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.