Russel Smith is the co-founder and executive director of Texas Renewable Energy Industries Association (TREIA). Hear Russel review and interpret the 2013 Texas Legislative Session and its impact on the solar energy market. Be sure to join this LIVE webinar to find out how the legislature's actions will affect you and your business during the question-and-answer segment following Russel's presentation.

1. Principal Solar Institute
Russel Smith, Executive Director TREIA
Russel Smith is the co-founder and executive director of Texas Renewable
Energy Industries Association (TREIA). His career spans more than three
decades working with governmental, educational and non-profit boards, and
on state committees promoting the development of solar wind, biomass,
geothermal and hydro resources. Smith is also a founding member and
former executive director of the educational non-profit Texas Solar Energy
Society.
.
What Happened for Solar During the
2013 Texas Legislative Session?

2. 83rd Legislature What We Expected?
 Passing legislation considered doubtful
 Simply defending and retaining existing supportive laws would
be the measure of success
 Tea Party politics prominent
 Success exceeded expectations

3. The Usual Massive Undertaking
 Several thousand bills filed
 TREIA targeted 106 bills to support, oppose, or monitor
 50 initially (ultimately 46) garnered official TREIA support
– 5 passed
– 4 passed committee, 1 passed full Senate + House committee
– 12 heard in committee, left pending
– 24 received no hearing
 5 officially opposed – 5 defeated
 55 monitored
– 9 passed, 46 failed

4. Bills Monitored and Passed
 Of 9 monitored bills that passed, 4 of interest
– HB 35 – HOA/POAs may not prohibit home owner’s use of adjacent lot
for residential purposes
– HB 1223 – Tax refund on equipment purchase to manage/operate data
centers, includes electric and cooling
– SB 700 – State agencies and institutions of higher ed. Must set % goals
for reducing elec. consumption and produce plan to do so
– SB 902 – Certain water districts must study elec. consumption and
implement measures to reduce

5. Bills Opposed and Fixed
HB 1490 - Authorized solid waste disposal fees
for use funding natural gas fueling stations,
municipal solid waste renewable energy
projects, or wastewater treatment facility
biogas projects.
Successfully defended renewable energy
definition

6. Bills Opposed and Defeated
 HB 538 (Rep. Yvonne Davis) – Repeal Property Tax Exemption,
Franchise Tax Exemption, Fuel Use Tax Exemption for
renewables.
 HB 605 (Rep. Lozano) – Made siting wind plants near airports
more difficult. Extended reach of related zoning to extra-
territorial jurisdictions and within a 25 mile radius of state or
federal radar installation.
 HB 2026 (Rep. Sanford) – Repeal of state’s Goal for Renewable
Energy including renewable energy credits and CREZ project.

7. Bills Opposed and Defeated, cont’d
 HB 2338 (Rep. Parker) – Amended existing HOA law to allow
prohibiting solar installation 1) visible from street in front of
property; 2) weighing more than roof can support; 3) covering
more than 50% of roof; 4) if in yard not reasonably concealed
from public view by privacy fence; 5) generates more
electricity than necessary for residence; 5) impacts electric
service of neighboring properties by creating voltage spikes.
 HB 2695 (Rep. Yvonne Davis) – Allowing municipalities to
regulate wind turbines in the extra-territorial jurisdiction of
the municipality.

8. Bills Supported and Passed
 SB 385 (Sen. Carona) – Property Assessed Clean Energy
(PACE). Effective immediately.
 HB 2500 (Rep. Bohac) – Appraisal of solar energy property for
ad valorem tax purposes. Effective Jan. 1, 2014.
 HB 3390 (Rep. Hilderbran) – Chapter 313 Texas Economic
Development Act. Effective Jan. 1, 2014.

9. Bills Supported and Passed, cont’d
 HB 2712 (Rep. Perez) – Ad valorem tax exemption of energy
storage systems used for the control of air pollution in a
nonattainment area. Effective Jan. 1, 2014.
 HB 1864 (Rep. Bohac) – Consideration of Combined Heat &
Power systems for certain government facilities

10. Bills Supported, Didn’t Pass, Went Farthest
 SB 1239 (Rodriguez) – Passed committee. Fair mkt. value for
DRG surplus. Coops & Munis included
 SB 1478 (Rodriguez) – Passed committee. El Paso Electric must
purchase 50% of required RECs from their Tx. service territory
 SB 1551 (Lucio) – Passed full Senate, passed House
committee. DRG demonstration for Colonias in Rio Grande
Valley

11. HB 385 – PACE
Key Definitions
 “Qualified Improvements” - PACE funding under SB 385 is restricted to
“qualified improvements,” defined as:
– …[P]ermanent improvement[s] fixed to real property and intended to
decrease water or energy consumption or demand, including a
product, device, or interacting group of products or devices on the
customer’s side of the meter that uses energy technology to generate
electricity, provide thermal energy, or regulate temperature.
 “Real Property” - Within this definition, “real property” means:
– …[P]rivately owned commercial or industrial real property or
residential real property with five or more dwelling units.

12. HB 385 – PACE, cont’d
Exclusions
 Some property and projects are specifically excluded from
eligibility under SB 385. This includes financing for:
– undeveloped lots or lots undergoing development at the
time of the assessment; and
– the purchase or installation of products or devices not
permanently fixed to real property.

13. HB 385 – PACE, cont’d
Eligibility for Financing
 Written contracts are required
 Can be provided by third party or local government
 If third party, local government must also contract with third
party financier
 the period of the property assessments may not exceed the
useful life of the qualified project
 The financing may include
– the cost of materials and labor necessary for installation or
modification of a qualified improvement
– a wide range of fees

14. HB 385 – PACE, cont’d
Financing Requirements
 Mortgage lien holder consent. Local government must obtain written consent from holder of
any mortgage lien on the property
 Record keeping. Local governments are required to file written notice of each contractual
assessment in the real property records of the county in which the property is located
 Lien status. Assessments are considered a first and prior lien against the real property
 Collections. Local governments may contract with another taxing unit to perform duties
relating to collection of assessments
 Bonds. Local governments are authorized to issue bonds or notes to finance qualified
projects
 Prohibitions: Local governments may not make the issuance of a permit, license or other
authorization from the local government contingent on participation in a PACE financing
program, or otherwise compel a property owner to use PACE financing for a qualified project

15. HB 385 – PACE, cont’d
Program Establishment
Local governments must:
 determine a program is “convenient and necessary;”
 designate a region or regions within the local government’s jurisdiction in
which the program will operate;
 prepare a detailed report describing the program;
 adopt a resolution of intent to establish a program, including
announcement of a public hearing and availability of the detailed report;
 hold a public hearing at which the public may comment on the proposed
program and required report;
 adopt a resolution establishing the program and its terms; and
 two or more local governments are authorized to administer a program
jointly.

16. HB 385 – PACE, cont’d
Project Review and Savings Verification
 Each proposed project is required to provide a review by an independent
third party of the water or energy baseline conditions and the projected
water or energy savings expected. Once a project is completed, the local
government must obtain verification that the project was properly
completed and is operating as intended.
Project Ownership
 Participating property owners may purchase directly the equipment and
materials necessary for the qualified improvement, or may contract
directly, including through lease, power purchase agreement, or other
service contract, for the installation or modification of a qualified
improvement.

17. HB 2500 – Solar Energy Property
Tax Appraisal
Key Definitions
“Solar energy property” – “Sec. 23.26. SOLAR
ENERGY PROPERTY. (a) In this section, “solar energy
property” means a “solar energy device” as defined
by Section 11.27(c)(1)that is used for a commercial
purpose, including a commercial storage device,
power conditioning equipment, transfer equipment,
and necessary parts for the device and equipment”

18. HB 2500 – Solar Energy Property
Tax Appraisal, cont’d
Purpose of the Law
 Removes ambiguity as to the assessment of ad valorem taxes
on solar energy property
 Enables appraisers to take into account rapidly occurring
technological changes in the solar industry
 Does not create a new incentive or abatement
 Does not affect any currently existing incentives or
abatements

19. HB 2500 – Solar Energy Property
Tax Appraisal, cont’d
Requirements in the Law
 In determining market value of a solar energy property an appraiser in an
appraisal district must:
– Use the cost method of appraisal
– Use cost data obtained from generally accepted sources
– Make an appropriate adjustment for physical, functional, or economic
obsolescence
– Calculate the property’s depreciated value using a maximum useful life
of 10 years
 An appraiser may not:
– Determine the depreciated value to be less than 20 percent of the
value determined using the above method

20. HB 3390 - Limitation On Appraised Value
(CHAPTER 313)
Program Extended and Renewables Included
 Chapter 313, Texas Tax Code (Texas Economic Development Act), was
scheduled to expire on December 31, 2014
 Several related bills filed
 Effort to eliminate the program failed
 Efforts to remove “renewable energy electric generation” as an eligible
property use option failed
 Elements of different bills included in HB 3390 which passed – effective
Jan. 1, 2014
 Program extended for 8 years thru 2022

21. HB 3390 - Limitation On Appraised Value
(CHAPTER 313), Cont’d
Time Elements Extended
 Program extended for 8 years thru 2022
 Term of limitation agreements lengthened from 8 years to 10
years
 Property owner’s “viable presence” requirement extended
from 3 years to 5 years

