“In the interests of producing the best possible solution to a complex issue, a bill (HB3526/SB3296) that would affect property assessments for solar businesses is being postponed.,” said Jason Mumpower, chief of staff in the state Comptroller’s office. “While there has been a good discussion during this session about how solar businesses should be assessed, it is not advisable to seek a quick resolution of the concerns that have been raised during the session’s waning days.
“In fact, legislation enacted in haste through the technical corrections bill two years ago created the problem we now have, which is that the law currently requires solar businesses to be assessed at a rate deemed unconstitutional by the Attorney General. It is our belief that without corrective action, the law will be challenged and solar businesses could end up being assessed at 100 percent of their value, as opposed to the much reduced percentage of value we suggest to provide an incentive to the solar industry. We want to work with the industry over the summer in hopes of achieving the broadest consensus we can about the best way to move forward.”
As all of you have heard, the Tennessee legislature is contemplating a change in the tax rate for solar installations. Without the change in state law, the machinery and equipment used to make electricity at a “certified green energy production facility” is assessed at its salvage value. It applies to any facility used to make electricity off premises using clean energy technology including solar, wind, geothermal and hydrogen technology. Both houses of the legislature have introduced bills that would change the taxation raising the tax to a third of total installed costs based on the “immediate economic value” of such a facility.
The bill has been amended since the March hearing to phase in the increased taxation by 2016. The amended bill was due in the Finance, Ways and Means committees of the House and Senate in Nashville this week. The amendment followed some different definitions of what solar arrays might be affected.
“This bill will take from 10 to 20 percent of the revenue generated by the systems to pay the tax,” said Steve Johnson, the founder and president ofLightWave Solar Electric LLC. LightWave designed and installed the Agricenter array.
Carl Hartley, the attorney for the Tennessee Solar Industry Association, contends the legal opinions don’t mean the classification should be scrapped entirely. “I think that the constitutional issue is a tactic,” he said.
“We’re confusing the entire conversation. This is not an exemption. This is a reduction in the value for property tax purposes,” he said of the existing law before addressing the proposed change.
“We are trying to develop alternative forms of energy in this state. We are trying to encourage industry to locate here. We are trying to encourage manufacturing to locate here. … This knocks that in the head and moves it to a higher tax base.”
Tennessee is not the only state where a tax on solar systems has been an issue, take Virginia where delegate Terry Kilgore – who recently received national attention for his proposal to give families a tax break for literally shooting deceased relatives’ remains into the heavens as a way to bolster Virginia’s commercial space industry – also included a provision allowing utilities to charge a so-called standby charge to each residential net-metering customer with a generation facility sized between 10 and 20 kW. It didn’t take long for Dominion Virginia Power, the state’s largest utility, to submit its proposal for a monthly standby charge for its net-metering customers with photovoltaic (PV) systems. Arguing that the utility is required to provide the same distribution infrastructure for PV system operators as it does for other electricity consumers, Dominion petitioned the regulatory body to sign off on a fee structure late last July. On Nov. 23, regulators gave their assent for Dominion to begin charging $4.19 per kW per month for assessing the fee. Dominion is a for-profit power company.
Here in Tennessee our non-profit TVA distributors in the forseeable future will have to face the need to transform their distribution system to meet future demands of the impact of the electric car and in managing distributed energy from intermittent sources. We are not ready today to attack the issue but we must being considering what changes will be needed and who will pay for these changes.