Barry Goldwater Jr.

Barry Goldwater Jr., co-chair of an organization sponsored by rooftop solar leasing companies, decries a Department of Revenue interpretation of state laws that the leases are taxable and asks Gov. Jan Brewer on Wednesday to overrule her agency — something she is unlikely to do. [Howard Fischer/Capitol Media Services]

Calling it unfair — and fearing loss of business — the state's solar industry called on Gov. Jan Brewer on Wednesday to overrule a decision by her Department of Revenue that the rooftop panels they lease are taxable.

Barry Goldwater Jr., chairman of the industry sponsored Tell Utilities Solar won't be Killed, or TUSK, said the state agency acted improperly in deciding that leased panels are subject to the state's property tax on business-owned equipment. He said this is an improper interpretation of Arizona law and Brewer should intercede.

“I'm asking Gov. Brewer: Tear down this tax,” he said at a rally Wednesday at the Capitol populated largely by industry employees but including retired homeowners from Sun City and elsewhere who have leased these units.

Gubernatorial spokesman Andrew Wilder said that's not going to happen. Wilder said his boss is confident in the legal conclusion reached by the Department of Revenue that the panels, when leased, are subject to property taxes.

“Inappropriate requests are being made of the governor to interfere and strong-arm the Department of Revenue,” he said. Wilder said that would make Brewer just as guilty of using the government's taxing agency for political purposes as accusations that the White House leaned on the Internal Revenue Service to pay special attention to efforts by conservative groups to gain tax-exempt status.

But Goldwater insisted this is different. He said Brewer, as the state's chief executive, is certainly free to tell a state agency when she believes it has gotten something wrong.

“They work for her,” he said. “She has the authority to step in. She has influence. She can make that happen.”

Hanging in the balance could be the future of electricity-generating panels on homes. That's because the $13 a month in taxes the Department of Revenue says would due on a typical leased residential system would cut into — and potentially wipe out — the monthly savings on utility bills that companies use to convince homeowners to sign up for the leases in the first place.

The tax question arose because the industry, finding many customers unable or unwilling to shell out tens of thousands of dollars to purchase a system, has adopted a model of leasing the devices to consumers.

The panels are guaranteed to generate a certain amount of power for the lease payments. There is also the promise of lower utility bills, at least in part because homeowners can sell the excess of what they use back to the utilities that have to purchase it.

State law is clear that a panel owned by a homeowner is not subject to property tax, but Sean Laux, spokesman for the Department of Revenue, said leased panels remain the property of the leasing companies.

“This equipment is being used to generate electricity for sale,” he said. And that, he said, means they legally are no different for tax purposes than a power plant, solar or otherwise, owned by a utility.

The department issued a policy statement last year to that effect, with Laux saying that was not based on pressure from any utility.

He said there were meetings last summer with all parties, including with the rooftop solar industry. But Laux said nothing presented convinced his agency that its interpretation of the law is incorrect.

It agreed to delay implementation until this year, a move that gave a chance for industry lobbyists to try to convince legislators to change the statutes.

Senate Majority Leader John McComish, R-Phoenix, introduced a bill to do just that. McComish said the measure came up short of the needed votes as lobbyists from the both traditional power companies and at least one firm hoping to form a commercial-scale solar company working to kill it.

So now the industry is applying political pressure on Brewer to overrule the policy. Attorney Court Rich said Brewer needs to look at the law and conclude that the Department of Revenue is basing its policy on a misunderstanding of what the industry does.

“If you look at a solar lease, it is clear it is a lease of equipment,” he said. “And the customer generates their own electricity.”

Laux said the contracts he has seen are not simple leases of equipment. He said they promise a certain amount of power at a certain price.

“And they guarantee it and will actually pay you if it doesn't” provide those results. “So it sounds to us as if you are paying for a certain number of kilowatts.”

While Wilder said Brewer does not interfere with how agencies interpret the law, there is a precedent of sorts, albeit not on the tax front. It was Brewer's executive order in 2012 that directed the state Motor Vehicle Division to conclude that those in the Obama administration's Deferred Action for Childhood Arrivals are not entitled to state-issued licenses to drive.

That order said that, as far as Arizona was concerned, the fact these DACA recipients were allowed to remain despite being here illegally and issued documents entitling them to work does not make them “authorized” to be in this country for purposes of being licensed. Prior to that order, MVD had taken no position.

Wilder, however, would not discuss that action.

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