HF 641 (LSB 1790YH (2) 89)

HOUSE FILE 641

BY  BOHANNAN

(COMPANION TO SF 215 BY BOLKCOM)

A BILL FOR

An Act relating to the solar energy system tax credit available against the individual and corporate income tax, the franchise tax, the moneys and credits tax, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
SOLAR ENERGY SYSTEM STATE TAX CREDIT

    Section 1.  Section 422.11L, Code 2021, is amended by striking the section and inserting in lieu thereof the following:
   422.11L  Solar energy system tax credits.
   1.  As used in this section:
   a.  “Commercial solar energy system” means a solar energy system on property that is not residential or multiresidential.
   b.  “Residential solar energy system” means a solar energy system on residential property or multiresidential property.
   c.  “Solar energy system” means a system of equipment capable of collecting and converting incident solar radiation into thermal, mechanical, or electrical energy and transporting the energy by a separate apparatus to storage or to a point of use.
   2.  Beginning with installations completed on or after January 1, 2021, the taxes imposed under this subchapter, less the credits allowed under section 422.12, shall be reduced by a solar energy system tax credit equal to fifteen percent of the gross cost of the solar energy system, not to exceed the following amounts:
   a.  For a residential solar energy system, five thousand dollars.
   b.  For a commercial solar energy system, twenty thousand dollars.
   3.  Any credit in excess of the tax liability is not refundable but the excess for the tax year may be credited to the tax liability for the following ten years or until depleted, whichever is earlier. 
   4.  a.  An individual may claim the tax credit allowed a partnership, limited liability company, S corporation, estate, or trust electing to have the income taxed directly to the individual. The amount claimed by the individual shall be based upon the pro rata share of the individual’s earnings of the partnership, limited liability company, S corporation, estate, or trust.
   b.  A taxpayer who is eligible to claim a credit under this section shall not be eligible to claim a renewable energy tax credit under chapter 476C.
   c.  A taxpayer may claim more than one credit under this section, but may claim only one credit per separate and distinct solar energy system installation. The department shall establish criteria, by rule, for determining what constitutes a separate and distinct installation.
   d.  (1)  A taxpayer must submit an application to the department for each separate and distinct solar energy system installation. The application must be approved by the department in order to claim the tax credit. The application must be filed by May 1 following the year of the installation of the solar energy system.
   (2)  The department shall accept and approve applications on a first-come, first-served basis until the maximum amount of tax credits that may be claimed pursuant to subsection 5 is reached. If for a tax year the aggregate amount of tax credits applied for exceeds the amount specified in subsection 5, the department shall establish a wait list for tax credits. Valid applications filed by the taxpayer by May 1 following the year of the installation but not approved by the department shall be placed on a wait list in the order the applications were received and those applicants shall be given priority for having their applications approved in succeeding years. Placement on a wait list pursuant to this subparagraph shall not constitute a promise binding the state. The availability of a tax credit and approval of a tax credit application pursuant to this section in a future year is contingent upon the availability of tax credits in that particular year.
   5.  a.  The cumulative value of tax credits claimed annually by applicants pursuant to this section shall not exceed ten million dollars. 
   b.  If an amount of tax credits available for a tax year pursuant to paragraph “a” goes unclaimed, the amount of the unclaimed tax credits shall be made available for the following tax year in addition to, and cumulated with, the amount available pursuant to paragraph “a” for the following tax year.
   6.  On or before January 1, annually, the department shall submit a written report to the governor and the general assembly regarding the number and value of tax credits claimed under this section, and any other information the department may deem relevant and appropriate.
   7.  The director shall adopt rules pursuant to chapter 17A to administer this section.
    Sec. 2.  Section 422.33, subsection 29, paragraph a, Code 2021, is amended to read as follows:
   a.  The Beginning with installations completed on or after January 1, 2021, the taxes imposed under this subchapter shall be reduced by a solar energy system tax credit equal to sixty percent of the federal energy credit related to solar energy systems provided in section 48(a)(2)(A)(i)(II) and section 48(a)(2)(A)(i)(III) of the Internal Revenue Code, not to exceed twenty thousand dollars. For installations occurring on or after January 1, 2016, the applicable percentage of the federal energy credit related to solar energy systems shall be fifty percent allowed under section 422.11L.
    Sec. 3.  Section 422.60, subsection 12, paragraph a, Code 2021, is amended to read as follows:
   a.  The Beginning with the installations completed on or after January 1, 2021, the taxes imposed under this subchapter shall be reduced by a solar energy system tax credit equal to sixty percent of the federal energy credit related to solar energy systems provided in section 48(a)(2)(A)(i)(II) and section 48(a)(2)(A)(i)(III) of the Internal Revenue Code, not to exceed twenty thousand dollars. For installations occurring on or after January 1, 2016, the applicable percentage of the federal energy credit related to solar energy systems shall be fifty percent allowed under section 422.11L.
    Sec. 4.  Section 533.329, subsection 2, paragraph k, Code 2021, is amended to read as follows:
   k.  The Beginning with the installations completed on or after January 1, 2021, the moneys and credits tax imposed under this section shall be reduced by a solar energy system tax credit allowed under section 422.11L.
    Sec. 5.  WAIT LIST FOR CLAIMS PRIOR TO JANUARY 1, 2021.  The wait list pursuant to section 422.11L, subsection 3, paragraph “d”, subparagraph (2), Code 2021, in existence prior to January 1, 2021, shall remain in effect, and an applicant from that wait list shall be given priority on any new wait list based upon the date the application for the credit was received by the department.
    Sec. 6.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 7.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 1, 2021, for tax years ending on or after that date.
DIVISION II
MAXIMUM CUMULATIVE VALUE OF TAX CREDITS FOR YEAR 2020

