Lawmakers may turn out lights on solar panel tax credits
Legislators say the money saved would be spent on education
February 24, 2017
The sun may be setting on the lucrative income tax credits for Utah residents who install solar panels on their homes.
Currently, homeowners can receive up to a $2,000 tax break for installing residential solar panel systems, but H.B. 23 seeks to phase out the credits by the end of 2021. The legislation, sponsored by Rep. Jeremy Peterson, a Republican from Odgen, would cut the tax credit amount to $1,600 in 2018 and decrease it $400 each year until eventually hitting zero.
The bill, which lawmakers are touting as a compromise with the solar industry because it would also remove a cap on the total amount of annual funding available for the tax credits through 2021, has drawn broad support from Republican legislators who say the millions of dollars saved could be spent on other efforts like education. It passed the Utah House of Representatives earlier this month and was approved by the Senate Thursday. As of Friday morning, it awaited the signature of Gov. Gary Herbert.
However, Lisa Yoder, Summit County's sustainability manager, said the legislation could slow local sustainability efforts at a time when hundreds of residents in the area are choosing to install solar panels. The tax credits, she added, have been vital in fostering the growth of the industry in Summit County.
"I would say it's definitely going to be a deal-breaker for some people," she said. "I suspect it will impact people in the next couple years who will decide against doing solar. Because $2,000 is substantial."
Rep. Tim Quinn, a Republican freshman legislator from Heber City whose district includes Park City, said the benefit to the state's bank account justifies doing away with the credits, however. He said they will cost the state an estimated $25 million this year, and Rep. Peterson has said that amount could jump to $60 million next year.
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That's money that would be better utilized in public education, Quinn said.
"All of that revenue, because it's an income tax credit, would be taken out of the education fund," he said. "We're constantly hearing, and we all agree, that the education fund needs to be funded at greater levels, and this is a way that we can add $25 million dollars to it."
Even if phasing out the tax credits causes a negative effect in the short-term, Yoder anticipates the industry will keep its strong footing in Summit County. She said the industry has thrived in Utah — due largely to the tax credits — causing the price of solar panels to decrease rapidly. The cost should continue to fall as the technology becomes more common, meaning solar panels should at some point become affordable enough for average homeowners even without tax credits.
"Eventually, I think things will level out," she said.
Quinn agreed, saying the industry has matured to the point where the tax credits are no longer necessary. He expects the industry to continue to flourish even if the credits are eliminated.
He added that choosing to phase out the credits rather than getting rid of them immediately was the result of Rep. Peterson working with the industry to find a solution that won't halt its momentum.
"If we just shut the credits off instantly, it really damages the industry because a lot of people are planning on their purchases using those credits," he said. "So we thought a phase out was fair."
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