HF 370 (LSB 2375YH (2) 91)

HOUSE FILE 370

BY  GJERDE

A BILL FOR

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

    Section 1.  NEW SECTION.  422.10C  Solar installation tax credits.
   1.  For installations occurring on or after January 1, 2025, the taxes imposed under this subchapter, less the credits allowed under section 422.12, shall be reduced by a solar installation tax credit equal to the sum of the following:
   a.  Fifty percent of the federal residential clean energy credit related to solar energy provided in section 25D(a)(1) and section 25D(a)(2) of the Internal Revenue Code, not to exceed five thousand dollars.
   b.  Fifty 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.
   2.  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. The director of revenue shall adopt rules to implement this section.
   3.  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.  (1)  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.
   (2)  A taxpayer shall not be eligible to claim both the tax credit under this section and the solar energy tax credit under section 422.11L for the same installation.
   c.  A taxpayer may claim more than one credit under this section, but may claim only one credit per separate and distinct solar 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 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 4 is reached. If for a tax year the aggregate amount of tax credits applied for exceeds the amount specified in subsection 4, 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.
   4.  a.  The cumulative value of tax credits claimed annually by applicants pursuant to this section shall not exceed five million dollars. Of this amount, at least one million dollars shall be reserved for claims associated with or resulting from residential solar energy system installations. In the event that the total amount of claims submitted for residential solar energy system installations in a tax year is an amount less than one million dollars, the remaining unclaimed reserved amount shall be made available for claims associated with or resulting from nonresidential solar energy system installations received for the tax year.
   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.
   5.  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.
    Sec. 2.  Section 422.33, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  33.  The taxes imposed under this subchapter shall be reduced by a solar installation tax credit allowed under section 422.10C.
    Sec. 3.  Section 422.60, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  16.  The taxes imposed under this subchapter shall be reduced by a solar installation tax credit allowed under section 422.10C.
    Sec. 4.  Section 476C.2, subsection 3, Code 2025, is amended to read as follows:
   3.  A taxpayer who is eligible to claim a renewable energy tax credit under this chapter shall not be eligible to claim a solar installation tax credit under section 422.10C, 422.33, 422.60, or 533.329, or the solar energy system tax credit under section 422.11L, or 422.33, 422.60, or 533.329.
    Sec. 5.  Section 533.329, subsection 2, Code 2025, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  n.  The moneys and credits tax imposed under this section shall be reduced by a solar installation tax credit allowed under section 422.10C.
    Sec. 6.  EFFECTIVE DATE.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 7.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2025, for tax years beginning 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 establishes a solar installation tax credit available against the individual and corporate income taxes, the moneys and credits tax, and the franchise tax.
   The solar installation credit is similar to the solar energy systems tax credit in Code section 422.11L, except the solar installation credit established in the bill couples with current federal law.
   The credit is equal to 50 percent of the federal clean energy credit related to solar energy provided in section 25D of the Internal Revenue Code, not to exceed $5,000, and 50 percent of the federal energy credit related to solar energy systems provided in section 48 of the Internal Revenue Code, not to exceed $20,000. The credit is nonrefundable, but may be carried forward for 10 years, or until depleted.
   The bill provides that an individual may claim the tax credit allowed a partnership, limited liability company, S corporation, estate, or trust based upon the individual’s pro rata share of the earnings. A taxpayer who is eligible to claim a credit under the bill shall not be eligible to claim a renewable energy tax credit under Code chapter 476C. A taxpayer shall not be eligible to both claim the tax credit under the bill and the solar energy tax credit under Code section 422.11L for the same installation.
   Further, the bill restricts the cumulative total of solar energy systems tax credits issued for all taxpayers to an amount not exceeding $5 million annually. Of this amount, at least $1 million shall be reserved for claims associated with or resulting from residential solar installations. In the event that the total amount of claims submitted for residential solar installations in a tax year is an amount less than $1 million, the remaining unclaimed reserved amount shall be made available for claims associated with or resulting from nonresidential solar installations received for the tax year. If an amount of tax credits available for a tax year 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 $5 million amount available for the following tax year.
   The bill contains reporting requirements regarding the number and value of tax credits claimed, and any other information the department may deem relevant and appropriate.
   The bill takes effect upon enactment, and applies retroactively to tax years beginning on or after January 1, 2025.