A bill before the South Carolina House Ways and Means Committee presents a nearly one-and-a-half billion-dollar investment opportunity for the state if it ultimately passes. The Renewable Energy Jobs and Economic Development Bill (S. 44/H. 3079) seeks to attract investment from the solar industry, similar to what North Carolina has enjoyed in recent years, by setting tax policy for solar energy development projects consistent with North Carolina’s. The bill offers the opportunity to help close the investment gap when it comes to solar and also paves the way for major increases in local government revenue in counties around the state. The South Carolina Senate has already passed the bill with overwhelming support (38-4 vote), and SACE encourages the Committee to support the bill and help open the doors to major investment in a clean, reliable, cost-effective energy technology for South Carolina’s future.
Specifically, the bill would exempt residential solar installations from property taxes, which is currently often standard practice in local jurisdictions, albeit in the absence of an official state policy. For larger, non-residential solar energy systems (greater than 20 kW), local property tax would be assessed at 20% of market value.The proposed policy would provide uniformity from county to county on tax treatment for solar energy systems, which would help provide clarity and streamline the installation processes for homeowners and solar developers alike. Currently, solar developers often work out deals with individual counties that result in a tax liability of less than the 20% contemplated by the bill, but the downside of this process for solar developers is that it requires them to go through a negotiation process with each individual county, which adds cost and burden — a barrier for investment. A uniform statewide policy would decrease that barrier, lower “soft costs” for installers, hasten investment, and get more projects in local governments’ tax bases quickly.
South Carolina is lagging behind both its neighbors to the north and south when it comes to investment by the solar industry. For example in 2015, Georgia received an investment of $311 million and North Carolina received an investment of $1.6 billion. In that same year, South Carolina received just $10 million in solar project investment — less than one percent of North Carolina’s sum and about three percent of Georgia’s total.
While some progress has been made in closing this investment gap, especially via Act 236, South Carolina could help level the playing field by changing a messy tax policy into a simpler, streamlined approach, as proposed in S. 44, a policy in line with what has already been adopted by 29 states. What effect could it have? The North Carolina Legislature passed a similar bill in 2008, which exempted 80 percent of the value of solar projects from taxation. The result contributed — along with many other factors — to North Carolina having received more than $4.4 billion in solar investments and $500 million in state and local tax revenue from 2007 through 2015. North Carolina now ranks second nationally in the amount of solar installed.
The South Carolina Solar Business Alliance has identified 91 projects throughout the state that are in various stages of development planning, altogether representing $1.4 billion in investment over the next three years. Unfortunately, some of these projects are on hold until the Legislature provides clarity about how they will be taxed.
The bill not only would attract investment to our state, but would also open the doors to substantially increase revenue for local governments. As Andy Brack reported in the Statehouse Report, since solar farms are generally built on rural land that typically generate little in property taxes, their development can dramatically increase local governments’ tax bases. For example, today, the rural properties that would host the 91 proposed projects generate only $21 thousand in annual property taxes. If the Legislature passes S. 44/H. 3079, the host counties stand to receive $13 million annually. About half of that $13 million revenue increase would be paid to Chesterfield, Darlington, Dillon, Lee, Lexington, and Orangeburg counties.
South Carolina would be wise to pass the bill and help level the playing field and attract additional capital while also promoting non-polluting power generation.