The Honorable Mark W. Everson
Commissioner of Internal Revenue
C/O Floyd Williams
Director of Legislative Affairs
1111Constitution Avenue NW
Washington, DC 20224

 

Dear Commissioner Everson:

 

I am writing regarding a matter of great importance to me and the people of California.  In recent years, domestic and international factors have underscored the need for alternative energy sources.  For California, a leader in environmentally sound and energy efficient initiatives, this means fully realizing the potential of renewable energy policies already in place.  It has come to my attention, however, that the solar industry in California has been impeded from entering into the non-profit market because of existing gaps in tax incentives between for-profit companies and donors who would fund solar installations for non-profits.

 

Solar energy, especially in the state of California, has proven itself as a viable component of an energy independent future for our country.  The solar market in California is an established business sector, representing 80% of the entire US market.  With the intent of emulating this on a national level, last summer I wrote the chairman of the Ways and Means Committee, Bill Thomas, to express my support for increasing the business tax credit for solar energy to 30%.  The increase was incorporated into the final energy bill that was signed by the President in August (Public Law No: 109-58), in addition to a 30% residential solar tax credit.  A strong U.S. solar industry will not only serve our environmental and security needs, but spur investments in manufacturing and small businesses that could create over 20,000 quality jobs in the U.S.  Moreover, Americans will be able to save billions on natural gas and electricity costs.

 

Congress’ efforts have been bolstered by California’s commitment to solar energy.  Earlier this month the California Public Utilities Commission (CPUC) approved the California Solar Initiative, a program to install 3,000 megawatts of solar on California homes, businesses, farms, schools and public facilities over 11 years.  The initiative is the nation’s largest solar power investment.  It will help one million homeowners and businesses install solar energy systems that will provide reliable power for over 25 years, while also achieving billions of dollars in savings for California’s residents.

As you can see, the right steps have been taken on a federal and state level to develop solar energy in the U.S.  However, it is imperative that the IRS collaborate with these efforts by facilitating the entry of the solar industry into the non-profit sector.  As I mentioned above, current tax guidelines proscribe private donors who fund solar installations for non-profits from receiving the same tax credits extended to for-profit companies.  For example, a non-profit organization that receives a $500,000 gift, complying with current guidelines, would be able to purchase a pre-rebate system (California grants up to 40% in rebates for the purchase of solar systems) of approximately $830,000.  The same $500,000, however, would yield a far better return in the for-profit sector.  After 40% in rebates, 30% in tax credits, and the 5-year depreciation schedule which would add a further $300,000 in savings, the cost of a $2 million system would be reduced to a net cost of $540,000- an amount very close to the $500,000 gift.  Providing the same tax incentives to donors would not only enable non-profits to significantly increase their purchasing power, but also allow for a higher return on investment since savings on electric bills would also increase considerably.

 

With the IRS’ compliance, California’s thousands of non-profit organizations can become a lucrative market for the solar industry, not to mention a conduit for increased awareness and use of solar energy.  Therefore, I respectfully request the IRS to explicitly permit donors to purchase solar installations for non-profits, lease them to non-profits and benefit from the tax credits and depreciation, and then sell the systems to non-profits after 5 years.

Thank you very much for your attention to this important matter.  I look forward to your response.