Two Republicans hoping to sit on the Arizona Corporation Commission lashed out Wednesday at a decision by the state Department of Revenue to impose property taxes on leased solar panels.
“We have unelected officials in our state passing laws that affect seniors, churches, schools,” complained Vernon Parker. He said if the panels are to be taxed, that should have been a decision by the Legislature.
Lucy Mason, running as a team with Parker, agreed that the levy is unjustified.
“I don't like it at all,” she said during a debate sponsored by the Citizens Clean Elections Commission and televised on KAET-TV.
But Doug Little said it's not that simple. He said that exempting the solar panels leased by individual homeowners from the annual property tax creates an inequity with firms that are in the business of actually selling electricity.
Tom Forese, who has paired with Little in seeking the two open seats on the five-member commission, said his concern is not that the Department of Revenue has decided the panels are taxable but the timing of that decision. He said if the panels are really taxable under state law, the levy should be imposed in a way so that those who leased them before are not suddenly surprised with the new cost.
Hanging in the balance could be the future of “distributed generation,” a key element of solar energy in Arizona.
That idea involves individual homeowners getting their own solar panels to generate the power they need. More to the point, any excess they have is essentially sold back to the power company.
They do remain connected to the electrical grid because of the current limits on the ability to store generated power at night.
State law says panels owned by homeowners do not add to the value of their houses, at least not for property tax purposes.
But with the high cost of these systems — tens of thousands of dollars — the bigger market has been with companies leasing the equipment to consumers. Customers are promised the panels will generate at least a set amount of power at that cost.
Only thing is, the Department of Revenue, after studying the issue, concluded last year that the firms that actually own the panels are in the business of generating electricity. And that, according to Sean Laux, an agency spokesman, makes them taxable as power generating equipment.
The bills will be going out later this year. And the leasing companies will pass on that taxable cost to customers who already have signed — and are stuck in — long-term leases.
That cost, estimated at $13 a month, could wipe out potential savings from leasing solar panels. Aside from affecting existing customers who have signed these long-term leases — including the seniors, churches and schools cited by Parker — it likely would deter future lease deals.
Legislation crafted earlier this year by Senate Majority Leader John McComish that would have clarified the issue a bit faltered. McComish said the plan ran into opposition from traditional power companies.
Forese, who is currently a state representative, said he would hope the Legislature would revisit the issue next year. In the interim, though, the law, as interpreted by the Department of Revenue, remains.
Mason chastised the agency for making that decision.
“It was a tax without the daylight of the Legislature,” she said.
“It was in the shadows of the bureaucracies,” Mason continued. “I'm furious about it because it's taxation without representation.”
Little, however, said those objections ignore what Arizona law requires.
“I don't like any new taxes at all,” he said.
“But recognize that businesses pay these kinds of taxes on property that they own and lease,” Little said. In this case, the panels are owned not by the homeowners but by commercial firms.
“So it's not new,” he said.
Parker, however, said that ignores the reality of the situation: If the state determines these panels are taxable, it's not the firms that own them that will pay the levy. “It's the property owners,” he said, the ones that are already paying the monthly leases.
Gov. Jan Brewer has rejected calls by some solar advocates to ask the Department of Revenue to reconsider its interpretation.
The two Republicans who survive the primary will face off in November against Democrats Sandra Kennedy and Jim Holway.
On a related subject, all four Republicans expressed concerns with the separate costs of what utilities will be able to charge those with solar panels for the privilege of remaining connected to the grid.
The existing commission has allowed at least Arizona Public Service to pass on a small fee, about $5 a month. That's less than the utility wanted but more than solar advocates said was necessary.
The new commission elected in November is likely to revisit the issue.
Little said there is a reason to pass on some of the costs of maintaining the grid even to people who don't use it much.
He compared it to those who own all-electric vehicles who buy no gasoline and therefore pay no fuel taxes that are used to build and maintain highways. “But you still use the roads,” he said.