By ALEXIS ZOTOS
6 News Reporter
OAK RIDGE (WATE) – A local solar energy company has put 40 projects on hold while it awaits the possibility of a 6,000 percent tax increase on solar powered facilities.
Two years ago, solar energy was deemed basically tax exempt, but now there are questions raised over the legality of that tax rate. The bill (HB3520/SB3296) was considered earlier this year by the Tennessee Legislature.
"It's a bill that came from the comptroller's office. Their rationale was that the tax exemption that was granted in 2010 was constitutionally suspect and we needed to clear it up," explained Sen. Randy McNally (R-Oak Ridge), a sponsor of the bill.
Right now, solar facilities pay a tax rate of .5 percent of the salvage cost of the material, which is essentially nothing. The new bill proposes a tax rate of one-third of the property's value.
"When you look at the taxes, it's very low. Under the new tax, essentially 30 percent of the (businesses') revenue that's generated by this system would have to go to pay for the taxes of this system. The bill effectively would increase the property tax on solar systems by about 6,000 percent," said Robbie Thomas, president of Efficient Energy of Tennessee.
Thomas installs solar projects around the state and the possibility of this tax has nearly 40 projects on hold.
"Right now if this passes, we would not follow through with those systems," Thomas explained.
And many systems already in place are concerned over the financial future.
"They financed the money for these systems, large system, large amount of money, so when they did that they took into account the amount of taxes of point five percent of the salvage value."
The one megawatt facility off Andrew Johnson Highway powers 200 homes a day. A similar sized facility pays an annual $300 in taxes. With the new rate, it would pay $18,054.
But Sen. McNally says if they do nothing, it could be worse. "It would be a very dramatic tax increase if the courts overturned it, which I think they would. Then (these facilities) would be taxed at full value," he said.
Sen. McNally would like to place solar energy in the same category as wind, thermal and hydro-electric energy, which pay the one-third tax rate.
But the solar energy industry says its status as green energy production facilities should keep it where it is, in the same category as pollution control.
And although McNally admits the same constitutional questions about solar could be made for pollution control, that industry is not being addressed in the bill.
Thomas says they need more discussion, and nothing should be done until there's a better understanding.
"Solar's a new industry. It's growing," Thomas said. "We shouldn't punish solar."
Two years ago, solar energy was deemed basically tax exempt, but now there are questions raised over the legality of that tax rate.
