FISCAL NOTE

Date Requested: January 14, 2016
Time Requested: 10:58 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1105 Introduced SB98
CBD Subject: Tax


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to apply the residential solar energy tax credit of up to $2,000 to each installation of a solar energy system. The bill extends the tax credit until July 1, 2023. According to our interpretation, this bill would retroactively extend the Residential Solar Energy Tax Credit until July 1, 2023. The prior program expired as of July 1, 2013. The credit is offered to any West Virginia resident who installs a solar energy system on property located in this state and owned by the taxpayer that is used as a residence after July 1, 2009. The State tax credit would be in addition to the Federal Residential Renewable Energy Tax Credit. The Federal Residential Renewable Energy Tax Credit is 30% for systems placed in service by December 31, 2019; 26% for systems placed in service between December 31, 2019 and January 1, 2021, and 22% for systems placed in service after December 31, 2020 but before January 1, 2022. Based on current industry trends, passage of this bill would result in an estimated General Revenue Fund loss of roughly $1.2 million in FY2017 and $600,000 or more in FY2018 and subsequent fiscal years. The higher cost in FY2017 is because of the provisions of the bill would be retroactive. The credit is for the lesser of 30% or $2,000 of the costs to purchase and install the system. The bill’s proposal to allow the credit for “systems” and to allow a tax credit up to a maximum of $2,000 “for each installation” may result in tax credit claims for a single residence well in excess of the current $2,000 limit. The pre-incentive cost of a solar energy system for a typical home may range between $10,000 and $30,000. Additional administrative costs incurred by the State Tax Department would be $5,500 in FY2017, $10,000 in FY2018 and $5,000 per year in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 5,500 10,000 5,000
Personal Services 5,000 5,000 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 500 5,000 0
2. Estimated Total Revenues 0 -1,200,000 -600,000


Explanation of above estimates (including long-range effect):


According to our interpretation, this bill would retroactively extend the Residential Solar Energy Tax Credit until July 1, 2023. The prior program expired as of July 1, 2013. The credit is offered to any West Virginia resident who installs a solar energy system on property located in this state and owned by the taxpayer that is used as a residence after July 1, 2009. The State tax credit would be in addition to the Federal Residential Renewable Energy Tax Credit. The Federal Residential Renewable Energy Tax Credit is 30% for systems placed in service by December 31, 2019; 26% for systems placed in service between December 31, 2019 and January 1, 2021, and 22% for systems placed in service after December 31, 2020 but before January 1, 2022. Based on current industry trends, passage of this bill would result in an estimated General Revenue Fund loss of roughly $1.2 million in FY2017 and $600,000 or more in FY2018 and subsequent fiscal years. The higher cost in FY2017 is because of the provisions of the bill would be retroactive. The credit is for the lesser of 30% or $2,000 of the costs to purchase and install the system. The bill’s proposal to allow the credit for “systems” and to allow a tax credit up to a maximum of $2,000 “for each installation” may result in tax credit claims for a single residence well in excess of the current $2,000 limit. The pre-incentive cost of a solar energy system for a typical home may range between $10,000 and $30,000. Additional administrative costs incurred by the State Tax Department would be $5,500 in FY2017, $10,000 in FY2018 and $5,000 per year in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to apply the residential solar energy tax credit of up to $2,000 to each installation of a solar energy system. The bill extends the tax credit until July 1, 2023. There are several areas of ambiguity in this bill. First, the bill does not clarify when the ability to claim the credit would end. The bill provides in the last sentence of the amended WV Code §11-13Z-3, “no taxpayer may take a credit pursuant to the article for a solar energy system installed after July 1, 2023.” This speaks to the date the solar energy system would have to have been installed to qualify for the credit, not the expiration date of the credit. Language in the current law limits the installation date to July 1, 2013. Ambiguity about the expiration date is worsened by language in West Virginia Legislative Rule §110-21D, “Residential Solar Energy Tax Credit, “subsection 3.2, which allows the taxpayer to claim the tax credit on an “annual” basis. It is not clear whether an eligible taxpayer can claim the credit up to $2,000 on an unlimited basis. It is unclear whether this bill is meant to make the Residential Solar Energy Tax Credit retroactive. If the bill is intended to be retroactive, language stating this, along with the beginning date to which it is meant to retroactively apply, should be added to the bill. WV Code §11-10-14(l)(1) limits claims for credits up to 3 years after the due date of the return for which the tax was imposed, unless the Tax Commissioner enters into a written agreement to extend the period per W.Va. Code §11-10-14(l)(2).



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov