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Hold off on solar-tax rule changes


2010 May 10 CTY - The Hawaii State Department of Education has embarked on an ambitious two-year plan to bring solar power to public schools throughout the state by awarding its first Power Purchase Agreement contract to Hawaii Pacific Solar, LLC.“Utilizing renewable energy sources to reduce the cost of school operations is a top priority for the DOE,” said Randolph Moore, assistant superintendent of the Office of School Facilities and Support Services. A Power Purchase Agreement (PPA) is a legal arrangement that allows a third party organization to own and operate a solar photovoltaic system installed on a building or on land owned by an independent entity. The third party sells the energy produced by the system, usually at a discount, to the owner of the land or the building.

In the upcoming session, state lawmakers can no longer be idle on dialing down generous solar tax credits, a clean-energy policy that was initially worthwhile to launch the photovoltaic industry, but has now resulted in millions of dollars in lost state revenue and too-fertile ground for opportunists.

Hawaii's solar industry, now robustly competitive and mature, needs to be weaned off the credits — though that should be done by policymaking legislators in the next couple of months, not abruptly by new temporary tax rules effective Jan. 1.

Legislators should have foreseen that their inaction last session would spur a frustrated state Tax Department to impose the new rules to curtail solar tax credits after higher-than-expected costs to the economy.

That lost revenue to state coffers rose significantly to $173.8 million in 2012 from $34.7 million two years earlier, spurring the state Council on Revenues to downgrade Hawaii's total revenue forecast.

We're concerned, though, that the department's temporary tax rules will cause confusion among businesses and consumers, especially those caught unfairly between the shifting landscape. Announced last month, the changing tax rules would affect photovoltaic installations that have already been contractually agreed to, assuming existing cost benefits, but not yet installed.

The Tax Department is urged to defer its new rules while lawmakers tackle the needed solar-credit readjustments. This is especially sensible since some PV projects have already gained exemptions from the Jan. 1 change.

Further compounding the confusion: Two environmental groups have filed suit over the department's new rules, which aim to suddenly reduce the number of solar tax credits that can be claimed.

Hawaii law incentivizes homeowners to install photovoltaic systems with a 35 percent tax credit — for example, spending $10,000 on a system would allow $3,500 back from the state. And that is on top of a federal 30 percent tax credit for PV installation that remains through 2016. All quite generous.

The state credit is supposed to be capped at $5,000 in a single year, but some have gamed the system by installing multiple circuit breakers and inverters, advising consumers that each constitutes a separate system to reap multiple tax credits back.

The proliferation of photovoltaics to harness solar energy in Hawaii has become the proverbial double-edged sword: PV businesses have flourished and energy consumers are becoming increasingly "green," but legal vagueness over tax benefits has opened the industry to shadiness, costing the state the nearly $174 million in lost tax revenues. This was already a problem at the start of the year, when lawmakers were urged to tighten PV-installation laws to restrict tax generosity — but they failed to act.

Solar power has become a booming, key component in Hawaii's admirable push toward natural and renewable resources. The idea now is not to kill the goals, or progress being made, on Hawaii's clean energy initiative. It should be to encourage consumers and businesses alike to do the right thing, but minus a greediness that comes at such palpable expense to the state's economy.

There is widespread agreement that many are gaming the system. It is up to state lawmakers to quickly acknowledge this, clarify its definition and intent for a $5,000 credit cap for a PV system, and start phasing down solar tax credits.

