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Monday, October 17, 2011
Solar Credits: 1000s of Homeowners to Face Audits to Cover up DoTAX Re-write of Law
By Andrew Walden @ 12:59 AM :: 8206 Views :: Energy, Tax Credits

by Andrew Walden

In a clear response to an October 3 Hawai`i Free Press article exposing abuse of Hawaii solar tax credits, the Hawaii Department of Taxation October 13 announced it would begin auditing homeowners and solar contractors who installed multiple systems and claimed multiple tax credits on a single family residence. The purpose of DoTAX’ sudden flurry of activity is to deceive the legislature by distracting attention from the DoTAX rulings which authorized the abuse of legislative intent.

Stupidly, while seeking to evade responsibility, DoTAX officials led HNN to report: “whether a person spends $15,000 or $50,000, the most they are supposed to get back from the state for a single PV system in a single year is $5,000.” This is tantamount to admitting that two DoTAX TIRs and at least one Letter Ruling have provided false guidance in contravention of HRS 235-12.5 to solar installers for over a year now. In essence, DoTAX has now admitted that they re-wrote HRS 235-12.5 to suit their own whimsy and without legislative authorization started giving away “millions” in taxpayer dollars from the General Fund.

Jeff King, a partner with Solar Services Hawaii, tells HNN: "It seems that the tax office has determined that egregious violations of the intent of the tax law ... have finally caught up with them."

A Big Island solar contractor tells Hawai`i Free Press: “It’s amazing that it took so long for DoTAX to finally crack down on what’s been going on in the industry for years. This has the potential to cause severe turbulence in the PV industry and is sure to catch the attention of Hawaii lawmakers once the next session starts.  We’re in for a bumpy and painful ride.”

To deflect blame, DoTAX will now go after what Jeff King believes will be thousands of homeowners for those millions of dollars. DoTAX’s public statements do not mention any enforcement action against commercial solar installations for whom the tax credit—subject to exactly the same DoTAX rules as residential--is $500,000, not $5,000.

HNN reported the DoTAX line October 13:

The Hawaii Department of Taxation will audit homeowners who broke a state law that offers tax credits for photovoltaic (PV) systems even though it appears many of the homeowners may have unknowingly violated the law because of advice from solar electric companies.

Hawaii law provides incentive for homeowners to install PV systems by offering a 35% tax credit for money spent on new PV systems. So, for example, if someone spends $10,000 on a system, they are eligible to get $3,500 back from the state.

The credit has a $5,000 dollar cap.

The Department of Taxation contends that whether a person spends $15,000 or $50,000, the most they are supposed to get back from the state for a single PV system in a single year is $5,000. But in an effort to generate more business, some solar companies have found a way to get more money back for their customers. They have been installing multiple circuit breakers and inverters and telling customers that every circuit breaker / inverter combo constitutes a separate system.

This last statement is a bald-faced lie. Installation of multiple systems may violate the intent of the Legislature, but this violation comes with explicit and written DoTAX approval. Multiple systems—both residential and commercial-- are explicitly authorized by DoTAX in the following three rulings:

Although we broke this story, Hawai`i Free Press received no response to a couple of simple and obvious questions put to DoTAX spokesperson Mallory Fujitani:

1) Will DoTax be auditing tax credits given for commercial solar and wind installations as well?

2) How will auditors respond to the assertion that contractors and homeowners and commercial installations were acting in accordance with the DoTAX advice given in these May, 2010 DoTAX TIRs and the Feb 2011 DoTAX Letter Ruling"?

The reaction from the solar industry was mixed. HNN reports:

"I think the thing they'll find if they were to audit anybody is that these systems were installed in a way that is consistent with (DoTAX) guidance," said Mark Duda, President of the Hawaii Solar Energy Association....

He acknowledges there are a lot of homes with multiple systems and homeowners who have claimed multiple credits. But says the cases he is familiar with are perfectly legal.

Duda showed us a document from the Department of Taxation dated May 21, 2010. It clearly lists reasons homeowners can install multiple systems and claim multiple credits.

"It is a relatively long list. It includes things like maximum power point tracking, multiple roof planes, shading, future system expansion, increased inverter efficiency, utility interaction requirements, and maximizing the production of renewable energy," Duda said while reading the document word for word.

But, regardless of DoTAX complicity, other solar contractors are relieved at the opportunity to be rid of what the feel is unfair competition destabilizing their business. A Honolulu solar contractor interviewed before the DoTAX announcement, explained:

“Everybody’s talking about environmental sustainability, I don’t think anybody is looking at financial sustainability…. We were not one of those companies playing those ridiculous games calling one panel and one micro-inverter (a system entitled to its own tax credit).

“There’s people getting away with everything…. We talk to people every day that never had permits pulled. That don’t have the systems grounded. That never had their net metering applications processed by their contractor. It’s the wild, wild, west out there right now….”

Added to the mix: A squad of DoTAX bureaucrats pounding on doors—desperately seeking a scapegoat.


DETAILS: Why Stop at $500K? DoTAX Quietly Multiplies Hawaii Solar Tax Credit

HNN: Homeowners face audits over solar tax credit abuse

HNN: Solar industry responds to PV audit concerns




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