S.F. 2318 Section 1. Section 422.11L, Code 2022, is amended by 1 striking the section and inserting in lieu thereof the 2 following: 3 422.11L Solar energy system tax credits. 4 1. As used in this section: 5 a. “Commercial solar energy system” means a solar energy 6 system on multiresidential property or nonresidential property. 7 b. “Residential solar energy system” means a solar energy 8 system on residential property. 9 c. “Solar energy system” means a system of equipment capable 10 of collecting and converting incident solar radiation into 11 thermal, mechanical, or electrical energy and transporting the 12 energy by a separate apparatus to storage or to a point of use. 13 2. Beginning with installations completed on or after 14 January 1, 2022, the taxes imposed under this subchapter, less 15 the credits allowed under section 422.12, shall be reduced by 16 a solar energy system tax credit equal to fifty percent of 17 the gross cost of the solar energy system, not to exceed the 18 following amounts: 19 a. For a residential solar energy system, five thousand 20 dollars. 21 b. For a commercial solar energy system, twenty thousand 22 dollars. 23 3. Any credit in excess of the tax liability is not 24 refundable but the excess for the tax year may be credited 25 to the tax liability for the following ten years or until 26 depleted, whichever is earlier. 27 4. a. An individual may claim the tax credit allowed a 28 partnership, limited liability company, S corporation, estate, 29 or trust electing to have the income taxed directly to the 30 individual. The amount claimed by the individual shall be 31 based upon the pro rata share of the individual’s earnings of 32 the partnership, limited liability company, S corporation, 33 estate, or trust. 34 b. A taxpayer who is eligible to claim a credit under this 35 -1- LSB 6127XS (3) 89 jm/jh 1/ 5

S.F. 2318 section shall not be eligible to claim a renewable energy tax 1 credit under chapter 476C. 2 c. A taxpayer may claim more than one credit under this 3 section, but may claim only one credit per separate and 4 distinct solar energy system installation. The department 5 shall establish criteria, by rule, for determining what 6 constitutes a separate and distinct installation. 7 d. (1) A taxpayer must submit an application to the 8 department for each separate and distinct solar energy 9 system installation. The application must be approved by the 10 department in order to claim the tax credit. The application 11 must be filed by May 1 following the year of the installation 12 of the solar energy system. 13 (2) The department shall accept and approve applications on 14 a first-come, first-served basis. 15 5. The director shall adopt rules pursuant to chapter 17A to 16 administer this section. 17 Sec. 2. Section 422.33, subsection 29, Code 2022, is amended 18 to read as follows: 19 29. a. The taxes imposed under this subchapter shall be 20 reduced by a solar energy system tax credit equal to sixty 21 percent of the federal energy credit related to solar energy 22 systems provided in section 48(a)(2)(A)(i)(II) and section 23 48(a)(2)(A)(i)(III) of the Internal Revenue Code , not to exceed 24 twenty thousand dollars. For installations occurring on or 25 after January 1, 2016, the applicable percentage of the federal 26 energy credit related to solar energy systems shall be fifty 27 percent. 28 b. The taxpayer may claim the credit pursuant to this 29 subsection and according to the same requirements, conditions, 30 and limitations as provided pursuant to section 422.11L . 31 Sec. 3. Section 422.60, subsection 12, Code 2022, is amended 32 to read as follows: 33 12. a. The taxes imposed under this subchapter shall be 34 reduced by a solar energy system tax credit equal to sixty 35 -2- LSB 6127XS (3) 89 jm/jh 2/ 5

