Iowa Homeowners Set To Lose Millions In Promised Solar Tax Credits

From Our Partner at the Winneshiek Energy District: 

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 Republican-controlled 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:

The Department estimates that for residential installation applications with a submission date of October 1, 2020, or later, the application and tax credit request will expire under Iowa law and the taxpayer will not receive an Iowa Solar Energy System Tax Credit.

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 the end of 2021 was, well, a tax credit available through 2021.

The mission of Winneshiek Energy District is to lead, implement, and accelerate the locally-owned, inclusive, clean energy transition in Winneshiek County. Our key strategies together build an unstoppable flywheel of momentum and include energy planning, market transformation, public engagement, policy advocacy, and readiness.

As the founding Energy District, our mission also includes the demonstration of the energy district model viability and the growth of an energy district network throughout Iowa and beyond.