When it comes to providing solar energy tax credits at the state level, Louisiana arguably has the best deal going in the country. Homeowners who install a qualifying solar panel system or solar water heater can receive a tax credit worth 50 percent of the first $25,000 of the cost of the system. That’s a maximum credit of $12,500. The best part? Excess credit is refundable: the Louisiana Department of Revenue will send you a refund check within a year of receiving your claim.

Compared to similar programs in other states, this is a sweet deal. The arrangement hasn’t been without its flaws, however. As Maya Rodriguez at wwltv.com reports, lawmakers recently tweaked the credit to address a minor lacuna that has been gumming up third-party financing:

The state tax credit had already been in effect for several years. The new act closes a loophole in the law, allowing people other than the homeowner to take advantage of the tax credit. That could make it easier for homeowners to get financing for a solar powered system, which otherwise can cost thousands up dollars up front.

The act helps foster a solar leasing business, where an installer pays the money upfront, gets the tax credit and a homeowner leases the system back from them.

“You, in essence, pay a bill to them, just like you would pay your utility bill through Entergy or any other utility,” Von Otnott said. “At the end of the lease, after they’ve made their return on investment, you’re allowed to purchase that system for a dollar.”

Before the change in the law, it wasn’t possible for anyone, other than the homeowner, to claim the state tax credit. Now, though, the new law will benefit not just third parties, but also could be used by developers.

In addition to facilitating solar lease arrangements in the state, the new changes may also improve the prospects of power purchase agreements (PPAs), which typically transfer the underlying tax credit to third-party financiers in exchange for fronting the cash needed to install the solar power system.

Here’s a slightly more detailed explanation of the new provision, enshrined in House Bill 858, from the Database of State Incentives for Renewables and Efficiency (DSIRE):

Louisiana provides a tax credit for the purchase and installation of solar and wind energy systems purchased and installed on or after January 1, 2008. The credit may be applied to personal, corporate or franchise taxes, depending on the entity which purchases and installs the system, but the system must be installed at either a residence or a residential rental apartment complex to be eligible. HB 858, enacted in July 2009, extended the tax credit to taxpayers that purchase and install systems rather than only the owners of the residential property. This legislation also clarifies that only one credit can be taken per system, so if the property is sold, the taxpayer who originally claimed the credit must disclose this, as the new owner will not be eligible for another tax credit on the same system.

The main take aways here: (1) solar panels are relatively expensive and may still, even in the presence of state and federal tax credit, require considerable sums of money upfront; (2) By emending the structure of the state solar tax credit, Louisiana is (as far as I can tell) aiming to enable entities with plenty of money (and tax appetite) — like banks and developers — to qualify for the credit. In the end, the move has the potential to free up more cash for solar installations in LA, which is, in our eyes, a very good thing.

UPDATE: In her article, Ms. Rodriguez states that “the [Louisiana] state tax credit can also be combined with an additional federal tax credit, which can be as high as 20 percent.” Note that she is likely reporting on an effective tax credit rate. The nominal rate for the federal renewable energy tax credit is actually 30 percent. Read here for more information on federal energy tax credits for homeowners, and read here for more info on federal solar incentives for businesses.