Senate Democrats urge more stringent tax rules for Chinese solar firms

Two Senate Democrats unveiled a proposal on Tuesday that would make it harder for Chinese solar panel firms to qualify for tax credits that they say are giving those companies an edge over U.S. manufacturers. 

The measure, introduced by Sens. Charles Schumer (N.Y.) and Sherrod Brown (Ohio), would add a domestic content requirement to solar panels sold in the United States, making it more difficult for Chinese-made solar panel firms to qualify for the 30 percent tax credit that U.S. individuals and businesses receive for purchasing and installing solar panels.

“The federal government has to take China’s stranglehold on the solar power industry very seriously, and U.S. manufacturers must have every arrow in their quiver to fight back,” Schumer said. 

"This proposal is tough, but it’s needed to successfully counter China’s unfair trade practices," he said. 

The proposal would require that 70 percent of the parts of the qualifying solar panel be made in the United States; if the final point of manufacture is here, then 50 percent of the parts must be U.S.-made.

The IRS provides tax incentives for all solar panels sold and installed in the United States, no matter where they are made. 

Schumer and Brown said that it makes no sense to let Chinese companies take advantage of these tax credits on top of the built-in subsidies it gets at home in China.

The Commerce Department on Thursday is expected to announce a preliminary decision on an antidumping petition against Chinese solar manufacturers. 

U.S. solar companies have alleged that China is flooding the U.S. market with underpriced solar panels and illegally subsidizing its solar industry.

“We can’t trade our dependence on foreign oil for a dependence on Chinese-made solar panels,” Brown said. 

"When the Chinese government provides direct export subsidies to its solar manufacturers, that’s not competing, it’s cheating," he said. 

The lawmakers said the Chinese firms have gotten a foothold on the U.S. solar industry at a rapid rate because they have taken large, government-subsidized loans from banks. 

Those loan rates have led to plunging prices for wholesale solar panel makers in the United States, at approximately $1 a watt of capacity today, down from $1.80 in January and $3.30 in 2008, they said. 

Schumer and Brown’s efforts come as the amount of new solar wattage installed in the United States has grown more than 70 percent a year since 2008, yet the vast majority of those solar panels have been Chinese-produced, undercutting U.S. producers and jobs.