22. HB 3390 - Limitation On Appraised Value
(CHAPTER 313), Cont’d
Comptroller Gains Greater Approval Authority
 Legislative intent clause says keep ultimate control of economic
development related property tax decisions at local level
 School district must request third party economic impact evaluation
 Comptroller determines what info. will be included in the evaluation
 Comptroller must determine that project will result in economic impact on
state within 25 yrs. sufficient to offset certain tax revenue lost to the
school district
 Comptroller must determine that receiving limitation is a determining
factor in project locating in Texas

23. HB 3390 - Limitation On Appraised Value
(CHAPTER 313), Cont’d
Comptroller Gains Greater Approval Authority, Cont’d
 Comptroller determines whether issue a Certificate for Limitation on
Appraised Value
 Comptroller’s office may issue Certificate if requirements not met if it
determines other benefits justify
 A school district may choose not to approve an application regardless of
Comptroller’s actions
 A school district may not approve an application if Comptroller does not
issue a Certificate

24. HB 3390 - Limitation On Appraised Value
(CHAPTER 313), Cont’d
Job Creation Requirements – Tightened Here, Loosened There
 “Qualifying Job” remains a permanent full-time job with certain benefits
 “Qualifying Job” must pay at least 110% of county manufacturing job
average weekly wage, not “county average weekly wage for all jobs” if
property owner creates over 1,000 jobs, as before
 Number of jobs that must be created remains 25
 Provision allowing 20% to be “non-qualifying” jobs is eliminated
 Average weekly wage for non-qualifying jobs must now be greater than
the county’s average weekly wage

25. HB 3390 - Limitation On Appraised Value
(CHAPTER 313), Cont’d
Supplemental Payments Modified
With the exception of certain special circumstances, supplemental payments by applicants
for limitation on appraised value to school districts, and now any other entity on behalf of a
district, is modified. Instead of the previous $100/student/year, the new law allows the
greater of $100/student/year, or $50,000/year.
Minimum Qualified Investment
The required minimum qualified investment amounts remain as before. Penalties for failing
to meet the minimum qualified investment also remain, however the Comptroller may now
grant a waiver of penalties under certain circumstances.
Minimum Amount of Limitation
The minimum amount of tax limitation a school district may agree to is increased in school
district categories II – V. Category V = $10 million; Category IV = $15 million; Category III = $20
million; Category II = $25 million; and Category I is unchanged at $30 million

26. HB 2712 - Ad Valorem Tax Exemption - Energy
Storage Systems
Key Definitions
“Energy Storage System”:
Sec. 11.315. ENERGY STORAGE SYSTEM IN NONATTAINMENT
AREA. (a) In this section, "energy storage system" means a
device capable of storing energy to be discharged at a later
time, including a chemical, mechanical, or thermal storage
device.

27. HB 2712 - Ad Valorem Tax Exemption - Energy
Storage Systems, Cont’d
Eligibility Requirements
 A person is entitled to an exemption from taxation by a taxing unit of an
energy storage system owned by the person if:
– it is to be used, constructed, acquired, or installed wholly or partly to
meet or exceed local, state, or federal rules for monitoring, control, or
reduction of air pollution;
– it be located in an air non-attainment area of the Federal Clean Air
Act;
– it also be located in a municipality with a population of at least
100,000 adjacent to a municipality with a population of more than two
million;
– have a capacity of at least 10 megawatts; and
– be installed on or after January 1, 2014.

28. HB 2712 - Ad Valorem Tax Exemption - Energy
Storage Systems, Cont’d
The Granting Entity
 The tax exemption is an option controlled and granted by
– the county commissioners where the municipality is located, the
corresponding appraisal district board and its chief appraiser, and/or,
– the local school district where the project is located and it’s governing
board.
 Compensation and Benefits to Grantee
– School district to be fully reimbursed by the State of Texas for lost tax
revenue
– Municipalities or counties recover tax abatement indirectly through
job creation and local spending, plus mitigation of cost of poorer air
quality that would exist without the system.

29. HB 2712 - Ad Valorem Tax Exemption - Energy
Storage Systems, Cont’d
Term of Exemption
 The act has no term limit for granting the tax exemption
 local taxing authority may revoke the exemption at any time
for the coming year
 The exemption, once granted, need not be reapplied for
annually

30. Principal Solar Institute
Russel E. Smith, 512-345-5446, rsmith@treia.org
Scott Kornfeld, 612-716-9012, skornfeld@treia.org
Not a member? Click “Join TREIA”
at
www.treia.org