Legislature Nixes Solar Tax Credit; Clean Energy Districts of Iowa Calls on Governor to Keep Iowa’s Promise to Waitlisted Solar Owners

Andy Johnson, Executive Director

The Iowa Legislature failed to extend Iowa’s solar tax credits during the 2021 session. The immediate impact is an expiration of the Iowa credit at the end of 2021. Hundreds of existing solar owners on the tax credit waitlist are also set to lose their promised credit.

Solar advocates statewide had supported House File 221, which was introduced early in the session, passed out of subcommittee, then was stalled by Republican leadership. As our partners at the Iowa Solar Energy Trade Association outline, the bill would have extended and strengthened the Iowa credit and continued Iowa’s leadership in promoting local solar ownership.

“This should have been a bipartisan winner for the Legislature, given that a recent poll released by Iowa Business for Clean Energy shows that over 80% of Iowans support solar tax credits for homes, farms, and businesses”, said Andy Johnson, Executive Director of the Clean Energy Districts of Iowa. “It’s too bad the Legislature’s leadership either doesn’t understand or doesn’t support the tremendous clean energy prosperity that comes to our rural counties and communities from locally-owned renewable energy.”

The Legislature’s inaction impacts both future and past solar owners. Clearly, the credit will not be available for solar systems installed after 2021. It also appears to cancel the credit for hundreds of Iowans who have already installed solar systems, and are on the tax credit waitlist. 

Because applications for the tax credit have exceeded the annual $5 million cap for years, the Iowa Department of Revenue (IDR) maintains a waitlist of backlogged applications. According to the IDR, the waitlist includes approximately $9 million in credit applications, meaning the awarding of the credit is about two years delayed.

What happens to those still on the wait list when the credit expires? According to the IDR, commercial (farm and business) applicants and residential applicants are in two different boats, because of the way the Iowa credit is linked to the federal credit. 

“It is complicated” says Winneshiek Energy District’s Joel Zook, “but our current understanding from IDR is that commercial applicants with projects completed or that have started construction by the end of 2021 may receive their solar tax credit going forward. For residential applicants, it appears the waitlist will simply be eliminated the beginning of 2022, and hundreds of current solar owners who invested based on the promise of this credit will be out of luck.”

“It’s one thing for legislators to determine tax policy going forward” said Johnson. “It’s another for them to renege on the promise, and yank the credit after hundreds have invested based on that promise. We hope Republican legislative leaders or the Governor will right that wrong as soon as possible.”

It is unclear whether Republican leaders are seriously considering options to make whole those on the waitlist, but at least a couple options may be available. On the one hand, the Governor may be able to utilize federal stimulus funds. On the other hand, the Legislature could act immediately upon returning in January 2022 to approve funding to pay everyone on or qualifying for the waitlist through 2021. 

This second option would depend in part on whether the Iowa Department of Revenue keeps adequate records of the waitlist long enough for the Legislature to act. “We call on the Governor to immediately direct IDR to retain all records related to the Iowa solar tax credit waitlist at least through 2022, and to prioritize fulfilling Iowa’s promise to those on the waitlist” said Johnson.

Meanwhile, solar continues to be an important option for keeping energy wealth in local pocketbooks, balance sheets, and communities. “The Iowa credit really made for a great 1-2 punch as an investment incentive”, said Zook, “but the federal credit continues at the current 26% rate through the end of 2022, and the Biden Administration has proposed continuation at the original 30% level. Solar is still a good opportunity for many homes, farms, and businesses, and we encourage everyone to contact their favorite local installer and consider the option.”


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