(Note: This is an unedited version of a column written for Knoxville Business Journal. The edited version is HERE.)
Most folks didn’t notice, but the Tennessee General Assembly imposed a new tax on some Tennessee businesses during its recently-completed 2013 session and raised taxes on others.
Gov. Bill Haslam, through his Department of Revenue, spearheaded a bill that did both under the title “Uniformity and Small Business Relief Act of 2013′ (SB183, as amended). An increased tax on companies producing solar energy products was accomplished through SB1000.
Yes, while legislators uniformly announced in post-session news releases they had cut taxes, they had also raised them.
The ballyhooed cuts were a reduction the state sales tax on grocery food from 5.25 percent to 5 percent and the exemption of more people over age 65 from paying the Hall income tax. (The exemption level was increase from $26,200 to $33,000 for single filers and from $37,000 to $59,000 for joint filers.)
NASHVILLE, Tenn. (AP) — Tennessee Attorney General Robert Cooper says a tax break for the solar industry violates the state constitution.
Cooper told The Tennessean (http://tnne.ws/REhVWm ) that the issue with the tax break is that it favors certain taxpayers. He cited a provision of the constitution that prohibits lawmakers from passing legislation that allows one group of taxpayers to opt out of paying property taxes.
The newspaper reports that Cooper’s announcement on Friday jeopardizes the credit’s future viability and is likely to reinvigorate efforts to roll back the measure and replace it.
Gov. Phil Bredesen pushed the credit and two others through the legislature as his administration came to an end, actions that raised questioned weeks later when Bredesen and two aides started a solar energy company. The other credits haven’t been challenged.
— Note: The full AG opinion is HERE.
A top state legislator in the solar tax debate tells the Nashville Business Journal that he’s awaiting an attorney general’s opinion on the matter, but acknowledged that Silicon Ranch’s application for state tax breaks “very well could” whet Republicans’ appetite for repeal. On Thursday, the Nashville Business Journal reported that the company — run by top aides to former Gov. Phil Bredesen who helped pass the tax break — had applied for it in relation to eight projects.
State Sen. Randy McNally, the Oak Ridge Republican who last spring carried a bill to change the tax arrangement, said today the bill could come back to an invigorated debate in the 2013 legislative session. He made clear that his primary interest is whether Attorney General Bob Cooper will reaffirm a 1986 opinion that the state’s use of “pollution control” for taxation issues was unconstitutional.
“I think we’ll continue to look at that, and if it does come back that it’s constitutionally suspect or unconstitutional, consider bringing the legislation again to try and correct the problems,” he said.
In addition to the constitutional issues — raised by the office of Comptroller Justin Wilson — Republicans last year were eager to repeal the tax break. Some, including McNally, questioned whether solar investments deserved the tax break, and there was also suspicion that Matt Kisber, Bredesen’s economic development commissioner, and Reagan Farr, his revenue commissioner, had pushed the original tax break to later take advantage of it. They deny doing so, saying they were seeking to encourage an industry they believed key for the state.
Silicon Ranch — the company with ties to former Gov. Phil Bredesen’s administration — has applied for a solar tax break that is sure to fan the flames of debate over the economic development incentive’s future, reports the Nashville Business Journal.
The company’s founders include Bredesen and major economic development players from his administration, Matt Kisber and Reagan Farr. They spearheaded the passage of the tax break in 2010 aimed at encouraging the fledgling solar industry.
In the 2012 Tennessee General Assembly, some Republicans had planned to alter the tax arrangement in part because they were suspicious after those who put it in place started a solar company. Since then, Silicon Ranch has made eight applications for green energy certification, a stamp necessary to receive the tax break, according to Tennessee Department of Environment and Conservation records.
…Kisber and Farr said the company had not planned previously to apply for the tax credit — or any other incentive they had advocated — unless a new legislature and administration affirmed the legitimacy of a Bredesen-era policy. Farr, who served as Bredesen’s revenue commissioner, said the Republicans’ ultimate decision not to alter the policy “reaffirmed” it and led the company to consider applying.
Lifted from a Tennessean story on solar energy tax credits and their impact in Tennessee, which has been rated as having “the third-fastest-growing clean energy economy” in the nation: Tennessee now gives a massive property-tax break to solar-power facilities by allowing them to be assessed at their salvage value — defined as no more than one-half of 1 percent of their initial investment costs. But companion bills filed by several Republican legislators in the General Assembly earlier this year would eliminate that break so that solar installations would be assessed and taxed based on their real value, just like other business and residential property.
“That has already pretty much shut down any new solar companies coming to Tennessee,” said Ben Macias, vice president of Shoals Technologies Group in Portland, a manufacturer of components for solar systems that has about 500 workers.
“A lot of solar-power manufacturers are coming to the Southeast, but they are on hold as far as relocating in Tennessee is concerned because of the tax question in the legislature,” he said.
For a 50-kilowatt solar system installed at a business, for instance, the change could raise the property tax $1,500 a year, said Billy Gibson, vice president for engineering and development at Integrated Solar, another Nashville company that installs home and business systems.
The state comptroller’s office has decided against continuing to push for action this year on legsilation that would have repealed a property tax break granted the solar industry during former Gov. Phil Bredesen’s tenure.