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tiki886 wrote:
This comment has been deleted.
on December 21,2012 | 01:43AM
bender wrote:
Thank you for helping to fund my sleek new PV system on my roof.
on December 21,2012 | 05:07AM
Pocho wrote:
Mahalo to Hawaii State & Federal Tax payers!
on December 21,2012 | 01:19PM
aomohoa wrote:
We pay a lot of taxes and deserve a break once in a while. It's nice to get something back than being the ones that pay for the losers on welfare.
on December 21,2012 | 02:46PM
allie wrote:
true..dump tax credits. They are bad policy. People don't need credits to do what is good for them anyway
on December 21,2012 | 05:13AM
localguy wrote:
allie - Might want to review your posts. Have you ever been in a position to use a credit of any kind? Rebate for buying energy efficient appliance, turn in clunker refrigerator, bought an energy efficient product at Costco or Sam's club and noticed the credit on product price form? IRS gives tax credits to couples with children, so much per child, perhaps we should dump those too, reducing our population and straining earth's resources. Way too many people making babies they cannot afford. Notice shibai TV ads asking taxpayers to pay for pre school. No way, we pay K-12, let parents pay for their night of hot fun, not all taxpayers.
on December 21,2012 | 05:42AM
aomohoa wrote:
Besides the fact that people on welare get rewarded to keep breeding!
on December 21,2012 | 07:48AM
allie wrote:
huh? My mom was on welfare for years and we lived in poverty. I am an only child!
on December 22,2012 | 08:19AM
allie wrote:
People tend to do what is good for them. In most cases, they need to get tax credits to do what is good for themselves
on December 22,2012 | 08:20AM
aomohoa wrote:
The government encouraged this because it is good for the environment.It was just more successful than they anticipated. Being a dirt poor student I would think you would understand that not everyone has the money to do this without help. You don't live in the real world.
on December 21,2012 | 07:47AM
aomohoa wrote:
OH, that was for allie!
on December 21,2012 | 08:59AM
Grimbold wrote:
This comment has been deleted.
on December 21,2012 | 06:09AM
lee1957 wrote:
Who is your accountant? The numbers don't add up.
on December 21,2012 | 06:18AM
localguy wrote:
lee1957 - 16,000 / 3 = 5,333 X 2 (Federal and State 1/3rd portion each) = $10,666. Right, accountant off by $666. Whoa, mark of the devil, where is Damien? hehehe
on December 21,2012 | 06:49AM
lee1957 wrote:
State cap is $3500, not 5333. From the size of the sytem, you have around 10 panels, not enough to qualify for two systems. Account math off by $2499, whoa, mark of a tax cheat.
on December 21,2012 | 03:33PM
Toneyuki wrote:
State cap is 5000.
on December 21,2012 | 07:57PM
fstop wrote:
State cap is 35% up to $5000 per system. If he has two systems totaling $16,000 ($8000/system) thats $8000 x .35 = $2800 per system = $5600 total from the State 0.3 x $16,000 = $4800 from the Feds or a total tax credit to $10,400, so the system will only cost him $5600.
on December 21,2012 | 10:55PM
WEATHER wrote:
If you think it's so outrageous (although the claims are exactly as authorized by law) then don't claim them.
on December 21,2012 | 08:27AM
aomohoa wrote:
Maybe a typo Grimbold?
on December 21,2012 | 04:13PM
Sunny wrote:
Did the the State factor in the the increase in GET taxes paid by the purchasers and sellers of the solar PV systems as well as the payroll taxes and subsequent spending generated by the solar industry? With it's abundance of sunshine Hawaii is ideal for PV electric generation and will assist the State in it's reliance on electricity generating using fossil fuels.
on December 21,2012 | 08:18AM
