Reinstate Solar Energy Tax Credit

With market forces producing cheap oil in recent years, alternative energy tax credits have gone out of vogue. But the respite in escalating petroleum costs is not expected to last long. Domestic reserves are declining. California and the nation cannot afford to let the pursuit of practical alternative energy supplies languish.

For that reason, Chairman John Garamendi (D-Walnut Grove) of the Senate Revenue and Taxation Committee sponsored SB 227 during the recent session of the Legislature to reinstate a commercial solar energy tax credit in California. The previous, broader tax break was allowed to expire last year even though the credit had given a valuable boost to the solar energy industry, often meaning the difference between red ink and a slim margin of profit.

The Garamendi bill is relatively modest, with the state Franchise Tax Board estimating the cost to be only about $11 million a year. The measure would provide a 10% tax credit through 1994 to commercial purchasers of photovoltaic devices that transform solar energy into electricity, and for solar thermal systems. To be eligible, the solar devices must be certified by the California Energy Commission to last at least five years, be reliable and market-ready. The credit is allowed only once, in the tax year of the purchase, but expansions to the system in subsequent years may be claimed.

Garamendi sponsored the bill on behalf of the Chronar Corp., which said such a credit should lead to self-sufficient production of photovoltaic devices within the five-year life of the act. While the Deukmejian Administration expressed concern about the loss of tax revenue, the measure should provide energy-saving benefits to California for decades to come, as well as additional tax revenue from successful solar energy establishments. The governor’s signature on this bill will amount to a prudent investment in the state’s future.