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"Recent changes to federal law regarding tax credits for solar energy systems may impact incentives"

New solar credit changes could eliminate rebates. Don't wait to get your solar system. Rebates might be eliminated!
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ADMINISTRATIVE LAW JUDGE’S RULING REQUESTING COMMENTS ON FEDERAL SOLAR TAX CREDIT CHANGES

This ruling requests parties’ comments on how recent changes to federal law regarding tax credits for solar energy systems may impact incentives under the Commission’s California Solar Initiative (CSI).

In Decision (D.) 06-08-028, the Commission committed to assessing the need for changes to CSI incentive levels depending on the status of federal tax credits. In numerous places throughout the decision, the Commission noted that the availability of tax credits affected the adopted solar incentive levels for the various customer classes. The Commission also committed to examine incentive levels as part of our biennial review of the CSI program.

On Friday, October 3, 2008, H.R. 1424, the “Emergency Economic Stabilization Act of 2008,”was signed into law. This law includes an eight-year extension of the commercial and residential solar investment tax credit (ITC). (See H.R. 1424, Division B, “Energy Improvement and Extension Act of 2008,” Title 1, Section 103.) The ITC is a reduction in the overall tax liability for individuals or businesses that make various investments. For residential solar-electric and solar water heating investments, the ITC is calculated based on 30% of total system cost, but the ITC was previously capped at a maximum of $2,000 per household. The new law eliminates the $2,000 cap for residential solar installations claimed in taxable years beginning after December 31, 2008. (Id., Section 106.) For commercial installations, the credit remains 30 percent of the installed cost with no cap. The new law allows corporate and individual taxpayers to claim the ITC against the Alternative Minimum Tax (AMT), and eliminates the public utility exception to the ITC. (Id., Section 103.)

The eight year extension of the ITC means that the federal tax credit for a typical 3-4 kW residential system will increase from $2,000 to approximately $6,000 or even as high as $10,000 or more, depending on total system cost and the value of a 30% tax credit, calculated on a post-CSI rebate basis.

This ruling seeks comment on the recent changes in federal tax law regarding the solar ITC, and what, if any, CSI incentive level changes the Commission should consider based on the removal of the $2,000 cap for residential solar energy systems. The current residential CSI incentives were established in D.06-12-033, Appendix B, Table 13. Customers of Pacific Gas and Electric Company and San Diego Gas & Electric Company currently receive incentives at Step 4, or $1.90/watt, while Southern California Edison Company’s customers receive a Step 3 incentive of $2.20/watt. As a reminder to parties, incentive levels changes would only occur following issuance of a Commission decision modifying the incentives established in D.06-08-028.

IT IS RULED that:
1. Parties may file comments no later than November 20, 2008 on whether the Commission should consider modifying the California Solar Initiative incentives adopted in Decision 06-08-028 given recent changes in federal tax law in H.R. 1424.
2. Parties may file reply comments no later than December 4, 2008. Dated October 31, 2008, at San Francisco, California.

/s/ DOROTHY J. DUDA
Dorothy J. Duda
Administrative Law Judge

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