realist3463 wrote:
Eliminate State Solar credits and the cost for them will go down. Strong and legitimate Solar companies will survive. Scammers will fail.
on December 21,2012 | 02:30AM
Anonymous wrote:
Every state has solar tax credits so why should Hawaii do away with them when it has a mandate to be green by 2020?
on December 21,2012 | 04:10AM
MakikiView wrote:
The state isn't doing away with solar credits. The rules were just revised to stop people from "gaming" the system, e.g., installing multiple systems -- or parts of one -- to get multiple credits in one home. Everyone is pretty much in agreement that that was going on, even the Star-Advertiser. But apparently the Sierra Club has no problem playing on fears, as long as it fits their purposes.
on December 21,2012 | 06:07AM
Graham wrote:
on December 21,2012 | 07:39AM
Toneyuki wrote:
Gaming the system? Maybe. But even claiming multiple systems just gets them around the cap, it's not like they are getting more than 35% anyway.
on December 21,2012 | 07:59PM
Anonymous wrote:
The SA continually uses the term "state economy" when it means state taxes. The state taking in taxes is not part of the state economy it is taking away from the economy. The state is willing to pay $1 Billion for an electrical extension cord to Maui but not willing to pay for solar tax credits to help the common person with their going green.
on December 21,2012 | 04:09AM
bender wrote:
If we are to go down the road of elininating tax credits, let's make sure we include the wind farms as well. Each turbine counts as a system and is entitled to a $500,000 tax credit. That makes the credits given to homeowners look like a good deal. I think I understand why the Gov didn't tell the tax department to include wind farms though, that's becuase David Murdoch of Dole Company wants to build a large windfarm on Lanai. If those tax credits go away, then Murdoch would be upset and the Gov won't allow that. Plus the Gov wants the electric rate payers to fund the undersea cable between islands. Without wind farms there will be no need for the udnersea cable and another of the Gov's pipe dreams would drown.
on December 21,2012 | 05:06AM
allie wrote:
ummm..Murdoch sold lanai hon
on December 21,2012 | 05:13AM
Blue_Powder wrote:
ummm..Murdoch retained the rights to the wind farm when he sold Lana'i ....hon.
on December 21,2012 | 06:13AM
onevoice82 wrote:
Watch it allie, people are checking your facts......
on December 21,2012 | 07:44AM
allie wrote:
we are both right. He did sell lanai and he kept certain rights to a possible wind farm
on December 22,2012 | 08:21AM
aomohoa wrote:
I like putting up the pro rail people that constantly challenge me more than a condescending dirt poor student that insults people by calling them hon. You must love annoying people.
on December 21,2012 | 07:51AM
localguy wrote:
Also eliminate all tax credit for Electrical vehicles and immediately assess a "road usage tax" to all who own these cars. After all, these people must be required to pay their "Fair Share" of road maintenance costs, not freeloading off others who pay through buying gas. How to tax? Simple. Take the yearly mileage recorded at vehicle safety inspection time, owner sent a road tax payment form, signed under penalty of $5k fine for not being honest with mileage. Assess a reasonable fee of say $.03 per mile, $300 per year for going 10k miles. Can't have other drivers subsidizing EV owners, not fair.
on December 21,2012 | 05:32AM
Toneyuki wrote:
I want a tax credit for my SUV. I pay way more in gas taxes than the average freeloader.
on December 21,2012 | 08:02PM
Kalaheo1 wrote:
I think HECO and the State are beginning to fear the loss in revenue that a solid PV system causes,

