By JANINE WEISMAN/ecoRI News contributor
When the General Assembly repealed the renewable energy tax credit in June 2010, the move came as part of a personal income tax system revamp designed to make Rhode Island more business friendly and create jobs.
Tell that to Newport Solar owner Doug Sabetti.
“It has completely shut down my business,” Sabetti said of the abrupt end of the state’s renewable energy system tax credit program on Jan. 1, 2011. Now he said he has no work for three installers who had worked for him and no encouragement to offer the young college graduates who send him their resumes looking for work.
Enacted in 2006, the renewable energy tax credit was one of 19 categories of credits repealed as the General Assembly sought to make the personal income tax overhaul revenue neutral. The revamp reduced the state’s top tax rate from 9.9 percent — which affected households with taxable income exceeding $373,000 — to the current 5.99 percent and reduced the number of tax brackets from five to three. It also increased the standard deduction for all taxpayers.
Little attention was given at the time to the tax credits omitted from the personal income tax legislation passed by the General Assembly and signed into law by then-Gov. Donald Carcieri. Indeed, the repeal was essentially achieved by only one sentence that stated, “No other state and federal tax credit shall be available to the taxpayers in computing tax liability.”
So Sabetti and other small-scale renewable energy systems installers were surprised to learn the tax credit vanished so quietly. The legislation enacting the tax credit is still online, where homeowners considering such projects could look it up and factor them into their cost calculations.
“Nobody knew about it,” said Sabetti, who founded Newport Solar in 2009. He installed five PV systems in 2010 and just two last year. He said he only learned the tax credit had been repealed through a story on ecoRI News.
The tax credit was equal to 25 percent of the system cost for residential installations of photovoltaic (PV), solar hot water, active solar heating, wind energy and geothermal energy systems. System costs were capped at $15,000 for photovoltaic, active solar-heating and wind systems, and $7,000 for geothermal and solar hot water.
Rep. Deb Ruggiero, D-Jamestown/Middletown, submitted a bill Jan. 18 to reintroduce the tax credits for homeowners after trying unsuccessfully last year. Her 2011 bill died in committee and there was no companion bill in the Senate. Her latest bill was referred to the House Finance Committee. In an e-mail, Ruggiero called the repeal an “unintended consequence” of income tax reform.
“The analysis I did with the renewable energy tax credit seems to only cost the state an average of about $150,000 a year,” Ruggiero wrote. “The benefit is to micro businesses (2-3 people operations) doing installations. They pay sales tax, payroll tax, and there is a residual benefit for having this tax credit for homeowners who ... want to be more energy efficient.”
In 2010, the state granted a total of $156,693 in renewable energy tax credits for 64 projects totaling $1.43 million, according to the Rhode Island Office of Energy Resources. These included 26 solar hot water and 23 photovoltaic, 13 geothermal and two wind-energy systems.
Sabetti said an average 2.5-kilowatt-hour, roof-mounted PV system might cost about $11,000. So the $2,750 state tax credit a homeowner used to be eligible for, on top of federal tax incentives, was a significant factor in making the decision to go green.
“That was a big make or break for many homeowners, said Tim Hetland, vice president of Rhode Island Wind Power Inc., in Middletown. “All during the downfall of the economy, no other type of grants or tax credits were in place for residential projects except the federal 1603 grant, which is now a tax credit in place of a cash grant for 2012.”
Hetland installed two residential turbines last year and “could easily have installed a dozen more for residences, but the numbers didn’t work in their favor without the state tax credit of $3,750.”
“It’s what helps you make the decision to do it,” said Hazard Stewart, owner of Newport Geothermal. “I understand the predicament that the state is in, but I think it’s shortsighted on their part.”