    Sec. 8.  CUMULATIVE VALUE OF TAX CREDIT FOR YEAR 2020.  Notwithstanding section 422.11L, subsection 4, Code 2021, the maximum cumulative value of tax credits that may be claimed during the 2020 calendar year shall not exceed ten million dollars.
    Sec. 9.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 10.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to tax years beginning on or after January 1, 2020, but before January 1, 2021.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the solar energy system tax credit. Under existing law, the Iowa solar energy system tax credit available against the individual or corporate income tax, the franchise tax, or the moneys and credits tax equals the sum of 50 percent of the federal residential energy efficient property credit, not to exceed $5,000, plus 50 percent of the federal energy credit related to solar energy systems, not to exceed $20,000.
   Division I strikes provisions basing the Iowa solar energy system tax credit as a percentage of federal energy tax credits and creates a new Iowa solar energy system tax credit for installations completed on or after January 1, 2021. The bill creates a residential solar energy system tax credit equal to 15 percent of the gross cost of the system, up to $5,000. The bill creates a separate commercial solar energy system tax credit not to exceed 15 percent of the gross cost of the system, up to $20,000. The tax credit is available against the individual and corporate income taxes, the franchise tax, and the moneys and credits tax. 
   The bill defines “residential solar energy system” to mean a solar energy project on residential property or multiresidential property. The bill defines “commercial solar energy system” to mean a solar energy system on a property that is not residential or multiresidential. 
   Any tax credit approved under the bill is not refundable but the excess for the tax year may be credited to the tax liability for the following 10 years or until depleted, whichever is earlier.
   A taxpayer eligible to claim a credit under the bill is not eligible to claim a renewable energy tax credit under Code chapter 476C.
   The bill provides that a taxpayer may claim more than one tax credit, but may claim only one credit per separate and distinct solar energy system installation.
   The bill permanently increases the maximum cumulative value of tax credits that may be claimed during the year from $4 million to $10 million.
   The bill provides that the wait list in existence prior to January 1, 2021, shall remain in effect, and an applicant from that wait list shall be given priority on any new wait list based upon the date the application for the credit was received by the department.
   The division takes effect upon enactment and applies retroactively to January 1, 2021, for tax years ending on or after that date.
   Division II raises the cumulative value of solar energy system tax credits that may be claimed during the 2020 calendar year from $4 million to $10 million. The division takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2020, but before January 1, 2021.