BATON ROUGE – The author of legislation that imposed a retroactive cap on the state’s refundable solar panel tax credits is defending a move that is now leaving as many as 2,000 homeowners without their promised refunds.
Former State Rep. Erich Ponti, R-Baton Rouge, resigned from the Legislature shortly after helping to close a $2 billion state budget gap in June 2015. One of his final acts was passing a bill he authored to phase out solar tax credits over three years, getting the state out of an incentive program it could no longer afford.
A general contractor, Ponti thought he’d left lawmaking behind to become executive director of the Louisiana Asphalt Pavement Association. But then came news last week that rattled some taxpayers: The Department of Revenue announced that it had received $40 million in solar tax credit applications as a part of 2015 tax returns -- $30 million more than the annual cap imposed by Ponti’s bill.
What’s more, solar installers have used federally tracked data to estimate that $23 million of those credit requests came from taxpayers who actually purchased and installed their solar panels before the cap was imposed on July 1, 2015. That already exceeds the $10 million cap for 2015 and the $10 million cap for the 2016 tax year, combined.
Ponti and other legislators knew that before imposing the caps.
“They essentially lied to people,” said Beverly Rogan, a Harahan homeowner who purchased a $25,000 solar system on March 5, 2015, back when there was no cap on credits and months before Ponti’s legislation was even proposed. “And (they’re) going back on a law that was in place. I mean, if people knew about it they wouldn’t have taken that risk.”
Matthew Newman of Optimize Solar says he has dozens of angry customers who want to know who’s to blame.
“Our customers are very shaken. I mean, nobody is trusting the state of Louisiana right now,” Newman said.
Newman specifically blames Ponti. He said he and other solar installers worked hand-in-hand with Ponti to craft a bill to phase out the credits without hurting anyone who had already bought panels, but it changed at the last minute to impose the 2015 cap retroactively.
“Representative Ponti assured us completely through the whole process that there’s no way this would ever happen: ‘You’re not going to have a retroactive cap, that would never be possible, that’s not even constitutional,’ we were told,” Newman said.
Newman and other solar industry representatives tell WWL-TV they informed Ponti they had already done at least $20 million of tax credit business before the bill’s final passage.
But Ponti says his bill addressed that and protected people like Rogan by making $25 million in credits available over three years. He said he took the information from the solar companies and made sure there would be enough credits to cover everyone who had already purchased a system – at least eventually.
“We needed to know what contracts were signed, we needed to protect the citizens who already had ink on paper and that’s what we did,” Ponti said. “And we gave room to accommodate a few more.”
Ponti rejects Newman’s contention that the lawmaker “flipped” on the solar sales industry and defends the final version of his bill. He pointed out that the $25 million set aside by the legislation will eventually cover the reimbursements for homeowners who have already purchased solar panels; they may simply have to wait longer than they would have because of the $10 million annual cap, which was imposed to help ease the state's budget problems.
“We needed to protect the citizens who already had ink on paper and that’s what we did,” Ponti said. “Never did I go back on my word."
Still, he acknowledges there will be pain for homeowners who took out short-term loans in order to finance solar panels. Many were counting on being able to collect the tax credits in the year after the work was completed — and before big finance charges would kick in. If the $10 million annual cap means they have to wait another year for those credits, the overall cost of the installation could climb considerably.
That’s why the retroactive cap is so damaging to people like Rogan.
Unfortunately, he said the impact on homeowners who financed their solar panel purchases was an “unintended consequence.”
Customers often buy the systems using bridge loans, allowing them to wait 18 months to collect their tax credits and pay their bill without finance charges. That way, a typical $25,000 system can be purchased for $5,000 out-of-pocket, and the taxpayer can collect a 30-percent federal tax credit ($7,500) and a 50-percent state credit ($12,500) when they file their next income tax returns and can pay off the loan before incurring massive finance charges.
“We just found out actually in the last few days or weeks that they are not going to pay us. So people don’t have a lot of time,” she said. “Our payment is due Aug. 11, in less than a month.”
Ponti says the solar companies never warned him about that issue and he wasn’t aware of it, even though he had authored most of the major solar tax credit bills over the years.
“They gave us the numbers that would satisfy the citizens of the state, but we never had a discussion on the loan amounts or those kind of issues,” he said. “Absolutely, I don’t remember any kind of conversation on that at all.”
Ponti noted that a part of his bill that reduced the tax credit amount from 50 percent of the first $25,000 to no more than $10,000 was not imposed retroactively. It only applied to homeowners who bought systems after the cap was imposed on July 1, 2015.
But that raises the question of why the legislation didn’t just cut off the solar tax credits at that point, given that legislators knew the credits were already nearly exhausted.
By keeping the credits available to people who kept buying the solar panels after July 1, 2015, homeowners who purchased panels in the second half of 2015 had just as much of a chance to get the credits this year as someone who bought the system before the cap was imposed.
It became first-come, first-served, based solely on when the customer’s tax return was handled by the state Revenue Department. Someone who installed panels on Dec. 31, 2015, could have been approved for the credits if the Revenue Department handled his application before someone who had installed them almost a full year earlier.
And Rogan, for example, filed her tax return on Jan. 22, the third day it was possible to do so. But state records show her application wasn’t accepted until Feb. 5, and she didn’t make it under the cap.
Revenue Secretary Kim Robinson, who took over this year as a part of Gov. John Bel Edwards’ administration, said her hands are tied. The best she can do is assure those who filed and missed the 2015 cap get a reserved place in line to get the credit next year.
Jeff Cantin, head of the Gulf States Renewable Energy Industries Association, said he tried to get the Legislature to fix the issue this year, but nobody would take up the cause. He said he’s encouraging solar companies to work with customers and financial institutions to extend loan terms until they can collect the credits next year.