Here’s a statement from Deputy Comptroller Jason Mumpower: “In the interests of producing the best possible solution to a complex issue, a bill (HB3526/SB3296) that would affect property assessments for solar businesses is being postponed,” said Jason Mumpower, chief of staff in the state Comptroller’s office. “While there has been a good discussion during this session about how solar businesses should be assessed, it is not advisable to seek a quick resolution of the concerns that have been raised during the session’s waning days.
“In fact, legislation enacted in haste through the technical corrections bill two years ago created the problem we now have, which is that the law currently requires solar businesses to be assessed at a rate deemed unconstitutional by the Attorney General. It is our belief that without corrective action, the law will be challenged and solar businesses could end up being assessed at 100 percent of their value, as opposed to the much reduced percentage of value we suggest to provide an incentive to the solar industry. We want to work with the industry over the summer in hopes of achieving the broadest consensus we can about the best way to move forward.”
And here’s a statement from the Senate Democratic Caucus on the move: “The decision by the Comptroller’s office to table a massive 6,000 percent tax increase on the solar industry is a prudent one. Small business owners and clean energy investors have made clear cases for how such an increase would cripple our fastest growing jobs sector.
“An open study committee is the best way to continue the conversation with those who would be most affected. As the Comptroller’s office is properly concerned about revenue consistency among clean energy sectors, I hope they’ll consider cutting other taxes instead of raising taxes on small businesses.”
News release from Department of Economic and Community Development:
STANTON, Tenn.– Tennessee has cut the ribbon on the state’s largest solar power array. DOE Deputy Secretary Poneman, Deputy Governor Ramsey and University of Tennessee President Dr. DiPietro joined a crowd of almost 200 to celebrate the opening of the West Tennessee Solar Farm. The Farm officially began generating power today.
The Haywood County facility is capable of generating 5 megawatts of electricity, enough to power 500 homes and offset 250 tons of coal each month. That makes it the largest solar-energy array connected to the Tennessee Valley Authority’s grid.
Note: This is a column written for the Knoxville Business Journal
While hailing bills that cut taxes, state legislators are quietly pushing tax increases. At least, that’s the tale told by folks who would be paying the levies involved.
Proponents say they are merely correcting oversights. Deputy Comptroller Jason Mumpower says SB3296 may be seen as a “technical correction of a technical correction.” The measure undoes a change in the property tax treatment of solar energy companies that was part of the 2010 “technical corrections” bill from Gov. Phil Bredesen’s Department of Revenue.
“It very unusual that this was placed in the technical corrections bill to begin with,” Mumpower said, noting that such legislative packages generally focus on state levies, not local property taxes. Solar power enjoys a 100 percent sales tax credit and a 100 percent franchise and excise tax credit, Mumpower said.
His bill would tax solar installations similar to other “green energy” sites. The Tennessee Solar Energy Industries Association counters that the measure “would increase the appraised value of solar property (for tax purposes) from .5 percent to 33 percent of the original cost, resulting in an incredibly large and burdensome tax increase.”
The state comptroller’s office says a current tax arrangement on solar energy is unconstitutional, upping the pressure on legislators to cast the policy aside as a fight over its purpose escalates, reports the Nashville Business Journal. A bill in the Tennessee General Assembly would change the tax treatment of solar companies, and various segments of the industry have spoken up, decrying it as a massive tax increase in place of an incentive they’d been anticipating.
Jason Mumpower, executive assistant to state Comptroller of the Treasury Justin Wilson, today cited a 1986 attorney general opinion, saying that a justification used for the treatment of solar installations is not constitutional.
He argued the current statute — passed in 2010 under the administration of Gov. Phil Bredesen, a Democrat — is open to challenge, and that therefore the comptroller is making tax law sound and preserving some incentive for solar companies.
“What we’re looking to do is correct a technical matter in the tax code,” Mumpower said. “What we’re doing is trying to help them.”
….Both McNally and Mumpower stopped short of accusing the Bredesen administration of passing a law to benefit a future business venture. But they said there could be the appearance of a conflict, with Farr pushing the law and then being part of the future company.
Farr called it “politics by a very political comptroller” for Republicans to be pushing the law change and making such suggestions. He said Silicon Ranch does not plan to apply for the tax benefit or other Bredesen initiatives. The company may consider future programs passed or reapproved by the legislature, based on circumstances at that time, he said.
Mumpower said the comptroller’s office is not seeking political gain against Farr or Democrats supportive of solar. Asked why the comptroller’s office doesn’t denounce suggestions about Farr, Mumpower said the comptroller’s motivation is only to fix the law, not engage in politics.
The family farm of Nashville songwriter and music executive Steve Ivey would become the largest solar-power production site in Georgia under a plan announced Thursday by Ivey and a company led by former Tennessee Gov. Phil Bredesen and two former state department heads, reports the Tennessean. A $90 million, large-scale solar-power array on the Ivey farm near Athens, Ga., would produce 30 megawatts of electricity that would be sold to Georgia Power Co. under a deal expected to get final approval by the Georgia Public Service Commission next week, said Ivey, who also owns IMI, a Music Row publishing and production house.
“The farm has been in my family since 1935,” Ivey said. “I got the idea for the solar project when I was trying to figure out a new way to heat water at my house in Brentwood. I’m in the music business and very technology-minded, and got locked into solar several years ago,” he said.
Bredesen’s Silicon Ranch Corp., a relatively new startup, has been part of the Georgia project only since last month. Silicon Ranch Corp. was started in late 2010 by Bredesen and the two members of his former administration (ECD Commissioner Matt Kisber and Revenue Commissioner Reagan Farr.)