On Its Way Out: Utah’s Solar Tax Credit (and Thriving Solar Industry?)

Utah Governor Gary Herbert (R) signed 80 bills into law on March 20, including HB 23 – Income Tax Modifications, which seeks to amend and, ultimately, to phase out, the personal state income tax credit for state residents who purchase rooftop solar.

The goal is “to promote a more competitive solar industry in the Beehive State,” Utah Political Capitol reported back in December, when the measure still was under discussion in a House committee.

The legislation will gradually reduce the state’s individual income tax credit for residential solar system purchasers and cap the maximum individual income tax credit allowed for residential solar rooftop energy systems installed within the state, Utah Political Capitol said.

To contain the impact of the increasingly popular solar tax incentive, the bill creates a moratorium that limits the state’s budget impact to between $20 million and $30 million for 2017.

Utah’s solar tax credit was set at $2,000 – or 25 percent of the cost of a specific system – (whichever was less) for new residential rooftop interconnections. As a tax credit, the amount reduced the individual’s entire state tax liability. There were no limits or caps to the program.

Ryan Evans, president of the Utah Energy Association, pointed out that this tax incentive was unique, the local news outlet said. “For every $20 million Utah invests in homeowners,” he said, “it results in more than $300 million in economic activity for our state. For every $2,000 Utah credits residents on their income tax, it generates an immediate return of approximately $1,000 in sales taxes to the state and local economies.

“Add in sales and property taxes paid on equipment and tools to support thousands of employees, corporate income taxes paid by solar companies and income taxes from new jobs created, and it is apparent the state recoup[ed] its initial $2,000 back, perhaps even more,” Evans commented.

ccording to Evans, in 2016 there were between 12,000 and 16,000 solar installations in Utah – corresponding to $315 million total economic activity for residential solar installations alone with $800-$1,200 in sales and use taxes generated per system.

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