Action Alert: Iowa Homeowners Set To Lose Millions In Promised Solar Tax Credits

Attribution: Andrew Johnson (Clean Energy Districts of Iowa) – edited to reflect Clayton County figures

For years, Iowa homeowners have been told the state’s solar tax credit is available for solar systems installed through 2021.

Now it appears the State of Iowa is about to break that promise. Iowa’s budget is strong and the solution is straightforward – if the Legislature acts. First we’ll explain the problem, then return to the solution (hint: your state legislators need to hear from you, and our action alert page is here).

The Iowa Department of Revenue’s Solar Energy System Tax Credit page says “The Iowa Solar Energy System Tax Credit expires and is unavailable under Iowa law for residential installations completed after December 31, 2021.” Seems clear enough: get the job done by the end of the year. But then it also says this:

Wait, WHAT? October 2020?!

That’s right, it looks like homeowners who invested in solar during the second half of 2020 and all of 2021 – believing the tax credit was available to them – are about to be hung out to dry.

Unfortunately, the Iowa solar tax credit for homes and businesses was established with a $5 million annual cap. Because applications have exceeded this amount in recent years, the Department of Revenue created a waitlist. The waitlist is over a year-long, and the Department awards credits annually in the order applications are received.

As explained on the IDR web page for the solar tax credits, Iowa law treats residential and business waitlist applicants differently when the tax credit ends on December 31st, 2021. Business applicants on the waitlist will carry forward to future years until all are paid.

Residential applicants, as the law now reads, are out of luck. Some legislators have said too bad, a tax credit with a cap is not a legally binding promise. To solar owners that did the work and made the investment, we suspect that sounds (at best) like a shirking of responsibility. Until very recently, everyone from contractors to tax accountants have assumed (wrongly, but not without good reason) that a tax credit expiring at the end of 2021 was, well, a tax credit available through 2021.

What is the magnitude of the broken promise? According to the Revenue Department, in October 2021 the waitlist of homeowners expected to lose their credit included 1,262 applicants and totaled $4,020,144 (over $3,000 per applicant). This number will grow significantly, as applications for summer and fall systems roll in.

According to the October data, Clayton County residents stand to lose at least $121,391 (representing about 38 residential solar systems). See the full waitlist by county here.

The fix is not rocket science: the Legislature needs to directly appropriate the money to make these residential solar owners whole, just as the waitlisted business solar owners will also be made whole.

According to Governor Reynolds’ office, the state ended the fiscal year 2021 in June with a budget surplus of $1.238 billion. “Iowa is in a very strong financial position,” said Reynolds, “We will continue to invest… going forward to meet the needs of our citizens and our state.” Honoring the solar tax credit promise to homeowners, we suggest, would be a good place to start.

Even if the residential waitlist grows through 2021 to a $5-6 million shortfall, this would still represent less than one-half of one percent of the 2021 budget surplus.

Last session (early 2021), an intense effort to extend Iowa’s solar tax credit beyond 2021 was rejected by the Legislature. At that time, when asked what will happen to those on the waitlist, legislators said ‘we’ll make them whole’. In northeast Iowa, both Senator Klimesh and Representative Bergan have expressed support for fully funding the waitlist.

For that promise to come true, however, waitlisted homeowners throughout the state will need to hold their elected officials’ feet to the fire to actually get the job done. That may be an uphill battle, as the Legislature’s leadership appears either silent or skeptical. The Governor could certainly have an impact but has so far been silent as well.

If you’re on Iowa’s solar residential tax credit waitlist, or have installed solar in 2021 and have yet to apply… now is the time to speak up, because your promised tax credit is on the line. Tell your legislators and Governor to do the work, fix the waitlist, and honor the state’s promise. See our action alert page for more details.