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F I S C A L I M P A C T R E P O R T
SPONSOR Feldman
ORIGINAL DATE
LAST UPDATED
1/23/08
1/23/08 HB
SHORT TITLE Solar Market Development Eligibility
SB 100
ANALYST Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY08
FY09
FY10
(180.0)
(258.0) Recurring General Fund
(Parenthesis ( ) Indicate Revenue Decreases)
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue Department
Responses Received From
Energy Minerals and Natural Resources Department (EMNRD)
Economic Development Department (EDD)
SUMMARY
Synopsis of Bill
Senate Bill 100 makes several changes to the solar market development tax credit that was
enacted in 2006:
•
Changes the definition of ownership to include a limited liability company or other business
association and allows the credit based on percentage of ownership
•
Allows the credit to be refundable if the taxpayer has a modified gross income of less than
150 percent of federal poverty
•
Addresses couples filing separately
The changes are effective for tax years beginning on or after January 1, 2008.
FISCAL IMPLICATIONS
TRD provided the fiscal impact based on reported credits from EMNRD. The credit is still well
under the maximum amount EMNRD is allowed to certify in a single year. The impact of
making the credit refundable for taxpayers with modified gross income of less than 150 percent
of federal poverty level is deemed to have an insignificant impact.
pg_0002
Senate Bill 100 – Page
2
2006
2007
2008 2009 2010
2011 2012
Present law:
Growth rate
9%
10%
10%
10%
10%
Total credits approved
-
552,000
600,000
660,000
726,000
798,600
878,460
60%
20%
10%
5%
3%
2%
2%
Credit claims
-
331,200
470,400
571,200
655,200
734,160
331,392
Amounts claimed by fiscal year
-
331,200
470,400
571,200
655,200
734,160
SB 100: (2008 Session)
Increased claims by businesses <1>
1.5
1.5
1.5
1.5
1.5
Total credits approved
-
552,000
900,000
990,000
1,089,000
1,197,900
1,317,690
Credit claims
60%
20%
10%
5%
3%
3%
3%
Credit claims
-
331,200
650,400
829,200
969,000
1,094,340
498,828
Amounts claimed by fiscal year
90,000
331,200
650,400
829,200
969,000
1,094,340
Difference
-
(180,000)
(258,000)
(313,800)
(360,180)
Source: TRD
SIGNIFICANT ISSUES
SB100 broadens the scope of eligible taxpayers to include limited liability companies and other
business associations which the taxpayer owns. This would allow builders and developers to
apply for the credit when they include solar systems in their projects. EMNRD reports that this
would keep the price of a home with solar lower for the consumer than if the consumer were to
add the system him or herself. This will also increase the number of systems installed. For
example, Mesa del Sol has committed to sustainable building which presumably will include
some solar systems. Their plan is to have over 8,000 houses built which they will have builders
build. Since the aggregate credit is restricted to no more than $5 million—$2 million for solar
thermal systems and $3 million for photovoltaic systems—there is little risk to the state since the
fiscal impact shows the credit reaching the limit but its not inconceivable that one developer
could apply for most or all of the credits in a given year.
EDD reports that expanding the credit would make the state more attractive for solar system
manufacturers because the credit is supporting market demand.
According to EMNRD, SB 100 would make it easier for low income citizens to participate in
this tax credit, by providing a direct refund for excess tax credit that would otherwise be received
over several years as carry forward tax credit due to low tax liability. Examples of system types
that may be within reach of low income citizens would be solar domestic hot water and solar air
heating systems. Once installed, the solar systems would provide the benefits of essential heat
during the colder fall-winter-spring seasons and also reduce the utility bills of low income
citizens. Small solar photovoltaic systems for electricity may also be within reach. However, as
the chart below shows, for a family of four 150 percent of the poverty level is just under $31,000
making the investment unreachable for most families.
pg_0003
Senate Bill 100 – Page
3
2007 Federal Poverty Level (FPL)
Family Size
150%
1
15,324
$
2
20,544
3
25,764
4
30,974
5
36,204
6
41,424
7
46,644
8
51,864
8 + add $3,400
TECHNICAL ISSUES
There is no definition of “business association" or “owner" and could be construed to refer to
many types of associations and ownership, including share holding. There may also be a need to
clarify that the credit will be awarded based on proportional ownership.
TRD reports a technical issue on page 2, lines 12 & 13, section B, “the amount of the solar credit
shall not be more than 30 percent" is subsequently negated by existing language in lines 14-17.
ADMINISTRATIVE IMPLICATIONS
According to EMNRD, the solar system certification rule (3.3.28 NMAC), would need to be
amended to clarify eligibility.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
If SB100 does not become law, the credit may not be fully utilized until 2011 and limited
liability companies and other business associations would not be able to receive the credit.
NF/bb