Hawaii Tax Department Poised to Crack Down on Solar Tax Credits

ProVision Solar

The state tax department is set to come out with new rules that would limit the number of tax credits solar companies can claim on a solar array.

And the solar industry, worried that the changes will deeply hurt the business, is already gearing up for a fight that likely will head to the Legislature in January.

Concerns that solar companies were gaming the system by claiming more credits than the tax credit law intended prompted state lawmakers to propose legislation last year that would ensure that only a single tax credit is taken per property. But the legislation, which the solar industry vigorously fought, never passed.

And now, armed with a recent report that says Hawaii's renewable energy tax credits cost the state $174 million in 2012, up from $35 million in 2010 — an amount that prompted the Council on Revenues to downgrade the state's revenue forecast from 5.3 percent to 4.9 percent — the tax department is stepping in. Frederick Pablo, director of the tax department, said that new rules are expected to be released any day.

At issue is what constitutes a system. Companies have been claiming multiple credits on arrays that use multiple inverters, something they say the tax department allows based on earlier rules issued in 2010. But those rules are about to change.

“We’re trying to make it easy for all — owners, installers, the solar industry, tax preparers — so everyone understands clearly,” said Pablo.

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