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Green energy tax credits could be up for a fight in the coming legislative session.
A proposal to extend tax credits for electric and other alternative-fuel vehicles garnered a favorable recommendation this week, but by only a narrow margin. And another committee recommended phasing out a state tax credit for residential solar installations, which is projected to take a toll on the state budget in 2016 — $20 million, up from less than $1 million annually, as Utah experiences a solar-installation boom.
If the trend continues, the impact could be as high as $60 million by the end of 2017, according to bill sponsor Rep. Jeremy Peterson, R-Ogden.
That money, he said, could be used to hire as many as 400 teachers with a salary of $50,000.
Improved technology and cheaper installations are behind solar's exponential growth, Peterson said, so it's time to retire the state tax credit, which provides Utah residents with a refund of up to $2,000.
"We want to promote the independence of the industry," he said during Wednesday's meeting of the Revenue and Taxation Interim Committee. "The industry was given some training wheels, so to speak, with the tax credit, to kind of prop it up. And it seems to have immediately taken off, suddenly and unexpectedly. So it seems time to pull those training wheels off and let the industry run under its own strength."
Peterson's proposal would place a temporary moratorium on the tax credits beginning when a bill is signed into law next spring. He estimated that by that time, the state would have already issued $20 million to $30 million in solar tax credits.
From that point on, he said, the bill would create a cap for solar tax credits issued each year, starting with a budget of $4 million in 2018. The cap would be reduced by $1 million each year, until the credit's full phase-out in 2021.
To increase the number of residents able to take advantage of the tax credit, the bill would also gradually reduce the amount of each individual refund by about $500 each year.
But the bill does not have the support of the solar industry, representatives said, which fears that the loss of tax credits, coupled with possible electrical rate changes for residential solar customers, could reverse the industry's growth in Utah.
"We've actually already seen a slowdown in the solar industry, and people are actually considering layoffs," said Ryan Evans, president of the Utah Solar Energy Association. "These are discussions that are much bigger than today … in my opinion, if we added this on top of that [rate change], we would seen an incredible loss of jobs in the state."
Evans said he believes prosperity in the solar industry creates tax revenues that negate the impact of the $2,000 credit. Each installation, he said, immediately generates $800 to $1,000 in sales tax, and an additional $350 returns to the state in the form of income tax from the employees installing the array, he said.
The bill also raised eyebrows among members of the interim committee, who questioned whether the solar tax credit was being unfairly singled out among other tax credits impacting the state budget.
"Here's my struggle — I think this is worthy of looking at, but I think we're looking at it in isolation and narrowing the scope," said Rep. Joel Briscoe, D-Salt Lake City. "I'm thinking of the subsidies we provide for oil and gas ... over time, for every dollar that we've given to renewables, the federal government has provided $74 in subsidies to oil and gas."
After a lengthy discussion, Rep. Marie Poulson, D-Cottonwood Heights, questioned whether the committee ought to fast-track a bill that appeared to be generating substantial controversy.
But others argued that it was time to begin phasing out the tax credit to channel more money to education.
"At what point do we tell the school kids, thanks for the help, we're good?" asked Rep. Eric Hutchings, R-Kearns. "The car's moving again. We appreciate the jump start — the battery was dead — but we're driving down the highway now, and we're still asking the kids to help push the car down the highway, even though the car's started, it's running, it's very, very profitable."
In a separate Wednesday hearing, the Natural Resources, Agriculture and Environment Interim Committee voted narrowly in favor of endorsing a bill that would incentivize the sale of electric vehicles in Utah.
That bill's sponsor, Rep. Stephen Handy, R-Layton, argued the state should incentivize electric cars to push the state toward transportation the of future and to reduce air pollution.
"I spent a couple of hours looking at electric vehicles," he said, "and the sales guys said traditional gas cars are a thing of the past, they just don't know it yet."
Handy's bills proposes to extend current tax credits for alternative-fuel vehicles through 2021, and would create a legal mechanism that would allow the car dealer to apply for the tax credit, enabling the consumer to take up to $1,500 off the price of the vehicle at the time of purchase.
Kevin Emerson, a senior policy associate for Utah Clean Energy, testified that Utah's support of alternative fuel vehicles has put the state in the top 10 for the size of the market share that is comprised of electric vehicles. But electric vehicles are still in their infancy, he said, and would need ongoing support to continue their trajectory in Utah.
But this bill also met opposition during its committee hearing, with lawmakers citing the declining interest in and availability of natural gas-fueled vehicles, which has fallen with the price of gasoline.
"I think that these new cars are fun and exciting," said Sen. Margaret Dayton, R-Orem. "My concern is that we are subsidizing some people's really nice cars."
The bill ultimately obtained a favorable recommendation, but by a margin of only four votes.
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