A report by Utah’s Office of Legislative Auditor General of a tax credit program the state has provided to incentivize the purchase of renewable energy systems and alternative fuel vehicles found people have been misusing the program by claiming credits the state did not approve or they did not earn, costing the state millions of dollars in uncollected tax revenues.
The November 14 audit was requested by the Utah Legislature’s Public Utilities, Energy, and Technology Interim Committee in October 2016, to obtain information on expenses of the state’s energy incentives programs after it decided to phase out the state’s tax credits for rooftop solar over time. The program cost the state $20 million in 2016.
The audit, which examined tax credits for oil and gas production in addition to those for renewable energy and alternative fuel vehicles, found individuals and companies in Utah claimed more than $74 million in energy-related tax credits between 2011 and 2015 across the seven programs examined.
The report details multiple instances of what it called “discrepancies” in the distribution of state energy tax credits, covering several of the energy-related tax credit programs.
Among the incidents described in the report, in one case a single employee in the Governor’s Office of Energy Development mistakenly approved more than $600,000 of Renewable Commercial Energy Systems tax credits for a Utah business between 2011 and 2015 based on estimated data, not confirmed production numbers.
In addition, although the Division of Air Quality approved just 247 residents’ claims for the Clean Fuel Vehicle Tax Credit in 2015, 645 Utahns claimed the credit on their 2015 tax returns, a discrepancy of more than $540,000.
Among the problems listed by the Auditor General as resulting in wrongly granted tax credits were a lack internal controls for the approval of the credits, poor communication among the multiple agencies granting the credits, and lack of verification individuals and businesses claiming eligibility for the credits actually purchased the systems or vehicles claimed.
‘In Serious Need of Fixing’
Derek Monson, executive director of the Sutherland Institute, says the lack of oversight in Utah’s renewable energy tax credits system makes it prone to misuse.
“The legislative audit shows tax incentives for energy not only create winners and losers but are also prone to fraud and abuse due to lack of proper verification,” Monson said. “As Utah pursues tax reform this upcoming legislative session, energy tax credits would appear to be an area ripe for reform and in serious need of fixing.”
Chris Talgo ([email protected]) is a marketing coordinator for The Heartland Institute.