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Solar firm gets tax breaks

3:00 PM, Oct 27, 2012   |    comments
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By Chas Sisk, The Tennessean

A company set up by former Gov. Phil Bredesen and two senior members of his administration has asked for tax breaks for several projects, tapping a law they helped push through just weeks before the company was founded.

The Tennessee Department of Environment and Conservation has certified eight projects from Silicon Ranch Corp. - a startup founded in 2010 by Bredesen, former tax chief Reagan Farr and former economic development chief Matt Kisber - for incentives that could slash their local and state tax bills.

The incentives were proposed by the Bredesen administration itself two years ago as a way to promote Tennessee's solar industry.

Bredesen and other Silicon Ranch officials could not be reached for comment by The Tennessean on Friday. But Farr, now the company's chief operating officer, told the Nashville Business Journal that they believe enough time has lapsed that company officials now feel comfortable applying for tax breaks they helped create.

"It was vetted and looked at and became something we were comfortable taking advantage of," he said.

Papers incorporating Silicon Ranch were filed in Delaware in August, with Bredesen listed as its chairman, Kisber as its president and chief executive officer and Farr as its vice chairman. Bredesen, whose role has been described as a passive investor, told The Tennessean in 2010 that he asked Farr to resign from state government to avoid any conflicts of interest.

Amount unknown

How much Silicon Ranch will receive in tax breaks for the projects will probably remain confidential. A spokesman for the Department of Revenue said it could not disclose whether Silicon Ranch has asked for tax breaks or how much it is in line to receive.

Bredesen, Farr and a third member of the former governor's Cabinet have been enthusiastic supporters of the solar industry. Promoting the industry in Tennessee was a linchpin of the governor's economic development strategy, with Farr and Kisber playing key roles in drawing companies such as Wacker Chemie and Hemlock Semiconductor to the state.

Both companies make polysilicon, a raw ingredient in solar panels.

They began laying the groundwork for Silicon Ranch before leaving office in 2010. Since then, they have announced several major projects, but company officials did not apply for tax breaks until this year.

Now Silicon Ranch is poised to receive breaks that could underwrite several of its projects in Tennessee.

The company could receive credits for three related projects near Pulaski, Tenn., that it says will generate 1.4 megawatts of electricity, enough for about 140 homes.

Tax incentives could also go toward solar arrays at two HCA's facilities in Midtown Nashville that will generate 193 kilowatts each, an array at the Second Harvest Food Bank in MetroCenter that will produce 260,000 kilowatt hours a year, a 1-megawatt solar farm at the Agricenter International building in Memphis and a 750-kilowatt array at the Memphis Bioworks Foundation.

The company is also building a 9.5-megawatt array for Volkswagen in Chattanooga and a 30-megawatt solar farm in Georgia that do not qualify for tax breaks.

The Silicon Ranch projects were approved for tax breaks in July, but they were not disclosed in September, when The Tennessean requested a list of all applications for recognition as a "certified green energy production facility." A spokeswoman for the department said a backlog in updating files meant the information had not been included on spreadsheets released to the newspaper.

Under the law, the projects qualify for three tax breaks:

• The company could get a full refund of any sales taxes it pays or owes on machinery or equipment.

• It would receive an exemption from the state's franchise tax on equipment.

• The company's local property taxes would be calculated based on the salvage value of the solar equipment, essentially nothing.

Credits expanded

Bredesen greatly expanded the use of tax breaks, making it a centerpiece of his economic development strategy. Farr and Kisber played key roles in formulating that policy, often testifying before the legislature on behalf of credits and exemptions that they said would encourage companies to open businesses or relocate to Tennessee.

Bredesen, a Democrat, argued tax incentives were a better deal for Tennessee than cash payments because companies could claim them only if they had fulfilled their obligations. But many Republicans have since complained that tax incentives are harder to track because tax returns are confidential in Tennessee.

Gov. Bill Haslam, Bredesen's Republican successor, has proposed giving companies lump sums for investments in Tennessee.

The Bredesen administration proposed the three tax incentives for solar energy in its 2010 tax bill, the last the governor proposed before leaving office. State lawmakers approved the measure in early June, shortly before adjourning for the year.

Tennessee now ranks 17th in the nation in solar-power capability. A recent report from the Pew Charitable Trust said the state has the third-fastest growing clean energy sector in the nation.

Farr resigned from the Department of Revenue nearly a month after Silicon Ranch was formed, and Kisber remained in office until late in the year. During that time, Kisber met with officials from at least one major Tennessee company, Corrections Corporation of America, to discuss a potential partnership with Silicon Ranch.

Rollback withdrawn

Lawmakers last year discussed rolling back one of the three tax incentives - the provision that slashed solar companies' property tax bills. State Comptroller Justin Wilson argued that taxing solar panels at a different rate would violate the state constitution.

The bill was withdrawn after solar companies complained that eliminating the tax break would crush the nascent industry.

The two other tax breaks for solar companies have not been reassessed.

Farr told the Nashville Business Journal that the legislature's failure to repeal the property tax break amounted to a "reaffirmation" of the proposal.

But Jason Mumpower, the comptroller's chief of staff, disputed Farr's interpretation of the legislature's inaction. He said lawmakers deferred a decision to give the attorney general time to review that matter.

"We were concerned with this one provision slipped into the end of the (2010) bill that created an exception for a certain type of solar equipment," he said. "We thought, surely to goodness, this had to be in error. ... This all has nothing to do with any individual or individual company."

Lawmakers could revisit the issue when they reconvene in January.

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