U.S. Senate Democrats urge creation of tax credits to help people install solar

A group of 25 U.S. Senate Democrats are urging Senate leaders to include a direct pay option for residential renewable energy property tax credits in the Internal Revenue Code to help low- and moderate-income (LMI) households install solar energy systems.

The lawmakers said this initiative would help to meet President Joe Biden’s goal of curbing greenhouse gas emissions by 50 percent from 2005 levels by 2030. They are calling for the direct pay option to be included in the upcoming reconciliation package.

“This essential tax credit is designed to help residential customers install renewable energy systems such as solar, wind and geothermal, but without a direct pay option, the low- and moderate-income (LMI) households who would benefit most from distributed generation are effectively blocked from accessing this tax credit,” the senators wrote in a letter to Senate Majority Leader Chuck Schumer (D-NY) and Finance Committee Chairman Ron Wyden (D-OR). “We believe that a direct pay option will not only help us meet President Biden’s goal of a 50% reduction of greenhouse gas emissions over 2005 levels by 2030, but it will also help address long-standing impacts of climate injustice.”

The letter was signed by 25 senators, including U.S. Sens. Alex Padilla (D-CA), Dianne Feinstein (D-CA), Cory Booker (D-NJ), Tammy Duckworth (D-IL), Jon Ossoff (D-GA), and Brian Schatz (D-HI).

“Renewable energy and environmental justice advocates estimate that roughly half of American households – approximately 60 million households – do not owe enough taxes to fully capitalize on the 25D tax credit in a single year under current law,” the senators added. “However, because these LMI households spend more of their income on energy bills, they will benefit disproportionately from installing distributed generation like solar on their properties. We have an obligation to ensure that all Americans have equal access to benefit from the renewable energy transition, and securing 25D direct pay is critical to this goal.”

The current tax code prevents an estimated 26 million households from fully benefiting from the residential solar tax credit in the same year that the system was purchased and placed in service. Implementing a direct pay option would allow homeowners to immediately realize their tax credits through a refund provided by the IRS.

The senators proposed a verification process at the Internal Revenue Service (IRS) where homeowners would provide basic data and proof to the federal government of their solar or other renewable system installation.