Missouri ends solar tax relief as federal incentives grow

As the U.S. government expands incentives for renewable energy, a Missouri Supreme Court ruling is pushing the state in the opposite direction by ending a solar energy tax break that had been planned for nearly a decade.

Legislation signed by President Joe Biden on Tuesday injects about $375 billion over a decade into initiatives aimed at tackling climate change. These include expanded tax breaks for clean energy generation, such as wind and solar power, and for consumers to install solar panels on their property.

Democrats passed the legislation through a divided Congress last week, around the same time Missouri’s top court overturned a 2013 state law granting a property tax exemption for some solar energy systems. The court said the tax relief was not authorized by the state constitution.

The case involved a private solar farm providing power to City Utilities of Springfield, which serves Missouri’s third-largest city. As a result of the ruling, the company that owns the solar power farm will owe at least $423,360 in property taxes from 2017 to 2020, Greene County collector Allen Icet said.

It’s unclear how many other solar power sites across Missouri could be affected by the ruling, or exactly how much tax revenue is at stake.

But the decision could have a chilling effect on the development of solar energy in Missouri, just as the federal government is trying to encourage it.

“It would obviously put a big problem and be expensive for someone trying to set up a large panel system, if you have to pay taxes on the material generating this renewable and free energy,” said Jon Dolan, executive director of the Solar Energy Industries Association of Missouri.

Federal and state governments have long offered incentives for solar power. A federal income tax credit for people who install solar panels on their property or make other energy-efficient upgrades has been renewed several times since 2005. Legislation Biden signed extends the tax credit through 2034 .

The new federal law also includes billions of dollars in tax credits to spur investment in clean energy manufacturing facilities and to offset production costs for items such as solar panels, wind turbines and batteries.

Beginning in the early 2000s, many states also funded rebates for residents to make energy-efficient upgrades. While some of these programs have been phased out, states have continued to offer other incentives for renewable energy.

Missouri was one of 38 states and the District of Columbia offering some sort of tax break for solar power systems, according to a database maintained by North Carolina State University’s NC Clean Energy Technology Center. Some states offer full tax exemptions while others only provide relief for a limited time or only for residential solar systems. Some states have given local authorities the power to waive property taxes for solar power systems.

The Missouri court’s decision “is an outlier” nationally, said Brian Lips, senior project manager for policy at the NC Clean Energy Technology Center.

“A lot of these incentives are basically on autopilot at this point,” Lips said. “So it’s interesting for a state to question something, especially something that’s been in place for so long.”

Missouri will not be devoid of solar energy incentives. A new state law taking effect Aug. 28 will provide a sales tax exemption for companies that purchase components to build solar power systems. This law also creates a working group to study solar energy policies, focusing in particular on those who distribute energy from their own solar panels to the electricity grid.

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This story has been corrected to show that 38 states, not 39, provide property tax relief for solar power systems.