment. MAINE (Chap. 542, Laws of 1977) Haine exempts solar equipment from property taxes for five years after ”nstallation. The law also provides for the refund of sales or use taxes. -rovisions expire Jan. 1, 1983. MARYLAND (Chapter 286, Laws of 1980) I Haryland allows jurisdictions to provide local real property tax credits for residential and non-residential buildings using solar energy for heating, cooling, or hot water. (Chap. 509, Laws of 1975, as amended by Chap. 509, Laws of 1978) flaryland provides that the property tax assessments for solar heating and cooling units be no more than the value of a conventional system appropriate for the building. (Chap. 740, Laws of 1976) Counties and cities are permitted to provide tax credits (limit 3 years) against local property taxes for all types of bildings using solar equipment. The amount of the credit and definition of solar heating and cooling equipment shall be determined by each locality. SSACHUSETTS (Chap. 734, Laws of 1975, as amended by Chap. 388, Laws of 1978) Solar energy systems are exempt from property taxes for 20 years after the CRS— 6 flB79231 UPDATE-O6/27/80 date of installation. (Chap. 989, Laws of 1977) Sales of equipment for residential solar energy systems, wind power systems, or heat pumps are exempt from sales tax. (Chap. 487, Laws of 1976) Corporations may deduct the cost of a solar or wind energy system from income. The deduction may be taken in lieu of depreciation. The system will also be exempt from tangible property tax. (Chap. 62, Section 6, Laws of 1979) Residences are eligible for a 35% income tax credit (limit $1,000) on the purchase of solar, photovoltaic, or wind equipment. The credit can be taken after Federal tax credits and grants are calculated and is retroactive to Jan. 1, 1979. There is a 3-year carry forward provision. Credit expires Dec. 31, 1983. HICHIGAN (Act 135, 1976) Hichigan exempts a solar, wind, or water energy system from property taxes, ending June 30, 1985. (Act 132, 1976) This Act allows for a deduction from gross income of the sales tax placed on any solar, wind, or water energy system for use in residential or commercial buildings. It also excludes any commercial buildings owned by a corporation which engages in the design or manufacture of solar, win, or water energy equipment. These deductions expire on Jan. 1, 1985. (Act 133, 1976) nichigan exempts solar energy systems, wind systems, or water energy systems from state excise taxes until Jan. 1, 1985. The law excludes any commercial buildings owned by a corporation which engages in the design or manufacture of solar, wind, or water energy devices. (Act 605, 1979) Income tax credit may be claimed for a residential solar, wind,. or water energy device that is used for heating, cooling, or electricity. Energy conservation measures installed in connection with such devices are also eligible. xThe credit may be carried until it is expended. To be eligible, expenditures must be made by Dec. 31, 1983. For 1979 and 1980, the rate for single-family dwelling is 25% of the first $2,000 spent, plus 15% of the next $8,000 spent. The rate for other buildings is 25% of the first $2,000, plus 15% of next $13,000. For 1981, credits are 20% on the first $2,000 and 10% on the next $8,000 for 1982 the credits are 15% on the first $2,000 and 5% on the next $8,000. For 1983, 10% on the first $2,000 and 5% on the next $8,000. For buildings other than single-family dwellings, the same credit schedule with the $13,000 ceiling will apply. cns- 7 211379231 UPDATE-0 6/27/80 .INNBSOfA (Chap. 786, Laws of 1978) Minnesota allows for the exclusion of the value of solar energy devices fro: property tax assessnents. This law applies to residential solar systems installed before Jan. 1, 1984. ~ HONIINA (Chapu 548, Laws of 1975, as amended by Chap. 570, Laws of 1977) Energy systems using non-fossil fuel. energy (such as solar, wind, decomposition of organic wastes) installed in a taxpayer's dwelling before ‘Dec. 31, 1982 are eligible for a tax credit of 10% for the first $1,000 and 5% of the next $3,000 (limit $250 with a four-year carryover). If a federal tax credit is also claimed, the state credit is reduced to 5% of the first $1,000 and 2-1/2% of the next $3,000. (Chap. 576, Laws of 1977) Montana allows deductions for energy conservation and non-fossil energy generating systems expenses from the corporate and license tax, or the income tax as follows: for residential, 100% of the first $1,000 spent; 50% of the "ext $1,000 spent, 20% of the third $1,000 spent; and 10% of the fourth 1,000 spent (limit $1,800). For nonresidential buildings: 100% of the first $2,000 spent; 50% of the next $2,000 spent; 20% of the third $2,000 spent; and 10% of the fourth $2,000 spent (limit $3,600). NEVADA (Chap 305, Laws of 1977) Nevada permits an allowance against property taxes equal to the assessed value of a solar, wind, geothermal, water power, or waste conversion system installed in a residential building. The law limits the allowance to the lesser of the amount of accrued taxes paid by the claimant on the building, or $2,000. NEW HAMPSHIRE (Chap. 391, Laws of 1975, as amended by Chap. 5202, Laws of 1977) New Hampshire allows individual cities and towns to exempt solar energy systems from property taxes. The anount of the exemption is left as a local option. (Chap. 185, Laws of 1977) Municipalities are permitted to adopt property tax exemptions for wind energy systems. CRS- 8 / HB79231 UPDATE-06/27/80 NEW JERSEY (Chap. 256, Laws of 1977) Property tax exemptions equal to the assessed value of a solar energy system installed in any type of building are allowed until Dec. 31, 1982. (Chap. 465, Laws of 1977) Solar energy systems are exempted from sales and use taxes. (Chap 5, Laws of 1978) This lam outlines sales tax exemption standards for solar energy systems. NEH HEXICO (chap. 12, Laws of 1975, as amended by Chap. 170, Laws of 1978) New uexico provides a tax credit (the lesser of $1,000 or 25% of the cost of solar heating or cooling equipment) against the personal income tax liability of any taxpayer who installs a solar heating or cooling system in his principal residence. If the tax credit.exceeds the taxpayer's income tax liability, the excess shall be refunded to the taxpayer. A taxpayer can claim the credit only once for a given principal residence and only once in any tax year. The credit may not be claimed if the taxpaye ’ claimed a credit, deduction, exemption, or exclusion on his federal income tax for the same solar system. i(Chap. 11u, Laws of 1977) New nexico allows an individual income tax credit equal to the cost of a solar energy system installed on a taxpayer's property for irrigation pumping purposes (limit $25,000 per project). The law requires plans for the design of the solar irrigation pumping system to be submitted and certified by the Energy Resources Board. Plans must show at least a projected 75% reduction in fossil energy use. NEW YORK (Chap; 322, Laws of 1977) New York exempts solar and wind energy systems installed on any type of building prior to July 1, 1988 from property taxes for 15 years. NORTH CAROLINA (Chap. 792, Laws of 1977) This law provides for individual and corporate income tax credits of 25% of the total installed cost of solar energy systems in buildings (limit $1,000). The system must also meet Federal performance criteria. Credits may be carried for three years. They expire Jan. 1, 1985. CRS- 9 MB79231 UPDATE—06/27/80 (Chap. 965, Laws of 1977) This law also provides that, for purposes of property taxation, no additional value shall be assigned for the difference between solar and conventional heating/cooling system costs. The credit expires Jan. 1, 1985. NORTH DAKOTA (Chap. 508, Laws of 1975) solar energy systems are exempted from property tax valuations for five years after installation. (Chap. 537, Laws of 1977) The law allows for an income tax credit of 5% per year (limit two years) of the installed cost of solar or wind energy devices with no maximum nor carryover provisions. OHIO (House Bill 657, Law 1 not yet availablk» Ohio provides a tax incentive package for homeowners and corporations who purchase solar, wind, or "hydrothermal" systems before Dec. 31, 1985. For ”usinesses, a 10% corporate franchise tax credit is offered (no ceiling) and 10% personal income tax credit is available (limit $1,000 with 2-year carryover). The systems are also exempt from state sales and real property taxes. OKLAHOMA (Chap. 209, Laws of 1977) Oklahoma provides an income tax credit (not to exceed 25% of the cost of a solar device, or $2,000) for the installation of solar energy devices. Credits may be carried over for up to five years. Provisions expire Jan. 1, 1988. OREGON (Chap. 196, Laws of 1977) This law provides for income tax credit for the installation of solar, wind, or geothermal energy systems. The credit equals 25% of the cost of the system. The maximum credit is $1,000. The credit may be spread over three years. The credit expires on Jan. 1, 1985. Credits are limited to one per taxpayer, rather than one peqvbuilding. This law also provides for a property tax exemption for property