Iowa Policy Points

Why do solar credits matter?

Editor’s Note: The proposed Senate overhaul of personal and corporate income taxes in Iowa includes elimination of the solar energy systems tax credit. This post by IPP co-founder David Osterberg offers a first-hand look at that credit in particular. The Senate bill would eliminate 11 tax credit programs, call for additions to four credits and changes to six others. Both the Senate bill and the Governor’s bill call for a review of tax credits between the 2018 and 2019 legislative sessions. See this page on the Department of Revenue website for evaluations of various Iowa tax credit programs.

So, why is a repeal of the Iowa solar tax credit a big deal? It makes a big difference in someone’s decision to put up solar panels. Four years ago, I put just under two kilowatts of solar on my garage. At the time Alliant gave me a rebate for solar just like they still do for buying a more efficient heating and air conditioning system. My after-rebate cost for the panels was about $7,000. The Iowa tax credit allowed me to cut my Iowa taxes by about $1,000 because of my purchase.

The credit has helped many Iowans. Between 2012 and 2017, the credit was used for 3,395 projects. Over that period the credit provided $21.6 million in tax cuts for businesses and residents like me. Our total investment in solar during that time was more than $166 million.

There are limits to how much any project can receive. It is $5,000 for residents and $20,000 for a business. The total amount of credits in any year is also limited to $5 million. The credit is scheduled to phase out as a federal investment tax credits phases out and will be gone for residential projects by 2022.

Much of the cost of my project went to a local contractor who put the panels on my garage. Some went to import the panels but still, 700 Iowans have pretty good jobs because of this $5 million credit that is targeted for elimination in the Senate leadership bill. By contrast, Apple got $20 million from the state to build a server farm that will employ 50 people. What is wrong with this picture?

David Osterberg is co-founder and lead environment and energy researcher for the nonpartisan Iowa Policy Project. He served six terms in the Iowa House of Representatives from Mount Vernon from 1983-95.