Iowa-2021-HF323-Introduced

H.F. 323 Section 1. Section 422.11L, Code 2021, is amended by 1 striking the section and inserting in lieu thereof the 2 following: 3 422.11L Solar energy system tax credits. 4 1. As used in this section: 5 a. “Commercial solar energy system” means a solar energy 6 system on property that is not residential or multiresidential. 7 b. “Residential solar energy system” means a solar energy 8 system on residential property or multiresidential property. 9 c. “Solar energy system” means a system of equipment capable 10 of collecting and converting incident solar radiation into 11 thermal, mechanical, or electrical energy and transporting the 12 energy by a separate apparatus to storage or to a point of use. 13 2. Beginning with installations completed on or after 14 January 1, 2021, the taxes imposed under this subchapter, less 15 the credits allowed under section 422.12, shall be reduced by a 16 solar energy system tax credit equal to an amount calculated 17 using only one of the following methods: 18 a. Fifteen percent of the gross cost of the solar energy 19 system, not to exceed the following amounts: 20 (1) For a residential solar energy system, five thousand 21 dollars. 22 (2) For a commercial solar energy system, twenty thousand 23 dollars. 24 b. The sum of the following: 25 (1) Fifty percent of the federal residential energy 26 efficient property credit related to solar energy provided in 27 section 25D(a)(1) and section 25D(a)(2) of the Internal Revenue 28 Code, not to exceed five thousand dollars. 29 (2) Fifty percent of the federal energy credit related to 30 solar energy systems provided in section 48(a)(2)(A)(i)(II) and 31 section 48(a)(2)(A)(i)(III) of the Internal Revenue Code, not 32 to exceed twenty thousand dollars. 33 3. Any credit in excess of the tax liability is not 34 refundable but the excess for the tax year may be credited 35 -1- LSB 2067YH (2) 89 jm/jh 1/ 6

H.F. 323 to the tax liability for the following ten years or until 1 depleted, whichever is earlier. 2 4. a. An individual may claim the tax credit allowed a 3 partnership, limited liability company, S corporation, estate, 4 or trust electing to have the income taxed directly to the 5 individual. The amount claimed by the individual shall be 6 based upon the pro rata share of the individual’s earnings of 7 the partnership, limited liability company, S corporation, 8 estate, or trust. 9 b. A taxpayer who is eligible to claim a credit under this 10 section shall not be eligible to claim a renewable energy tax 11 credit under chapter 476C. 12 c. A taxpayer may claim more than one credit under this 13 section, but may claim only one credit per separate and 14 distinct solar energy system installation. The department 15 shall establish criteria, by rule, for determining what 16 constitutes a separate and distinct installation. 17 d. (1) A taxpayer must submit an application to the 18 department for each separate and distinct solar energy 19 system installation. The application must be approved by the 20 department in order to claim the tax credit. The application 21 must be filed by May 1 following the year of the installation 22 of the solar energy system. 23 (2) The department shall accept and approve applications 24 on a first-come, first-served basis until the maximum amount 25 of tax credits that may be claimed pursuant to subsection 5 26 is reached. If for a tax year the aggregate amount of tax 27 credits applied for exceeds the amount specified in subsection 28 5, the department shall establish a wait list for tax credits. 29 Valid applications filed by the taxpayer by May 1 following the 30 year of the installation but not approved by the department 31 shall be placed on a wait list in the order the applications 32 were received and those applicants shall be given priority 33 for having their applications approved in succeeding years. 34 Placement on a wait list pursuant to this subparagraph shall 35 -2- LSB 2067YH (2) 89 jm/jh 2/ 6

H.F. 323 not constitute a promise binding the state. The availability 1 of a tax credit and approval of a tax credit application 2 pursuant to this section in a future year is contingent upon 3 the availability of tax credits in that particular year. 4 5. a. The cumulative value of tax credits claimed annually 5 by applicants pursuant to this section shall not exceed ten 6 million dollars. 7 b. If an amount of tax credits available for a tax year 8 pursuant to paragraph “a” goes unclaimed, the amount of the 9 unclaimed tax credits shall be made available for the following 10 tax year in addition to, and cumulated with, the amount 11 available pursuant to paragraph “a” for the following tax year. 12 6. On or before January 1, annually, the department shall 13 submit a written report to the governor and the general 14 assembly regarding the number and value of tax credits claimed 15 under this section, and any other information the department 16 may deem relevant and appropriate. 17 7. The director shall adopt rules pursuant to chapter 17A to 18 administer this section. 19 Sec. 2. Section 422.33, subsection 29, paragraph a, Code 20 2021, is amended to read as follows: 21 a. The Beginning with installations completed on or after 22 January 1, 2021, the taxes imposed under this subchapter shall 23 be reduced by a solar energy system tax credit equal to sixty 24 percent of the federal energy credit related to solar energy 25 systems provided in section 48(a)(2)(A)(i)(II) and section 26 48(a)(2)(A)(i)(III) of the Internal Revenue Code , not to exceed 27 twenty thousand dollars. For installations occurring on or 28 after January 1, 2016, the applicable percentage of the federal 29 energy credit related to solar energy systems shall be fifty 30 percent allowed under section 422.11L . 31 Sec. 3. Section 422.60, subsection 12, paragraph a, Code 32 2021, is amended to read as follows: 33 a. The Beginning with the installations completed on or 34 after January 1, 2021, the taxes imposed under this subchapter 35 -3- LSB 2067YH (2) 89 jm/jh 3/ 6

