The solar bill no one in Maine is talking about... but should be
Solar Steps Forward in Maine
The 129th Session of the Maine Legislature represents a gigantic step forward for the deployment of solar energy. The session started with the passage of LD 91, a bill that removed a punitive compensation system for solar owners that was highly costly to other ratepayers. Just this week, LD 1711 passed both the Maine House and Senate. This bipartisan bill was a comprehensive approach to removing arbitrary barriers in Maine for businesses and low-income households.
Solar Tax Exemption Bill
The one solar bill that has flown under the radar is LD 1430, An Act To Create Tax Equity Among Renewable Energy Investments. The bill creates a property tax exemption for solar energy projects that provide bill credits to Maine ratepayers.
LD 1430, sponsored by Rep. Ryan Tipping of Orono, received broad bipartisan support and was supported for funding by the Committee on Appropriations and Financial Affairs late Tuesday night. Though the fiscal note on the bill was just slightly over $100,000, the passage of this bill represents a significant signal to solar investors across the state.
What are the tax implications for solar?
The property tax implications of solar have been highly contentious over the past two years. In Maine, property taxes are administered by the municipality, and the treatment of solar has been quite inconsistent from town-to-town.
Some towns have placed an arbitrary value on solar based on its installed cost or the number of solar panels, regardless of whether the real estate market indicates that the installation increases its value. Other municipalities have opted not to apply property taxes to solar, citing a lack of empirical data in Maine that shows solar increases property value.
In some of the municipalities where these systems have been taxed, the property tax implications have severely undercut the expected energy savings from the system. This uncertainty has deterred some homeowners and businesses from making the investment.
Property Tax for Commercial Solar: An Update
The property tax issue with commercial solar has also had its issues. The state currently has a Business Equipment Tax Exemption (BETE) for certain capital investments made by Maine businesses. For example, a restaurant that buys a new grill to further its business operations can exempt the grill from state property taxes. This incentivizes businesses to invest in the state, while also ensuring that a portion of the lost tax revenue is provided to the local municipality. Any tax exemption requires the state to reimburse the local municipality for at least 50% of the taxes that would otherwise be required.
The BETE program is the most complicated program administered by Maine Revenue Services, and there has been significant confusion related to the BETE eligibility of solar investments.
In Maine, there are essentially two methods to deal with property tax – tax it or exempt it. The Constitution doesn't allow for any middle ground. As a result, the initial bill sought to clarify that certain solar investments are BETE eligible and to provide a tax exemption for any solar project providing bill credits to a residential customer.
At the recommendation of Maine Revenue Services, the bill was amended in committee to provide a blanket tax exemption for any Maine solar or wind project that provides bill credits, regardless of whether it is residential or commercial. This change makes the program simpler to implement and reduces the costs to the state since some communities in Maine receive a reimbursement from the state as high as 90% for BETE eligible investments.
Since the bill will promote further capital investment in Maine, the program will generate sales tax revenue and state payroll taxes to help offset the costs to reimburse local municipalities.
It was a priority for supporters to ensure the bill provided tax revenue and some local control to communities where solar is developed. Large scale solar projects that sell electricity to the grid are not eligible for the exemption and the taxes for these projects are managed by the local municipality. In addition, the property tax reimbursement to communities is expected to create a win-win for local communities, as they can now encourage solar development for homeowners and businesses, receive tax revenue from those investments, and avoid unfairly penalizing solar owners.
Questions about Maine's Solar Policies?
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