Solar tax break in bill might burn budget

By David McGrath Schwartz (contact)

Thursday, April 16, 2009 | 2 a.m.

Carson City — A bill making its way through the Legislature has the potential to devastate state and local government coffers by granting a 75 percent property and sales tax break to home and business owners who install enough solar panels on their roofs.

Senate Bill 331 would give the tax abatements for up to 30 years to any facility that uses solar energy as its primary power source and generates electricity that is sold or used for heating.

Nevada legislators and lobbyists concede that as written the bill could allow existing buildings, including private residences, to add panels and qualify for the large tax breaks.

But supporters say that wasn’t the intent of the measure, which they say was solely aimed at increasing incentives for large-scale solar projects.

“It won’t look like that at the end,” Pete Ernaut, a partner with the lobbying firm R&R Partners, said of the bill’s current language.

The exact financial impact of the proposal is unknown. But using the more narrow reading of the bill, the state Taxation Department estimates the state and local governments would lose nearly $100 million in tax revenue in fiscal year 2011, and $140 million every two years after that if certain planned renewable energy projects are built.

During a hearing on SB331 last week, a lobbyist said the measure’s vague wording reminded him of a 2005 bill that allowed companies to qualify for large tax abatements by meeting certain environmental building standards.

“Seems like another green building bill in the making,” said the lobbyist, who asked not to be identified.

Passed in the final minutes of the session, the green building bill cost state and local governments hundreds of millions of dollars in lost revenue. Legislators who pushed that bill in 2005 claimed they didn’t know the impact it would have and attempted to limit the tax breaks during the 2007 session. The bill was also pushed by key lobbyists for casino companies, many of which benefitted from the tax break.

Ernaut said he brought forward SB331 on behalf of solar developer BrightSource Energy, which has announced plans to build a large-scale solar project in Coyote Springs, a development backed by former super lobbyist Harvey Whittemore. Ernaut said the bill’s intent is to offer a 75 percent tax break for such large-scale solar projects. There is consensus among the solar industry that they want 75 percent tax abatements for large scale solar projects, according to Ernaut.

Currently the abatement is about 50 percent over 10 years, though that incentive expires this year.

The bill cleared the Senate Committee on Energy, Infrastructure and Transportation last week and was referred to the Senate Finance Committee. During the hearing lawmakers did not question whether the bill could be interpreted more broadly than the stated intent.

There’s little argument that the tax incentives will be extended. The solar industry notes that states including Arizona, California and New Mexico offer incentives similar to Nevada’s.

Yet so far, no one has talked publicly about giving an abatement for those who add solar capacity to existing buildings.

Ernaut argues that roofs are too small and solar panels too expensive for companies to take advantage of the broader reading of the bill. “The chance of that happening is nil,” he said.

In an interview with the Sun, Assemblywoman Marilyn Kirkpatrick, D-North Las Vegas, who has studied the state’s abatements, said the bill’s definition of which projects would qualify is “too broad.” She added, “These tax abatements are not intended for large businesses that are already here.”

She said the bill will not become law as written.

Asked why lawmakers won’t again allow unintended tax breaks as they had in 2005, she said, “We’re much more in tune with the issue. We’re paying close attention to any abatement.”

Ernaut acknowledged there is work to be done on the bill’s language. But, he said, bills are kept alive “to keep pieces in play. There’s some good language in bills, some bad language.”

Asked why the bill was worded so broadly, he said, “I didn’t draft the bill.”

“You have to have some shred of trust these things will be thoroughly vetted,” Ernaut said.