Current law allows homeowners and businesses in Hawaii to take 30% of the cost of solar installation off of their tax bill. This is in addition to a 30% federal tax bill. These incentives have led to fantastic growth in the solar industry here. Construction related to solar panel installations now accounts for 15% of construction industry growth and has generated 2000 jobs in the islands. Hawaii has become one of the top 10 solar producers nationwide.
However, this growth has come at a price:
"During the 2010 tax year, Hawaii residents claimed $42.8 million in renewable
energy credits, mostly for solar projects. In just six months of 2011, they
claimed $54.9 million in credits, according to data provided to
Stateline by the Hawaii Department of Taxation. This year, the price
will soar to $173.8 million, the state estimates. That’s out of an overall state
budget that hovers around $12 billion each year.
“Everybody is pretty much on board with this clean energy,” says Jack
Suyderhoud, a University of Hawaii economist and vice chair of the state’s
Council of Revenues. “But people are starting to ask, at what price?'"
Last week Friday, Hawaii's Department of Taxation issued new rules for renewable energy credits that will cut most tax credits on residential projects in half. While styled as an attempt to "clarify" existing tax credit rules for installation of solar projects, the purpose behind the rule change was an attempt to control the fiscal cost of tax credits associated with solar installations.
Environmental groups including the Sierra Club, question the State's action and its effect on the growing solar industry. However, with tax credit claims expanding from $35 million to $173 million this year, the State is looking for a means to control its revenue losses.
The new rules, which can be found here, go into effect on January 1, 2013, and apply to systems unless they are "installed and in place" by the end of 2012. "Installed and in place" according to the rules, means systems that have been completed, costs incurred, and building inspections ordered. If the system does not pass inspection, it will be deemed installed in the year in which it passes final inspection.
