Senate File 2342
PDF Signed Copy - Gov. Terry E. Branstad http://coolice.legis.state.ia.us/linc/84/external/govbills/sf2342.pdf
Iowa Legislature Web Copy
Before I begin, a quick explanation. The following is not a verbatim copy of the bill. The above links are, instead I have placed my own summary of the language I personally deemed important in normal text (like this) and my own explanation is in italics. I hope to provide a more thorough piece on Senate file 2342 with additional info on how one receives the tax credits and where to find qualified solar installation professionals.
Div I Sec 2 Sub-section 38 (Geothermal energy)
a. The value added to the home from the Geothermal system installation (parts and labor) shall be exempt for 10 consecutive years from property tax in the form of a geothermal heat pump tax credit.
A section of this bill that has not gotten a whole lot of attention is the tax credit for geothermal systems. Cedar Rapids GIA has, sadly, not had the opportunity to work on a house that uses a geothermal system but we like the sound of these systems. Incredible efficiency and with a decent return on investment (at least compared to the ROI of solar power) it is hard not to like these systems. Now the state of Iowa offers even more incentive for residents to get these installed in their homes.
Div II Sec 7.1
a - 50% tax credit of the federal residential energy efficient property credit (defined in section 25D of the Internal Revenue code) Basically this gives the taxpayer a tax credit equal to the sum of
30% of qualified solar electric property expenditures made by taxpayer during the taxable year
30% of qualified solar water heating property expenditures made by the taxpayer during the taxable year
30% of the qualified small wind energy property expenditures made by the taxpayer during the taxable year
30% of the qualified geothermal heat pump property expenditures made by the taxpayer during the taxable yearof which a taxpayer can only receive 50% of this in Iowa, not to exceed $3,000
b - 50% tax credit of the federal energy credit related to solar energy systems as provided in section 48 of the Internal Revenue Code (Energy credit valued at 30% of the solar expenditures of an “energy property” (long list of qualifications but if it uses solar power it is considered an ‘energy property’))
of which a taxpayer can only receive 50% of this in Iowa, not to exceed $15,000
My goodness, taxes. The language of taxes. Ugh, what a headache! From what I can parse out of this bill and with some additional research into existing law, this new Iowa bill adds state credit to the existing Federal credits. I’m working on checking the facts but this is my understanding. Picture a cake. Or a parfait, or an onion, or an ogre, just picture something with layers. Seems to me that the Iowa legislature has made this bill another delicious layer in the tax benefit cake of renewable energy. Important to note: this bill is not providing cash benefits for Iowans to install solar power. I’ll say that again: this bill is NOT providing cash benefits for Iowans to install solar power. If only the state were offering such sweet incentives. Instead, when you fill out your yearly taxes you can write off some of your energy expenditures based on how much electricity your solar power system generated, once for the Federal tax credit and again for the Iowa state tax credit (again, I am not 100% sure on this, but this is what I am understanding from the language of the bill). So that means that the caps on these tax credits, $3000 and $15,0000, can only be reached if you install solar systems large enough that 30% of your property expenditures on solar energy is equal to the credit caps. I’m guessing these limits are aimed at large businesses.
Div II Sec. 3
b - “A tax payer who is eligible to claim a credit under this section shall not be eligible to claim a renewable energy tax credit under chapter 476C”
Well it’s not all sunshine and free energy. Politics is the art of compromise and if our politicians seem to forget that when talking to each other they certainly do not forget that when offering their constituency benefits. The “Renewable energy tax credit under chapter 476C”, or just Iowa Code Section 476C, is a program that rewards participants (a “producer or purchaser of energy from an eligible renewable energy facility” - producer here being the person with a solar panel installed) for all of the energy they produce. Approximately $0.015 per Kilowatt-hour of electricity produced through renewable means. (Note: this is based on 2009 numbers, the rate may have shifted since). While this does not seem like a lot of money (frankly, it is not) in 2006 four individuals claimed $10,148 dollars in tax credit and in 2007 twelve individuals claimed $17,297 in tax credits. There were some businesses that claimed nearly one million dollars, but my focus here is on the little guy. Remember this is all from the state of Iowa alone.
With the new bill, those who wish to received the state tax credits in addition to the federal tax credits may no longer be allowed to file a claim under 476C. And thus miss out on their $0.015 per Kilowatt-hour of electricity. Whether the new bill will prove to be more effective than Section 476C for rewarding solar energy remains to be seen. The development of solar technology could use all the help it can get and taking away an existing incentive (though some may argue this incentive has merely been replaced) does the renewable energy market no favors.