Lawmakers Curtail Louisiana's Generous Solar Tax Break
BATON ROUGE (AP) — Sticker-shocked lawmakers say they never intended to give away millions to Louisiana's solar power industry and its Wall Street investors.
Yet industry watchers say that's exactly what happened when a loophole was added to a tax credit program for home solar panel systems — metastasizing into a subsidy that has cost the state $147 million since 2009.
After five years, Gov. Bobby Jindal and lawmakers are reining in the program, which expires in 2017. During the recently adjourned legislative session, they capped solar spending at roughly $20 million next year and put in place tighter fraud controls as a part of their plan to close the state's $1.6 billion budget deficit.
The changes — estimated to save the state $19 million in the upcoming budget year — have the solar industry crying foul.
"They were trying to balance the budget and they picked on us disproportionately," said Tucker Crawford, CEO of South Coast Solar, whose company sells and installs panels, but does not lease solar equipment — the sector of the industry believed to cost the state the most. "Somehow out of the 400-odd tax credit programs, we got axed harder than most."
Lawmakers raised $559 million for next year's budget by scaling back a wide array of tax breaks, including for the solar industry.
Implemented in 2008, the solar tax credit program offered a generous benefit to those who bought solar panel systems: it covered as much as half the cost, paying out up to $12,500.
But in 2009, lawmakers also wanted poor people to enjoy the benefits of solar panels, which are expensive to purchase and install.
To do so, the Legislature opened the tax credit program to solar panel leasing companies. Lessors got the valuable tax credit, those who rented solar panels benefited from lower electricity bills.
That's when the costs of the program started to add up, said former Rep. Erich Ponti, R-Baton Rouge, who sponsored the loophole which he later tried to repeal without success.
"These leasing guys created a new industry," said Ponti, who resigned last week from the Legislature to take another job. "It ruined the solar industry for everybody."
Before long, Wall Street firms like Goldman Sachs were investing in the lucrative business. Meanwhile, complaints of predatory leasing practices arose. Ponti said some consumers saw limited savings and shoddy work, while facing egregious contract opt-out provisions.
This fiscal year, solar panel lessors alone have applied for credits worth $45 million, according to state figures.
"If there's a hole, gap or loophole, there's people waiting to take advantage," Ponti said.
Just how much solar panel lessors have been paid by the state isn't clear. State solar tax credit data requested from the Louisiana Department of Revenue by The Associated Press was incomplete and inconclusive. The agency declined to provide more detailed figures.
Many lawmakers have resisted efforts to cut leasing companies out of the tax break because they felt it was unfair to poor people. Others were philosophically opposed to the state rewarding installers and sellers, while excluding leasing companies from the program.
Haywood Martin, chair of Sierra Club's Delta Chapter, says other energy industry lobbyists pushed for solar to bear the brunt of subsidy cuts — which lawmakers seemed happy to do.
"They didn't hardly touch the oil and gas industry," Martin said.
Former Democratic state Sen. Nick Gautreaux, who sponsored the initial 2007 bill that created the program, said it's unfortunate lawmakers targeted a tax break that helps homeowners and not just influential industries.
"This is for the taxpayer who wants to do something good," he said. "What about all these other tax credits that have been on the books for 50 years?"
– by AP Reporter Brian Slodysko