equipped with solar energy systems. The exemption equals the value of the property with the solar energy system minus the value of the property without the system. This credit expires Jan. 1, 1988. CBS-10 HB79231 UPDATE-U6/27/80 RHODE ISLAND (Chap. 202, Laws of 1977) Rhode Island provides that a solar heating or cooling system be assessed at not more than the value of a conventional heating or cooling system. The special assessment is offered Apr. 1, 1997. SOUTH DAKOTA (Chap. 74, Laws of 1978) This law provided property tax assessment credit for renewable resource energy systems (sun, wind, geothermal, and biomass). For residential property, the amount of the credit equals the assessed value of the property with the system, minus the assessed value of the property without the system, but not less than the actual installation costs of the system. The credit for systems in commercial buildings is equal to 50% of the cost of installation. For residential buildings, full credit is given for five years. For the next three years, the credit is 75%, 50%, and 25% of the full credit. For commercial buildings, full credit is given for three years, and for the next three years credit is 75%, 50%, and 25% of the full credit. TENNESSEE (Chap. 837, Laws of 1978) All solar energy systems are exempted from property tax valuations until Jan. 1, 1988. TEXAS (Chap. 719, Laws of 1975) Solar energy devices are exempt from state sales taxes. This law specifically excludes passive solar devices such as insulation, thermal glass, and certain types of roofs. Corporations may deduct from taxable capital the amortized cost of a solar energy device over a period of 60 months or more. 9 (Chap. 584, Laws of 1977) The law exempts those corporations engaged exclusively in the business of manufacturing, selling or installing solar energy devices from the state franchise tax. (Article VIII, Sec. 2(a) of the Texas Constitution, 1978) The legislature is allowed to exempt solar- or wind-powered energy devices from property tax. UTAH CBS-11 MB79231 UPDATE—06/27/80 (Annotation to Utah State Code 59-14B-1/H) Utah allows a 10% income tax credit for the installation of solar (active and passive systems), wind energy, and low-head hydroelectric systems. Credit limit is $1,000 for residential applications and $3,000 for commercial uses. It is retroactive to 1977, has a four-year carryover provision, and terminates at the end of 1985. VERHONT (Act 225, Laws of 1976) Vermont allows each town to exempt alternate energy systems from real and personal property taxes. (Act 210, Laws of 1978) This Act provides a residential income tax credit Of 25% of the installed cost of alternate energy systems (limit $1,000). Commercial solar applications are allowed a credit of 25% (limit $3,000). VIRGINIA (Chap. 561, Laws of 1977) This Act implements a proposed constitutional amendment, approved by the oters, providing for local option to exempt solar energy equipment wholly or partially from property taxation (minimum five years). WASHINGTON (Chap. 364, Laws of 1977) Washington exempts solar energy systems from property tax valuations for 7 years after the filing of a claim. The system must meet minimum federal standards. The provisions expire Dec. 31, 1981. (S.B. 3181, Laws of 1980) Amends the Washington Revenue Code, Section 84, 36, 410 and adds sections exempting solar energy systems from property taxes; amends the 1977 solar exemption by redefining solar systems without requiring them to meet energy efficiency standards and without requiring them to be the primary source of energy for a residence or business to receive the exemption. WISCONSIN (Chap. 313, Laws of 1977) iisconsin provides tax credit for the installed cost of solar energy systems (limit $10,000) beginning Apr. 20, 1977 through Dec. 31, 1984. After starting at 20% in 1977-78, the percentage of the costs which may be credited against income taxes declines by 2% each year until it. reaches 8% for 1983-84. "'Ij.E.';I IL.’ 11 CRS—12 Beginning in 1979, businesses ma installed costs of a solar energy system. 7' ‘_ 3 ._ -~~ v.‘ .‘::-;;{\"A"_“V_‘_ _L,'_, ,_._..‘_-;_;_»_.v_-_-_ I.-_. ;..€'- .trr:, k._4 ; u ‘I 1; L’‘“‘ :9"‘»: “":§"'n r’ ?= ! OK"). 1'4‘-'1 53;,-:_« C‘ 3 Lu‘ g‘. ,_ a,_ .. . vu ,. ,“‘> 2.: E i.__,,'u' . W ,3 33 :;r:.:-.i ‘a ma; ’ ,5 __ v: : L ,3 n‘. . \J Hy,‘ ‘ \" - 1 9- ""5 ‘*4, '1 """"¢_._\/,' ;;:.1i-°‘.v‘.“._:~r1°7! r. , . y_ "u gj‘ L(«,j‘l__;_'s .-A;-‘e\«.:3 .. n .., 31,-jg‘.-1 1-.-.:v__;-~:: * : ..,..,,.«-:...-~v.-nv—-~,_‘ : ,3}; gr,-, *1. . HB79231 UPDA TE -0 6/27/80 y deduct or amortize, over five years, ti