Legislators Warm to Solar Tax Incentives

February 24, 2011

Investigative Reports

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The NerveState bills offering tax incentives to the solar energy industry are about as predictable as sunny days in the Palmetto State.

So far this year, at least nine House or Senate bills have been introduced that would give income tax credits, sales tax exemptions or property tax breaks directly to the solar energy industry or to purchasers of solar energy products, a review by The Nerve found.

In the last legislative session, which covered 2009 and 2010, at least 16 bills relating to the industry were introduced.

In the latest wave of proposed legislation, Rep. James Smith, D-Richland, introduced a bill (H. 3591) this month that would classify “solar energy real property” as agricultural property for property tax assessment purposes.

Under state law, the assessment rate for agricultural property is 4 percent of fair market value if it is the owner’s primary residence and 6 percent if it is not a primary residence, compared to 6 percent for commercial property and 10.5 percent for industrial property.

Under the bill, “solar energy real property” is defined as a parcel of at least 20 acres “used or useful for the generation, storage, transmission or distribution of electric power by means of a low-emissions or no-emissions technology that primarily uses solar light or solar heat,” and that is used in the production of at least 100 megawatt hours of electricity per acre annually.

Smith also introduced another bill (H. 3593) that would allow income tax credits in varying amounts for the research or production of “solar liquid fuel,” which, according to industry literature, involves imitating the process of photosynthesis to produce fuels from carbon dioxide and water.

Last year, Smith sponsored a bill (H. 4703) that would have increased the percentage of allowable state income tax credits for the purchase and installation of solar energy systems from 25 percent of the cost of the equipment to 35 percent this year, and 30 percent from 2012 through 2015.

That bill never made it out of committee. Smith is co-sponsor of a similar bill (H. 3346) this year.

Smith did not return written or phone messages last week from The Nerve.

Erika Myers, manager of renewable energy programs at the S.C. Energy Office, a division of the state Budget and Control Board, told The Nerve last week that Smith was “very involved” in plans by AQT Solar to locate a manufacturing plant in Richland County, with the promise to create 1,000 jobs over the next four years. The California-based company publicly announced the project last year.

“He was part of the economic development group that reached out to AQT,” Myers said. Myers, who also manages a nonprofit organization promoting solar energy, called the South Carolina Energy Council, noted that the Energy Council last year honored Smith with its “2010 Legislator of the Year” award.

The council is the state chapter of the American Solar Energy Society. The society’s website lists the council’s address as the address of the S.C. Energy Office, which is located in the Wade Hampton Building on the State House grounds.

Budget and Control Board spokesman Delbert Singleton in a written response this week to The Nerve said the S.C. Solar Council was created with a U.S. Department of Energy grant awarded through the S.C. Energy Office, and that the DOE continues to provide funding through the Energy Office for “staff support” for the Solar Council. A similar funding setup exists with another alternative energy organization known as the S.C. Biomass Council, according to Singleton.

Myers didn’t know if either of Smith’s two bills introduced this month would benefit AQT, which announced it plans to invest $460 million in a plant in the Blythewood area. The company manufactures solar cells used in solar panels that convert sunlight to electricity.

Company officials could not be reached for comment .

The S.C. Coordinating Council for Economic Development approved two grants totaling $2 million to AQT for infrastructure and building improvements, provided the company creates 1,019 jobs in South Carolina in two phases, Kara Borie, spokeswoman for the S.C. Department of Commerce, told The Nervelast week.

The Coordinating Council, made up of the heads or board chairs of 11 state agencies that deal with economic development, also approved job development credits for AQT, or rebates of a portion of new employees’ state income withholding taxes, Borie said in her written response. She didn’t specify the value of those credits, explaining the amounts are determined by a company’s pay structure and location.

The solar energy industry in South Carolina has received plenty of taxpayer support in recent years. Last year, for example, more than $2.3 million in federal stimulus grants were awarded through the S.C. Energy Office for various solar energy projects, according to agency literature.

Claflin University, for instance, was awarded $500,000 to install a solar thermal system at its James S. Thomas Science Center, while another $500,000 was awarded for the installation of 70 solar water heaters in homes served by the Central Electric Power Cooperative. The cooperative purchases the majority of its power from state-owned utility Santee Cooper, which was awarded $475,000 to create the “Grand Strand Solar Station,” billed as the largest solar energy system in the state when finished.

As far as state tax breaks are concerned, in 2008 – the most recent data available from the S.C. Department of Revenue – a total of $210,092 in solar energy income tax credits were claimed by individual filers statewide.

A proviso proposed for this fiscal year’s state budget would have increased the amount of allowable state income tax credits for the installation of solar energy systems from 25 percent of the costs to 30 percent. But then-Gov. Mark Sanford vetoed the proviso, and the House sustained the veto.

Besides Smith’s bills, following is a sampling of other solar energy tax incentive bills filed this year, with the name of the bill’s main sponsor in parentheses:

  • H. 3077 (Rep. Bill Clyburn, D-Aiken) – For property tax assessments, exempts 85 percent of fair market value of all real property of any new electricity generating plants powered by solar energy (Tax break also extended to nuclear and fossil fuel plants.)
  • H. 3218 (Rep. Bill Herbkersman, R-Beaufort) – Provides sales tax exemptions for the purchase of solar panels used to generate electricity.
  • H. 3346 (Rep. Dwight Loftis, R-Greenville) – Allows state income tax credits equal to 35 percent of the cost of solar heating or cooling equipment in homes and businesses.
  • H. 3482 (Rep. Leon Stavrinakis, D-Charleston) – Exempts state sales tax on the purchase of machinery, machine tools and parts in the production of electricity from solar energy.
  • S. 32 (Sen. Glenn McConnell, R-Charleston ) – Provides a state income tax credit of 20 percent of any claimed federal income tax credit for a solar water hearing system; also exempts state sales taxes on the purchase of machinery, machine tools or parts used in the production of electricity from solar energy.

All of the House bills, including Smith’s proposals, were referred to the House Ways and Means Committee. McConnell’s bill is in the Senate Finance Committee.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.