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BATON ROUGE, La. (AP) — A tax break passed by lawmakers four years ago to spur investment in solar energy has become a more costly deal for the state than expected, siphoning millions of dollars from Louisiana's coffers above what had been estimated.
When lawmakers passed the Wind and Solar Energy Systems Tax Credit in 2007, fiscal analysts said they expected lost state tax income to be less than $500,000 a year.
But in four years of the tax break, the state has shelled out $37 million for the tax credit — more than 18 times the maximum estimate, according to data provided to The Associated Press by the Department of Revenue.
Supporters of the tax break say it encourages clean energy investment and has helped create new jobs across Louisiana in the solar industry, providing sales and income tax revenue that far outweigh the cost of the credit.
Jeff Shaw, owner of Gulf South Solar, said his Baton Rouge-based company was one of only two solar system installers before the tax break was created. He said Louisiana now has more than 200 registered licensed solar installers in the state, bringing with them new jobs and new tax revenue.
"Louisiana has the best tax credit in the nation, which makes it very favorable to do business here. A lot of companies have moved here and started here. Everything seemed to explode in 2008, after the tax credit was passed," said Shaw, executive director of the Louisiana Solar Energy Society.
Critics say the credit is too costly when the state has been cutting education and health care spending because of years of ongoing budget shortfalls.
"I love solar. It's a great clean energy, but let it pay for itself. We're cutting education and prisons and other things," said Clyde Holloway, a member of the Louisiana Public Service Commission, which regulates utilities in the state.
As questions have been raised about the generosity of the tax break, the revenue department is taking steps to put some limits on who can get the credit and what items are eligible for reimbursement.
The department released a draft proposal this week that would tighten regulations governing the tax program. It would clarify the term "energy system;" make sure a credit can't be claimed by both a homeowner and installer for the same solar system; and require itemized lists of equipment and installation costs.
Louisiana's tax credit tops out at $12,500. The credit is for 50 percent of the cost of a wind energy or solar energy system, including installation costs, up to that maximum. Taxpayers also are eligible for a federal tax break on solar systems that can further cut the cost.
Discussion about the price tag of the tax credit comes as a legislative study panel is combing through billions of dollars in tax breaks on the books to determine their worth and benefits to the state.
Rep. Joel Robideaux, R-Lafayette, leader of the study commission, said he doesn't fault the Legislative Fiscal Office for improper estimates of the solar tax credit's cost. He said lawmakers are considering whether fiscal analysts should be given more time to determine the true costs of the program, rather than a few days or weeks when lawmakers are in session.
"Perhaps some of these are passed too quickly without enough time for legitimate analysis of possible costs," Robideaux said.
He also said lawmakers are considering whether to put expiration dates on tax breaks programs so they can be forced to revisit the law, consider its benefits and see if it has exceeded cost estimates.