North Carolina House committee advances bill ending tax break for new solar projects

A North Carolina House committee on Tuesday approved legislation that would eliminate a long-standing property tax break for new utility-scale solar projects, advancing a proposal supporters say will return millions of dollars to local governments. Some are concerned the move could slow new energy development at a time when demand is skyrocketing.

The proposed committee substitute for House Bill 1213 would repeal the state's 80% property tax exclusion for solar energy systems placed into service on or after July 1, 2027. Existing solar facilities would continue receiving the exemption.

The House Finance Committee approved the measure on a 12-8 recorded vote, sending it to the House Rules Committee.

Rep. Jimmy Dixon, R-Duplin, said the tax incentive, created in 2008 to help establish North Carolina's solar industry, has outlived its original purpose.

"The solar industry in North Carolina has matured greatly over the last 16 years," Dixon told lawmakers. "It's becoming an adult, and it should act on its own as an adult."

An earlier proposal would have phased out the exemption over several years, but lawmakers replaced it after concerns were raised that the gradual approach could have retroactive effects on projects already in development.

The current version applies only to solar systems placed into service on or after July 1, 2027.

Supporters said repealing the exemption would strengthen local tax bases, particularly in rural counties where large solar projects are concentrated.

Joy Hicks, director of advocacy and policy for the North Carolina Association of County Commissioners, said counties statewide forgo about $40 million in property tax revenue each year because of the exemption. She said Edgecombe County alone loses roughly $2.5 million annually.

Opponents argued the change comes as North Carolina faces rapidly growing electricity demand and could discourage investment in new generation.

Democratic lawmakers questioned the timing, noting utilities are forecasting significant increases in electricity use. They also pointed to the role solar lease payments play in helping farmers supplement income during a difficult agricultural economy.

Ken Gurganus, a farmer who leases land for solar development, told lawmakers the payments help cover rising costs for fertilizer, fuel and other farm expenses.

Solar developers also warned the proposal could affect projects that are already under development but will not be operational before the July 2027 deadline.

Greg Gebhardt, director of economic development and government affairs for Cypress Creek Energy, said many projects already have long-term power purchase agreements approved by regulators, leaving developers unable to recover the additional tax costs if the exemption expires before construction is complete.

Dixon said North Carolina has already achieved the goals that prompted lawmakers to create the incentive nearly two decades ago.