Bill Summary – FastDemocracy

House File 221 - Introduced
                                  HOUSE FILE 221
                                  BY KLEIN
                            A BILL FOR
An Act relating to the solar energy system tax credit available
  against the individual and corporate income tax, the
  franchise tax, 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:
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                            DIVISION I
                  SOLAR ENERGY SYSTEM TAX CREDIT
    Section 1. Section 422.11L, Code 2021, 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 nonresidential property.
    b. “Residential solar energy system” means a solar energy
 system on residential property or multiresidential 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, 2021, but before December 31, 2030, 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 fifteen 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,
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 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 until the maximum amount
 of tax credits that may be claimed pursuant to subsection 5
 is reached. If for a tax year the aggregate amount of tax
 credits applied for exceeds the amount specified in subsection
 5, 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.
    5. a. The cumulative value of tax credits claimed annually
 by applicants pursuant to this section shall not exceed ten
 million dollars.
    b. If an amount of tax credits available for a tax year
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                                H.F. 221
 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.
    6. 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.
    7. This section is repealed January 1, 2041.
    8. The director shall adopt rules pursuant to chapter 17A to
 administer this section.
    Sec. 2. Section 422.33, subsection 29, paragraph a, Code
 2021, is amended to read as follows:
    a. The Beginning with installations completed on or after
 January 1, 2021, but before December 31, 2030, 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 allowed
 under section 422.11L.
    Sec. 3. Section 422.60, subsection 12, paragraph a, Code
 2021, is amended to read as follows:
    a. The Beginning with the installations completed on or
 after January 1, 2021, but before December 31, 2030, 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,
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                                H.F. 221
 2016, the applicable percentage of the federal energy credit
 related to solar energy systems shall be fifty percent allowed
 under section 422.11L.
    Sec. 4. Section 533.329, subsection 2, paragraph k, Code
 2021, is amended to read as follows:
    k. The Beginning with the installations completed on or
 after January 1, 2021, but before December 31, 2030, the moneys
 and credits tax imposed under this section shall be reduced by
 a solar energy system tax credit allowed under section 422.11L.
    Sec. 5. CUMULATIVE VALUE OF SOLAR ENERGY SYSTEM TAX CREDIT
 FOR YEAR 2021 —— RESERVED CLAIMS. Notwithstanding section
 422.11L, subsection 5, as enacted by this division of this Act,
 the maximum cumulative value of tax credits that may be claimed
 during the 2021 calendar year shall not exceed seventeen
 million dollars. Of this amount, at least seven million
 dollars shall be reserved for claims placed on the wait list
 pursuant to section 422.11L, subsection 3, Code 2021, prior to
 January 1, 2021. The reserved claims shall be approved using
 the same priority of approval established for the wait list.
 In the event claims from the wait list exceed the reserved
 amount, an applicant from the wait list shall be given priority
 to make a claim for amounts not reserved for the year 2021, to
 the extent such claims have not been claimed. In the event the
 maximum cumulative amount of tax credits have been claimed for
 the year 2021, an applicant from the wait list shall be given
 priority on any wait list based upon the date the application
 for the credit was received by the department.
    Sec. 6. EFFECTIVE DATE. This division of this Act, being
 deemed of immediate importance, takes effect upon enactment.
    Sec. 7. RETROACTIVE APPLICABILITY. This division of this
 Act applies retroactively to January 1, 2021, for tax years
 ending on or after that date.
                           DIVISION II
    CORRESPONDING CHANGES DUE TO FUTURE REPEAL OF SOLAR ENERGY
                        SYSTEM TAX CREDIT
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    Sec. 8. Section 422.33, subsection 29, Code 2021, is amended
 by adding the following new paragraph:
    NEW PARAGRAPH. c. This subsection is repealed on January
 1, 2041.
    Sec. 9. Section 422.60, subsection 12, Code 2021, is amended
 by adding the following new paragraph:
    NEW PARAGRAPH. c. This subsection is repealed on January
 1, 2041.
    Sec. 10. Section 476C.2, subsection 3, Code 2021, is amended
 to read as follows:
    3. a. A taxpayer who is eligible to claim a renewable
 energy tax credit under this chapter shall not be eligible to
 claim a solar energy system tax credit under section 422.11L
 or 422.33.
    b. This subsection is repealed on January 1, 2041.
    Sec. 11. Section 533.329, subsection 2, paragraph k, Code
 2021, is amended to read as follows:
    k. (1) The moneys and credits tax imposed under this
 section shall be reduced by a solar energy system tax credit
 allowed under section 422.11L.
    (2) This paragraph is repealed on January 1, 2041.
                           EXPLANATION
         The inclusion of this explanation does not constitute agreement with
          the explanation’s substance by the members of the general assembly.
    DIVISION I —— SOLAR ENERGY SYSTEM TAX CREDIT —— REPEAL. This
 bill relates to the solar energy system tax credit. 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.
    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
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 installations completed on or after January 1, 2021, but before
 December 31, 2030. The bill creates a residential solar energy
 system tax credit equal to 15 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 15 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 or
 multiresidential property. The bill defines “commercial
 solar energy system” to mean a solar energy system on 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.
    For the 2021 calendar year, the bill increases the maximum
 cumulative value of tax credits that may be claimed during
 the calendar year from $4 million to $17 million. Of this
 increased maximum tax credit amount for the 2021 calendar year,
 $7 million is reserved for claims placed on the wait list prior
 to January 1, 2021. The reserved claims shall be approved
 using the same priority of approval established for the wait
 list. An applicant placed on the wait list prior to January
 2021 shall be given priority to make a claim for amounts not
 reserved for the year 2021, to the extent such claims have not
 been claimed. In the event the maximum cumulative amount of
 tax credits have been claimed for the year 2021 under the bill,
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 the applicant shall have priority on any wait list based upon
 the date the application for the credit was received by the
 department of revenue.
    Beginning in the 2022 calendar year through the 2030
 calendar year, the bill establishes the maximum cumulative
 value of tax credits that may be claimed during the year at $10
 million.
    The bill repeals the solar energy tax credit on January
 1, 2041, which is 10 years after the tax year the credit may
 be claimed for completed installations in order to allow any
 credit in excess of tax liability for installations completed
 prior to December 31, 2030, to be credited to future tax
 liability for up to 10 years.
    Division I takes effect upon enactment and applies
 retroactively to January 1, 2021, for tax years ending on or
 after that date.
    DIVISION II —— CORRESPONDING CHANGES DUE TO REPEAL OF THE
 SOLAR ENERGY SYSTEM TAX CREDIT. The bill makes corresponding
 changes in the Code due to the repeal of the solar energy
 system tax credit on January 1, 2041.
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Statutes affected: 
Introduced: 422.11L, 422.12, 422.33, 422.60, 533.329, 476C.2