In addition to charges for electicity, your HECO bill is full of mysterious charges like the IRP Cost Recovery that allows Hawaiian Electric to recover the costs of its long-term energy planning process, Integrated Resource Planning, and the costs of certain energy management programs.

PBF Surcharge collects funds that are used to pay for energy efficiency programs, including customer incentives such as rebates, to reduce electricity use in Hawaii. Think about that one for a moment.

Purchased Power Adjustment recovers expenses and related taxes for non-energy purchased power costs from independent power producers, which were formerly recovered through the Non-Fuel Energy Charge. You'll note that there is still a hefty Non-Fuel Energy Charge anyway.

http://www.heco.com/ and search for "bill details."
on December 21,2012 | 05:15AM
localguy wrote:
Kalaheo1 - You forgot to mention the CLRF charge we all pay. What is it? Constance Lau Retirement Fund, where we are overcharged on our power bill to cover an overpaid and way, way, under worked CEO. What a joke.
on December 21,2012 | 05:34AM
localguy wrote:
Typical of our clueless bureaucrats to come up with a plan to hit those who played fair under the current rebate program. I used Kumu Kit for my two installs, rep was very clear on how much I could install each year for the credit, no multiple installs, spread out over two years. State knows exactly who gamed the system and should go after those people and installers, making them pay fines and pay back the rebate. Yes, this is why we are the "South Park" of the Pacific.
on December 21,2012 | 05:36AM
McCully wrote:
The state and HECO was begging everyone to go solar to save money on fossil fuels. Now that 75% of homeowners and business have gone solar, HECO and the state realizes that in the long run, their revenues are dropping. Well too bad, people needs the solar credits.
on December 21,2012 | 06:17AM
kainalu wrote:
75%? I look around my neighborhood, I doubt that 10% of us have gone solar - at least photovaltaic anyway. I'd like to, but having quotes start at $35K is something that's not doable right now, even with the credit.
on December 21,2012 | 06:25AM
localguy wrote:
kainalu - $35k? Why so much? Have you already installed solar water, energy star appliances, reduced your usage to the max? You can start with a smaller system, add each year.
on December 21,2012 | 06:37AM
kainalu wrote:
We only recently purchases a home - a previously owned home - that has a water solar panel that has to be over 20-years old - as I have been advised by a solar associate that inspected our system. He's confident that our solar water-heater has been changed our recently, but thinks our panel might not be working - at least not at full capacity. Meanwhile, we've been caught between a rock and a hard place - not knowing where to really start. But we're interested in doing the Full Monty, getting us a photovoltaic system that reduces our electric bill to the $18-a-month we see in the commericials.
on December 21,2012 | 12:51PM
Toneyuki wrote:
20K. If your electric bill is in the 200$ range then you should be able to get a system for around 20K. If your bill is higher than that, you might want to consider finding ways to conserve energy.
on December 21,2012 | 08:04PM
lee1957 wrote:
Get what you can afford. We got an 18 mos interest free loan from ASB who partners with our provider. Will be able to buy down the loan with the tax credits before the interest rate kicks in.
on December 21,2012 | 03:36PM
localguy wrote:
McCully - You stated, "Now that 75% of homeowners and business have gone solar" Not true. Not that many on the islands have gone solar. Remember, HECO had a much lower cap on installs per mini grid. Just recently increased to about 75%. Over time more and more homeowners will go solar, costs go down, panel efficiency increases. The less ratepayers give HECO, the better.
on December 21,2012 | 06:52AM
lee1957 wrote:
The editorial board needs a science advisor. There is a physical limit to the number of inverters in one systems. Installation of multiple systems for sound engineering reasons is legal and spelled out in DoTax amplyfing guidance. The legislature can't write a cogent policy so its the end users fault. If SA is accusing "some" of gaming the system, they should tell us who "some" are. DoTax guidance also spells out that breaking down into multiple systems for the purpose of claiming multiple credits is not allowable.
on December 21,2012 | 06:24AM
WEATHER wrote:
Exactly. Thanks for reminding folks what the very specific tax guidance is. "If you install 20 panels, that's not 20 systems, it's 2 systems." That's the state specific guidance. And it's based on engineering guidance from the manufacturers because there is a limit to how many panels can comprise a system. SA editorial sounds like Gov Abercrombie who accuses people of adhering to state guidance as crooks. Look, if you want the legislature to change it, then contact your elected representative. The answer is not misinformed commentary by the governor or SA.
on December 21,2012 | 08:33AM
ssofos wrote:
This is typical of the state. Destroy any business that is successful and making money in Hawaii. Just so the public employee unions can get more money and benefits. Instead of being a rubber stamp for the politicians, The Honolulu Star Advertiser should be pro-business rather than pro-democrat. Be a voice for the people not the unions.
on December 21,2012 | 07:12AM
ichiban wrote:
Isn't it funny; here we have the state urging its citizens to go "green" with clean energy. To get away from the dependency of fossil fuel. The state even gave out incentives (tax credits) to help subsidize the installation of a clean energy system (solar). But as soon as they realize how much money is being extracted from their revenue stream because of the tax credit they want to change the rule in mid-stream. I ask those state bureaucrats--what's up? The CLEAN ENERGY PROGRAM working much better than y'all expected? Didn't figure that many household would jump on the bandwagon to dent you revenue stream? Or maybe, just maybe HECO whispered in your ears and said "We're losing money from residential household electrical billings. If we don't have money we can't support your campaign."
on December 21,2012 | 07:22AM
ready2go wrote:
How can such a defective law, get pass the Legislature and the Governor's State Tax department?
on December 21,2012 | 08:13AM
mustangguru wrote:
Bottom line is those who are not on the so-called green band wagon get penalized indirectly. How? Take for instance the lost revenue stream to HECO because of reduced electric bills from PV installations. What to do? Increase rates to make up for the shortfall. Who do you penalize? Those that didn't go PV. Why the government incentive? Because people in general react to their pocketbook. No way the PV industry could get off the ground with a high initial cost to the consumer. Government stepped in with incentives to change the perceived value of PV so that people would change their minds and purchase them (good for the environment, reduced energy bill, and big fat credits to close the deal.) Same with the electric car industry. Regular people are subsidizing the roads, free charging stations, and again those lucrative credits. They are good stewards of the environment and the rest of us are evil carbon dioxide emitting boors. What a shibai. Now government finds out that they are losing money, so guess what, get rid of the credits and increase tax rates (believe me, it's coming) to make up for the shortfall.
on December 21,2012 | 08:46AM
BTO wrote:
When is trying to save money for the sensible fiscal sense green? Being green is environmentally conscience of resources, true it does reduce burning oil, but I doubt that the majority of homeowners got their PV's because of it. Most of these people would not drive hybrid or electric automobiles. A more interesting story will be when HECO will no longer buy back the electricity because capacity is at maximum or interferes with profitability or seeking other sources of cheap energy like LNG, their own solar, ocean, wind, and biofuel. Meanwhile you may want to get a trade in clause on your PV contract when they develop better and more compact technology within the next two years.
on December 21,2012 | 09:51AM
pake48 wrote:
The ones that are taking advantage of the tax credit are those that "sell back" excess power produced to HECO. They should not allow HECO to "buy back" power. This will reduce the amount of tax credits and allow those to install only what they actually need.
on December 21,2012 | 10:01AM
I still haven't gotten a photovolt as of yet. I still say the contractors charge too much is why we have the "kick-back" in money from the government. Blame the contractors! But wait....why are we getting photovolt? To save money on our high cost of electricity, shucks, I paid over $400 the other month, why? I'm helping my son and his family and they live with us. Oh, the other reason is that we need to conserve energy (oil, etc.), which is of course suppose to be the main reason. And again....remember the contractors also need to eat......lobster and steak.
on December 21,2012 | 10:05AM
lee1957 wrote:
Kinda like cutting off your nose to spite your face, huh. Do the math, payback is in the 5-7 year range, based on system cost and electricity rates. You can't swing a dead cat without hitting a PV installer. Hard to believe there is not enough competition for fair pricing. I'm putting money in my pocket despite the price paid for PV.
on December 21,2012 | 03:39PM
Bumby wrote:
Need info on leasing the system. How would it work before year end or next year? Would leasing be affected in anyway?
on December 21,2012 | 05:15PM
Toneyuki wrote:
Not for you. If you are leasing a system, then the company that gave you the PPA has to deal with the credits. Your lease is whatever you agreed to when you sign the contract.
on December 21,2012 | 08:07PM
cbalcher wrote:
Keep tax credits in place until Hawaii reaches energy independence.
on December 21,2012 | 09:31PM
honmani2 wrote:
Eliminate the tax deduction on home mortgages. Now that's welfare for the middle class.
on December 22,2012 | 07:14AM
allie wrote:
on December 22,2012 | 08:21AM
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