FISCAL NOTE

Date Requested: February 14, 2017
Time Requested: 02:25 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2382 Introduced SB291
CBD Subject:


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 solar energy tax credit of up to $2,000 to each installation of a solar energy system. The bill extends the 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 Energy Efficient Property Credit. The federal credit for the majority of alternative energy equipment is set to expire after December 31, 2016, however the federal tax credit for solar electric power and solar water heating property is available for property placed in service through December 31, 2021, based on an applicable percentage of 30 percent for property placed in service after December 31, 2016 and before January 1, 2020, 26 percent for property placed in service after December 31, 2019 and before January 31, 2021 and 22 percent for property placed in service after December 31, 2020 and before January 31, 2022. Based on current industry trends, passage of this bill would result in an estimated General Revenue Fund loss of roughly $1.8 million in FY2018 and $700,000 or more in FY2019 and subsequent fiscal years. The higher cost in FY2018 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 $15,000 in FY2017, $10,000 in FY2018 and $5,000 per year in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 15,000 10,000 5,000
Personal Services 10,000 5,000 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 5,000 5,000 0
2. Estimated Total Revenues 0 -1,800,000 -700,000


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 Energy Efficient Property Credit. The federal credit for the majority of alternative energy equipment is set to expire after December 31, 2016, however the federal tax credit for solar electric power and solar water heating property is available for property placed in service through December 31, 2021, based on an applicable percentage of 30 percent for property placed in service after December 31, 2016 and before January 1, 2020, 26 percent for property placed in service after December 31, 2019 and before January 31, 2021 and 22 percent for property placed in service after December 31, 2020 and before January 31, 2022. Based on current industry trends, passage of this bill would result in an estimated General Revenue Fund loss of roughly $1.8 million in FY2018 and $700,000 or more in FY2019 and subsequent fiscal years. The higher cost in FY2018 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 $15,000 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 solar energy tax credit of up to $2,000 to each installation of a solar energy system. The bill extends the credit until July 1, 2023. The bill reinstates the tax credit, rather than extending it. There is also a title defect. If this 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 and the bill title. This bill would retroactively make taxpayers eligible for this tax credit. Taxpayers who install a residential solar system after July 1, 2013 will now be eligible for this credit. It is also unclear what would happen to those taxpayers who filed returns and paid their personal income tax more than 3 years ago, but just now became eligible for this tax credit. W.Va. Code §11-10-14(I)(1) limits claims for credits up to three years after the due date of the return for which the tax was imposed, unless the Tax Commissioner enters a written agreement to extend the period. If this 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 and the bill title. Further, the bill does not clearly state when the ability to claim the credit would end. The bill provides in the last sentence of section three that no taxpayer may take a credit for a solar energy system installed after July 1, 2023. This speaks to the date the solar energy system would have to be installed to qualify for the credit, not the expiration date of the credit. If this bill is passed, then Legislative Rule §110-21D-1, et seq. will be in conflict with the Code and may need revised.



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