SF 2318 (LSB 6127XS (3) 89)

SENATE FILE 2318

BY  T. TAYLOR

A BILL FOR

An Act relating to the solar energy system tax credit available against the individual or corporate income tax, the franchise tax, and 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:

    Section 1.  Section 422.11L, Code 2022, 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 multiresidential property or nonresidential property.
   b.  “Residential solar energy system” means a solar energy system on residential 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, 2022, 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 fifty 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.
   5.  The director shall adopt rules pursuant to chapter 17A to administer this section.
    Sec. 2.  Section 422.33, subsection 29, Code 2022, is amended to read as follows:
   29.  a.  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.
   b.  The taxpayer may claim the credit pursuant to this subsection and according to the same requirements, conditions, and limitations as provided pursuant to section 422.11L.
    Sec. 3.  Section 422.60, subsection 12, Code 2022, is amended to read as follows:
   12.  a.  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.
   b.  The taxpayer may claim the credit pursuant to this subsection and according to the same requirements, conditions, and limitations as provided pursuant to section 422.11L.
    Sec. 4.  CUMULATIVE VALUE OF SOLAR ENERGY SYSTEM TAX CREDIT —— INSTALLATIONS PRIOR TO JANUARY 1, 2022.  The following applicants shall be eligible to claim the solar energy system tax credit for the tax year beginning on or after January 1, 2022, but before January 1, 2023, for the credit described in section 422.11L, subsection 1, paragraph “a”, Code 2021, as if the credit did not expire, and as if the annual cumulative value of the tax credit allowed to be claimed in Code section 422.11L, subsection 4, paragraph “a”, Code 2021, does not apply: an applicant with a valid application who was on the wait list as of December 31, 2021, and who did not receive the credit; an applicant whose application went through the review process of the department of revenue and who otherwise had a valid application but was nevertheless sent a denial letter by the department of revenue for the 2021 award year regardless of whether or not the applicant appealed the denial letter; an applicant whose application was in the review process of the department of revenue but whose application expired due to the expiration of the credit, regardless of whether the applicant appealed the denial letter; and an applicant who has not submitted an application for an installation that was completed during the 2021 calendar year.
    Sec. 5.  EFFECTIVE DATE.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 6.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2022, for tax years ending on or after that date.
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 available against individual and corporate income taxes, the franchise tax, and the moneys and credits tax.
   BACKGROUND. Currently, the solar energy system tax credit for residential installations has expired for installations completed after December 31, 2021. The solar energy system tax credit remains available for the construction of a commercial solar energy system commenced before calendar year 2022.
   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.
   CHANGES. The bill 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, 2022. The bill creates a residential solar energy system tax credit equal to 50 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 50 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.
   The bill defines “commercial solar energy system” to mean a solar energy system on a multiresidential property or a nonresidential property.
   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 removes the $5 million maximum cumulative value of solar energy system tax credits annually available for installations completed on or after January 1, 2022. The bill also removes the $5 million maximum cumulative value of solar energy system tax credits available in a tax year for installations completed prior to January 1, 2022, for the following applicants: an applicant with a valid application who was on the wait list as of December 31, 2021, and who did not receive the credit; an applicant whose application went through the review process of the department of revenue and who otherwise had a valid application but was nevertheless sent a denial letter by the department of revenue for the 2021 award year regardless of whether or not the applicant appealed the denial letter; an applicant whose application was in the review process of the department of revenue but whose application expired due to the expiration of the credit, regardless of whether the applicant appealed the denial letter; and an applicant who has not submitted an application for an installation that was completed during the 2021 calendar year.
   The bill takes effect upon enactment and applies retroactively to January 1, 2022, for tax years ending on or after that date.