Louisiana Gov. Bobby Jindal has signed legislation phasing out the state’s tax credit for solar energy. The credit will expire at the end of 2017.
Weaning Off Tax Subsidies
Sponsored by Rep. Eric Ponti (R-Baton Rouge), House Bill 705 became a much-amended compromise that sunsets the solar energy tax credit while honoring existing leases between solar power suppliers and customers. Speaking on the House floor, Ponti said the amended bill would establish a “weaning off” process for solar tax credit recipients.
Louisiana currently provides a tax credit for solar and wind energy systems purchased and installed on or after January 1, 2008. The tax credit amounts to 50 percent of the first $25,000 of the cost of each system, and it may be applied to personal, corporate, or franchise taxes. Under the Louisiana program, the system must be installed at either a residence or a residential retail apartment complex to be eligible.
Beginning July 1, 2013, the tax credit will only be available for a single solar photovoltaic system on single family residences. The tax credit will no long apply to wind power and solar systems on multi-unit residences.
Beginning January 1, 2014, the tax credit will cover an ever-smaller percentage of solar photovoltaic installation costs. Beginning January 1, 2014, the tax credit will only to only 38 percent of a system up $25,000. Beginning July 1, 2013, the tax credit will apply to 38 percent of a system up to $21,000. Beginning July 1, 2015, the tax credit will apply to 38 percent of a system up to $16,000. No more tax credits will be issued after December 31, 2017.
Senate amendments to the bill will allow those leasing a solar power system from a third party to continue claiming the tax credit. Those who installed a leased system before Jan. 1, 2014 can claim up to 50 percent of the first $25,000 in purchasing and installing costs. After that, 38 percent of the same amount can be claimed.
Senate amendments will also require any system for which a tax credit is being claimed to be built entirely from parts made in the United States.
Expensive Renewables Losing Favor
Daniel Simmons, director of state policy at the Institute for Energy Research, says the Louisiana bill illustrates how expensive wind and solar power are falling out of favor with state lawmakers.
“Solar power may someday be competitive, but that day is not yet here,” said Simmons.
“Louisiana is only recognizing the obvious—that they were subsidizing a source of energy that has been on the public dole for years, and now is the time for solar to stand on its own two feet. Let’s hope solar technology will improve and solar energy will become most cost-competitive, but it does not need taxpayer dollars to make that happen,” he added.
Bonner R. Cohen, Ph. D. ([email protected]), is a senior fellow at the National Center for Public Policy Research.