Solar energy companies would need to pay property taxes on nearly $6 billion in equipment if legislation that advanced out of the House Finance Committee on Tuesday become law.
A 2008 bill omits solar energy developers from paying property taxes on 80% of the value of the equipment they install. It does not omit the land on which the equipment is installed from property taxes.
That was part of an effort to incentivize solar development in North Carolina. It's seen as a success, with the Solar Energy Industries Association saying North Carolina's 9.6 gigawatts of installed solar ranking fifth in the country.
Now, amid a push from some county commissioners, Rep. Jimmy Dixon, a Duplin County Republican, wants to strike that property tax exemption entirely. It's a move that would let local governments levy taxes on about $5.9 billion in solar equipment.
"What we're seeing currently is not tax fairness when everybody else is paying 100% on the tax and the solar is getting away with it, ergo subsidizing it. It's falling on the backs of the taxpayers and the counties to bring together balanced budgets and make provisions for them," Rep. Keith Kidwell, a Beaufort Republican who supports the legislation, said Tuesday.
Opponents argue the bill could lead to solar developers pulling back from the state or investing elsewhere, while also sending a signal that could be detrimental to other economic development efforts.
When the bill first appeared in the House Agriculture and Environment Committee last week, lobbyist Alex Miller argued against it. Miller represents solar developers Cypress Creek Renewables and Strata Clean Energy, as well as the Clean Energy Carolinas Business Association, a trade group.
"How much of your own capital would you risk if you knew that you could wake up tomorrow and have a bill like this affect your industry, take away your rights, impose regulations retroactively and raise your taxes by 500%? I think the answer would be not much," Miller said.
Impact on local governments
There are 14 North Carolina counties that are missing out on at least $1 million in tax revenue due to the exclusions, according to the North Carolina Association of County Commissioners. Nearly 90% of that equipment is in unincorporated areas, typically the rural parts of North Carolina counties.
Most of the impacted counties are in Eastern North Carolina, with Edgecombe County leading the way.
The association estimates Edgecombe is missing out on $2.3 million in tax revenue due to the exclusion, followed by Bladen County's $1.9 million and Northampton and Robeson counties' $1.8 million in missed tax revenue.
Dixon's Duplin County would earn an additional $1.5 million in property tax revenue on already installed solar panels and other equipment should the bill pass. For comparison's sake, Duplin County's budget is $69.1 million, with $31.9 million coming from property taxes.
County commissioners have decided repealing the exclusion is their second-highest legislative goal this session, Kevin Leonard, the association's executive director, told the House Agriculture and Environment Committee last week.
"Repealing this would have a major economic positive impact for those counties to support the functions that they're required, by this body, to provide the citizens and the residents of those counties," Leonard said. He added that seeking to repeal the tax exclusion was not a statement on how county commissioners feel about clean energy.
Rep. Deb Butler, a Wilmington Democrat, said she is worried that striking the tax abatement could lead to solar companies leaving and the land ultimately being developed for homes.
"It's clear that you just want them out of business. That's not good for luring other industries to North Carolina, I can tell you that," Butler said.
She continued, "It's called the hokey pokey. You put it in, you take it out, you spin yourself about. That's not good for industry."
Dixon argued Tuesday that concerns about the solar developers leaving their existing sites are overblown because they typically have contracts that range between 15 and 30 years.
Rep. Sam Watford, a Davidson County Republican, shared Butler's concerns about slashing the abatement.
"I'd hate to have invested this money, myself, in the state based on what was happening in 2008 and then today be hit with a tax bill all of a sudden," Watford said.
In a rebuttal, Dixon argued that North Carolina routinely shifts tax policies. Watford ultimately joined other Republicans, voting to advance the bill out of the Finance committee along party lines.
Changes to solar bill
An earlier version of the bill also limited where new solar farms could be built in what Dixon framed as an effort to protect the state's farm land.
When the bill appeared in committee Tuesday, Dixon had removed a provision banning the construction of solar farms on active farmland or timberland. Members expressed concern about how that section would have impacted property rights, Dixon told the committee.
The bill still has a long way to go before potentially becoming law.
The Agriculture and Natural Resources Committee is scheduled to hear it Wednesday, and from there the bill will head to the Energy and Public Utilities Committee and then the Rules Committee before receiving a vote in the full House. It would also need to pass through the Senate.
