The Fayetteville Observer republished an opinion piece by JLF’s Mitch Kokai on renewable energy tax credits. Kokai writes:
“For roughly two decades, state law permitted some version of a 35% income tax credit for investments in facilities producing solar energy…
After Republicans took control of the N.C. House and Senate, they changed the law and axed the credit. But they included a so-called “grandfather” clause. It was designed to soften the blow for investors who had made long-term decisions based on the previous law. If a solar project had started by the time the law changed, the tax credit still could be claimed.
The old law had allowed the tax credit to be spread out over multiple years. So even with the General Assembly’s wise decision to ditch the credit prospectively, hundreds of millions of dollars of grandfathered credits would be possible for years to come.”
Recently, the North Carolina Department of Revenue (NCDOR) reneged on that promise to allow certain investors to claim their grandfathered tax credits. One company, Monarch Tax Credits, is suing over the matter. Kokai explains:
“In rejecting the credits, the Revenue Department contended that Monarch’s financial arrangements were inconsistent with federal law. Monarch responds in the lawsuit that the General Assembly chose not to mirror federal law in creating North Carolina’s tax credit. State law alone determines the rules regarding who can and cannot claim that credit, Monarch argues.”
Kokai agrees with Monarch on that point. The state has been allowing clients of companies like Monarch to receive these tax credits for years. It is only now that NCDOR is reversing course and denying these investors their tax credits. Kokai writes:
That leaves the Revenue Department with no legal justification for its rejection of claimed tax credits. “The agency is attempting to make tax law, rather than administer and interpret it,” as [Reporter Don] Carrington summarizes Monarch’s legal argument.
Though Kokai rejects North Carolina’s solar investment tax credits in principle, he says North Carolina is still obligated to carry out its promise to the people:
It’s easy to argue that the solar credits eventually should end for good. It’s entirely consistent to argue as well that the department should honor existing credits permitted under state law.
The law as written entitles investors to the credits. The law does not give the Revenue Department the right to pad the state treasury with more than $500 million of rejected credits.