H.F. 323 shall be reduced by a solar energy system tax credit equal to 1 sixty percent of the federal energy credit related to solar 2 energy systems provided in section 48(a)(2)(A)(i)(II) and 3 section 48(a)(2)(A)(i)(III) of the Internal Revenue Code , not 4 to exceed twenty thousand dollars. For installations occurring 5 on or after January 1, 2016, the applicable percentage of the 6 federal energy credit related to solar energy systems shall be 7 fifty percent allowed under section 422.11L . 8 Sec. 4. Section 533.329, subsection 2, paragraph k, Code 9 2021, is amended to read as follows: 10 k. The Beginning with the installations completed on or 11 after January 1, 2021, the moneys and credits tax imposed under 12 this section shall be reduced by a solar energy system tax 13 credit allowed under section 422.11L . 14 Sec. 5. CUMULATIVE VALUE OF SOLAR ENERGY SYSTEM TAX CREDIT 15 FOR YEAR 2021 —— WAIT LIST. Notwithstanding section 422.11L, 16 subsection 5, as enacted by this Act, there shall be no maximum 17 cumulative value of tax credits that may be claimed during the 18 2021 calendar year until such time as the wait list pursuant to 19 section 422.11L, subsection 3, Code 2021, has been eliminated. 20 If the wait list has been eliminated during the 2021 calendar 21 year, the maximum cumulative value of tax credits during 22 calendar year 2021 shall not exceed the maximum cumulative 23 value of tax credits specified in section 422.11L, subsection 24 5, as enacted by this Act. 25 Sec. 6. EFFECTIVE DATE. This Act, being deemed of immediate 26 importance, takes effect upon enactment. 27 Sec. 7. RETROACTIVE APPLICABILITY. This Act applies 28 retroactively to January 1, 2021, for tax years ending on or 29 after that date. 30 EXPLANATION 31 The inclusion of this explanation does not constitute agreement with 32 the explanation’s substance by the members of the general assembly. 33 This bill relates to the solar energy system tax credit. 34 Under existing law, the Iowa solar energy system tax credit 35 -4- LSB 2067YH (2) 89 jm/jh 4/ 6

H.F. 323 available against the individual or corporate income tax, the 1 franchise tax, or the moneys and credits tax equals the sum of 2 50 percent of the federal residential energy efficient property 3 credit, not to exceed $5,000, plus 50 percent of the federal 4 energy credit related to solar energy systems, not to exceed 5 $20,000. 6 The bill maintains the existing framework of the solar 7 energy system tax credit as a percentage of the federal energy 8 credit but creates a new Iowa solar energy system tax credit 9 for installations completed on or after January 1, 2021. For 10 solar energy systems completed on or after January 1, 2021, the 11 bill allows a taxpayer to calculate the solar energy system tax 12 credit amount as a percentage of the federal energy credit or 13 calculate the solar energy system tax credit amount pursuant 14 to the new Iowa solar energy system tax credit created in the 15 bill. The bill creates a residential solar energy system tax 16 credit equal to 15 percent of the gross cost of the system, up 17 to $5,000. The bill creates a separate commercial solar energy 18 system tax credit not to exceed 15 percent of the gross cost of 19 the system, up to $20,000. The bill defines “residential solar 20 energy system” to mean a solar energy project on residential 21 property or multiresidential property. The bill defines 22 “commercial solar energy system” to mean a solar energy system 23 on a property that is not residential or multiresidential. 24 Any tax credit approved under the bill is not refundable 25 but the excess for the tax year may be credited to the tax 26 liability for the following 10 years or until depleted, 27 whichever is earlier. 28 The tax credit is available against the individual and 29 corporate income taxes, the franchise tax, and the moneys and 30 credits tax. 31 A taxpayer eligible to claim a credit under the bill is not 32 eligible to claim a renewable energy tax credit under Code 33 chapter 476C. 34 The bill provides that a taxpayer may claim more than one tax 35 -5- LSB 2067YH (2) 89 jm/jh 5/ 6

H.F. 323 credit, but may claim only one credit per separate and distinct 1 solar energy system installation. 2 The bill permanently increases the maximum cumulative value 3 of tax credits that may be claimed during the year from $4 4 million to $10 million. 5 The bill eliminates the wait list for the tax credit by 6 removing the maximum cumulative value of tax credits that may 7 be claimed in a year for calendar year 2021 until the wait list 8 is eliminated. If the wait list is eliminated during calendar 9 year 2021, the maximum cumulative value of tax credits that 10 may be claimed during calendar year 2021 shall not exceed the 11 maximum cumulative value established in the bill, $10 million. 12 The bill takes effect upon enactment and applies 13 retroactively to January 1, 2021, for tax years ending on or 14 after that date. 15 -6- LSB 2067YH (2) 89 jm/jh 6/ 6