By Chas Sisk, The Tennessean
A tax break for Tennessee's solar industry violates the state
constitution because it favors certain taxpayers, state Attorney General
Robert Cooper said Friday, jeopardizing the future viability of the
An exemption created in 2010 for solar and other green
energy installations is prohibited by a provision of the state
constitution that says the legislature cannot pass laws that let certain
taxpayers out of paying property taxes, Cooper said.
was one of three that former Gov. Phil Bredesen pushed through the
legislature in the waning days of his administration. The decision is
likely to rekindle efforts, led by state Comptroller Justin Wilson, to
roll back the property tax exemption and replace it with a less generous
"The opinion reaffirms the position the comptroller's
office has held all along," said Jason Mumpower, the comptroller's chief
Bredesen, a Democrat, pushed breaks for green energy as
part of his 2010 tax bill, arguing that the state's nascent solar power
sector needed to be bolstered.
But questions about the tax breaks
began just weeks after they were passed, when Bredesen and two top
aides, Economic and Community Development Commissioner Matt Kisber and
Revenue Commissioner Reagan Farr, formed a solar energy company, Silicon
Ranch Corp. Eight of the company's projects were approved this summer
to receive the tax breaks.
Earlier this year, Wilson, a
Republican, urged the GOP-dominated legislature to repeal the property
tax break. Wilson said the break on property taxes is so generous that
it is in effect an exemption.
That runs counter to a 1986 attorney
general's opinion that Tennessee's constitution forbids the legislature
from letting select taxpayers out of property taxes, the comptroller
Wilson's office urged lawmakers to repeal the break.
Industry fights back
Supporters of the solar industry have fought back. They say that
removing the exemption would amount to a tax hike on an industry that is
still getting off the ground.
"It's a huge problem for us," Gil
Hough, chairman of the Tennessee Solar Energy Industry Association and
manager of the renewable energy division of Restoration Services Inc. in
Oak Ridge, said Friday. "This will kill a lot of projects and a lot of
jobs in the state."
After several weeks of debate during the 2012
legislative session, lawmakers set the issue aside so Cooper's office
could review the constitutionality of the exemption.
former adviser to Bredesen, sided with the comptroller's office. Saying
that nothing in the law has changed since 1986, Cooper and other state
attorneys wrote that the state constitution still prohibits a blanket
exemption from property taxes for any group of companies.
is no basis to presume that all machinery and equipment used to produce
electricity in a certified green energy production facility is of
negligible value," they wrote. "The valuation method ... effectively gives
certain business owners a property tax exemption that is not authorized
by the Constitution."
The ruling does not kill tax breaks for
green energy altogether. Two other breaks - a credit for sales tax paid
on green energy machinery and equipment and an exemption from franchise
taxes - have not been challenged by the comptroller's office.
comptroller also has proposed a less generous property tax break for
solar power. Rather than an exemption, Wilson's office proposed valuing
solar equipment at one-third of its installation cost, a break already
enjoyed by wind power.
"It's a different way of doing the same thing," Mumpower said. "What we want to do, unequivocally, is fix this issue."
But with its narrow profit margins, the solar industry would struggle with a smaller property tax break, Hough said.
are very hopeful that we can work something out with the comptroller's
office," he said. "This last bill kind of caught us by surprise, but I
think we can come up with a compromise that is constitutional and won't
hurt the industry."