S.F. 2318 percent of the federal energy credit related to solar energy 1 systems provided in section 48(a)(2)(A)(i)(II) and section 2 48(a)(2)(A)(i)(III) of the Internal Revenue Code , not to exceed 3 twenty thousand dollars. For installations occurring on or 4 after January 1, 2016, the applicable percentage of the federal 5 energy credit related to solar energy systems shall be fifty 6 percent. 7 b. The taxpayer may claim the credit pursuant to this 8 subsection and according to the same requirements, conditions, 9 and limitations as provided pursuant to section 422.11L . 10 Sec. 4. CUMULATIVE VALUE OF SOLAR ENERGY SYSTEM TAX CREDIT 11 —— INSTALLATIONS PRIOR TO JANUARY 1, 2022. The following 12 applicants shall be eligible to claim the solar energy system 13 tax credit for the tax year beginning on or after January 1, 14 2022, but before January 1, 2023, for the credit described in 15 section 422.11L, subsection 1, paragraph “a”, Code 2021, as 16 if the credit did not expire, and as if the annual cumulative 17 value of the tax credit allowed to be claimed in Code section 18 422.11L, subsection 4, paragraph “a”, Code 2021, does not 19 apply: an applicant with a valid application who was on the 20 wait list as of December 31, 2021, and who did not receive the 21 credit; an applicant whose application went through the review 22 process of the department of revenue and who otherwise had a 23 valid application but was nevertheless sent a denial letter by 24 the department of revenue for the 2021 award year regardless 25 of whether or not the applicant appealed the denial letter; an 26 applicant whose application was in the review process of the 27 department of revenue but whose application expired due to the 28 expiration of the credit, regardless of whether the applicant 29 appealed the denial letter; and an applicant who has not 30 submitted an application for an installation that was completed 31 during the 2021 calendar year. 32 Sec. 5. EFFECTIVE DATE. This Act, being deemed of immediate 33 importance, takes effect upon enactment. 34 Sec. 6. RETROACTIVE APPLICABILITY. This Act applies 35 -3- LSB 6127XS (3) 89 jm/jh 3/ 5

S.F. 2318 retroactively to January 1, 2022, for tax years ending on or 1 after that date. 2 EXPLANATION 3 The inclusion of this explanation does not constitute agreement with 4 the explanation’s substance by the members of the general assembly. 5 This bill relates to the solar energy system tax credit 6 available against individual and corporate income taxes, the 7 franchise tax, and the moneys and credits tax. 8 BACKGROUND. Currently, the solar energy system tax credit 9 for residential installations has expired for installations 10 completed after December 31, 2021. The solar energy system tax 11 credit remains available for the construction of a commercial 12 solar energy system commenced before calendar year 2022. 13 Under existing law, the Iowa solar energy system tax credit 14 available against the individual or corporate income tax, the 15 franchise tax, or the moneys and credits tax equals the sum of 16 50 percent of the federal residential energy efficient property 17 credit, not to exceed $5,000, plus 50 percent of the federal 18 energy credit related to solar energy systems, not to exceed 19 $20,000. 20 CHANGES. The bill strikes provisions basing the Iowa solar 21 energy system tax credit as a percentage of federal energy tax 22 credits and creates a new Iowa solar energy system tax credit 23 for installations completed on or after January 1, 2022. The 24 bill creates a residential solar energy system tax credit equal 25 to 50 percent of the gross cost of the system, up to $5,000. 26 The bill creates a separate commercial solar energy system 27 tax credit not to exceed 50 percent of the gross cost of the 28 system, up to $20,000. The tax credit is available against the 29 individual and corporate income taxes, the franchise tax, and 30 the moneys and credits tax. 31 The bill defines “residential solar energy system” to mean a 32 solar energy project on residential property. 33 The bill defines “commercial solar energy system” to mean 34 a solar energy system on a multiresidential property or a 35 -4- LSB 6127XS (3) 89 jm/jh 4/ 5

S.F. 2318 nonresidential property. 1 Any tax credit approved under the bill is not refundable 2 but the excess for the tax year may be credited to the tax 3 liability for the following 10 years or until depleted, 4 whichever is earlier. 5 A taxpayer eligible to claim a credit under the bill is not 6 eligible to claim a renewable energy tax credit under Code 7 chapter 476C. 8 The bill provides that a taxpayer may claim more than one tax 9 credit, but may claim only one credit per separate and distinct 10 solar energy system installation. 11 The bill removes the $5 million maximum cumulative value 12 of solar energy system tax credits annually available for 13 installations completed on or after January 1, 2022. The 14 bill also removes the $5 million maximum cumulative value of 15 solar energy system tax credits available in a tax year for 16 installations completed prior to January 1, 2022, for the 17 following applicants: an applicant with a valid application 18 who was on the wait list as of December 31, 2021, and who did 19 not receive the credit; an applicant whose application went 20 through the review process of the department of revenue and 21 who otherwise had a valid application but was nevertheless 22 sent a denial letter by the department of revenue for the 23 2021 award year regardless of whether or not the applicant 24 appealed the denial letter; an applicant whose application 25 was in the review process of the department of revenue but 26 whose application expired due to the expiration of the credit, 27 regardless of whether the applicant appealed the denial letter; 28 and an applicant who has not submitted an application for an 29 installation that was completed during the 2021 calendar year. 30 The bill takes effect upon enactment and applies 31 retroactively to January 1, 2022, for tax years ending on or 32 after that date. 33 -5- LSB 6127XS (3) 89 jm/jh 5/ 5