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Sunday, June 03, 2012
CoR: Solar Tax Credit Scammers Will Take $491M More than Projected
By Andrew Walden @ 8:36 PM :: 5278 Views :: Energy, Environment

by Andrew Walden

The failure of the Legislature to check rampant abuse of Solar and Wind tax credits and shortfalls in projected income from last year's GE Tax hike may cost the General Fund as much as $721M over the coming seven years according to the latest Council on Revenues forecast.

At its May 29 meeting, the CoR lowered its growth forecast for 2013 from 7.5% to 5.3%.  Because CoR projects year on year growth, this shortfall causes increasing losses from $106M to $135M each year thereafter.  The CoR didn't beat around the bush.  Just days after the Legislative Conference Committee failed to pass out HB2417 which would have applied modest restrictions on the growth of solar tax credits, the CoR explained:

The downward revision to the forecast for FY 2013 is mainly due to revised estimates for the revenue gains from Act 105 and the possibility that the renewable energy tax credits might cost more than initially anticipated.

CoR Chair Richard Kahle tells HNN:

"It's the tax law that's jerking us around. Every house built has to have a solar on it, or some kind of PVC on it. And that means every house gets a tax credit. Multiply that by two, three per house, you got a problem."

Lowell Kalapa of the Tax Foundation of Hawaii, cites DoTax estimates that the suspension of certain general excise tax exemptions will bring in $70M, not the $300M previously projected.  This means that the abuse of Solar and Wind tax credits is likely to cost taxpayers $491M--nearly half a billion dollars above the costs projected ealier.

Year

Gen Fund Revenue ‘000

Growth year over year

Previous Forecast

Gen Fund Previous Forecast ‘000

Difference ‘000

2012

4,848,828

12.0%

12.0%

4,848,828

0

2013

5,105,816

5.3%

7.50%

5,212,490

106,674

2014

5,310,049

4.0%

4.0%

5,420,989

110,940

2015

5,639,272

6.2%

6.2%

5,757,091

117,819

2016

5,864,843

4.0%

4.0%

5,987,375

122,532

2017

6,158,085

5.0%

5.0%

6,286,743

128,658

2018

6,465,989

5.0%

5.0%

6,601,080

135,091

·         Total Lost to General Fund: $721,714,000

·         Loss Due to failure of Act 105: $230,000,000

·         Solar and wind tax credit abuse: $491,714,000

Hawai`i Free Press last November exposed massive DoTAX-authorized abuse of State Renewable Energy Technologies Income Tax Credits (RETITC) by both residential and commercial solar projects.  This led directly to several pieces of legislation aimed at curbing the outlay.  The last of these, HB2417 HD2 SD2, amended into HB2417 CD1, died in Conference Committee April 27.  According to sources on the committee, Senate Ways and Means Committee Chair Sen. David Ige (D-Pearl City, Aiea), and House Finance Committee Chair Rep. Marcus Oshiro (D-Wahiawa) decided that no tax credit bills would pass this session.  The rationale was that in an election year, they did not want to anger any donors. 

Because Hawaii has the most lopsided legislature in the nation, and because Democrat legislators are punished for challenging any decision of Committee Chairs, there are not sufficient minority legislators to win the necessary 30% vote on the floor of the House or Senate to pull a bill out of committee and force a floor vote. 

Tuesday June 5 is the last day to file papers to run for legislature and many incumbents face little or no electoral challenge.   

Hawaii has the nation's most regressive State tax structure.  Now, thanks to secretive last minute negotiations, nearly half a billion dollars may be siphoned from the pockets of working class and middle class taxpayers and exported to mainland solar and wind companies, and the banks, brokerages and tobacco companies which finance them.

Knowing that no Hawaii media outlet would explain his culpability, Oshiro boldly indicted himself in a May 29 interview with KHON:

It means restricting Medicaid payments to hospitals, all of the grant in aids that were recently approved by the legislature, aid to community health centers, assistance to domestic violence shelters.

This will definitely have an impact on their collective bargaining positioning when they go in, right now as they look over the next several years.

But this is not the end of culpability.  Multiple solar credits per house are allowed only under DoTax Tax Information Releases 2010-02 and 2010-03 and a February 11, 2011 DoTAX “Letter Ruling.”  These edicts clearly violate the intent of the underlying RETITC Law: HRS 235-12.5.  It is thus fully within the power of the Abercrombie Administration to order DoTax to revise its interpretation of HRS 235-12.5. 

---30---

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