Solar customers sue La. Department of Revenue for 'unconstitutional' tax credit cap

By Tara Mapes | Sep 18, 2016

MARRERO – Solar panel customers are suing the state for allegedly violating their constitutional rights when it imposed a cap on refundable solar tax credits in July 2015 and denied claims for systems purchased before the cap went into effect.

In 2015, the state legislature sliced tax credits in response to a purported $2 billion budget deficit. It imposed a cap of $10 million per year on the solar tax credits through 2017. The cap drops to $5 million per year for the 2017-2018 fiscal year.

In July 2016, the state Department of Revenue acknowledged it had already reached the cap to pay claims on purchased systems through the end of Dec. 31, 2017, writing, “Consumers purchasing residential solar energy systems from this point forward should not expect to receive tax credits from the state.”

New Orleans Attorney Larry Centola filed the lawsuit on Sept. 9, requesting certification of a class action against the Louisiana Department of Revenue for refusing to pay more than 1,000 homeowners the credit for which they were qualified.

Before the tax credit went into effect in July 2015, thousands of Louisiana residents purchased solar panels for their homes. The state promised them a tax credit equal to 50 percent of the purchase price that could be combined with the federal solar tax credit of 30 percent. The Louisiana legislature retroactively applied the cap to the solar tax credit and denied credits to homeowners, however. Centola is fighting to have the retroactive cap declared unconstitutional under property laws.

Part of the new law reads, “Beginning in Fiscal Year 2015-2016, the maximum amount of tax credits for purchased systems which may be granted by the department on any return, regardless of tax year, shall be as follows: for tax credits claimed on returns filed on or after July 1, 2015, and before July 1, 2016, no more than ten million dollars of tax credits shall be granted.”

The court complaint alleges the language of the modified law harms consumers because it addresses the date consumers file their tax returns rather than the date the solar panels were purchased. Consumers who purchased systems for the first half of 2015 were doing so prior to the law going into effect, but they could not possibly file tax returns for their purchase until 2016. Consequently, the language of the law places the cap on consumers who purchased systems before the law existed, the suit claims.

“The right to the tax credit attaches once a consumer puts the panels on their homes," Centola told The Louisiana Record. "The people who put their panels (up) had that right when putting the panels on the house. The state can’t take that right away. In our view, it is clear it was unconstitutional. The amount these consumers could be owed is north of $10 million.”

Centola said he believes the motivation for the state to cap the tax credit was that companies were "possibly abusing the tax credits.” 

He explained the tax credit offered 50 percent credits to a system up to $25,000. Some of the systems solar companies were installing weren’t worth that much, but they were fraudulently valuing them at the maximum amount.

“Our information is that (the solar companies’) profit was very large," he said. "The legislature was frustrated by a few bad apples spoiling the bunch so the legislature put a tax cap on credits. Our message to them is that it’s not fair to injure the consumers when the people you were going after were the solar companies."

Centola explained a lot of Louisiana consumers signed up for one-year interest-free loans for their solar systems because the government didn’t have a cap at the time they signed up. He said consumers now are faced with economic hardships they don’t know how to cure. 

“Here we are a year later and they don’t have the $12,500  from the state and their loans will begin accruing 19 percent interest because (the) interest-free time period is about to run out.”

In addition to the loss from the tax credits, consumers have alleged that solar companies are still misrepresenting that the tax credits are still guaranteed. Centola is considering filing a second lawsuit against these companies to prevent further harm to consumers.

Centola said his firm is filing a motion to certify the class and the next step will be to request the district court to declare the cap unconstitutional.

 “We are hoping the lawsuit forces the state to pay the tax credit due to these people who purchased the solar system prior to effective date," Centola said. "Our lawsuit has gotten the attention of some state officials and we are looking forward to working with them to get a resolution that is beneficial. People are frustrated, people are angry; we are hoping our lawsuit is the vehicle for the state to right a wrong.” 

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