A solar-energy-systems trade association is forcing at least one local company to change its marketing practices, apparently partly because of concern that adverse publicity might harm a move in Congress to extend renewable energy tax credits due to expire Dec. 31.
The Maryland-District of Columbia Solar Energy Industries Association (MD-DC SEIA) has suspended the membership of Atlantic Solar Energy Inc. of Landover until the company drops what the national SEIA calls "heavy advertising rebates" for customers, which distort the value of the merchandise and swell the size of the tax credit. Such rebates are in violation of the trade group's code of ethics.
Atlantic Solar, which does most of its business in Northern Virginia to take advantage of the state's solar tax credit -- Maryland has none -- has been selling single-panel solar hot-air room heaters for $4,995. But it offers buyers a taxable payment of about $1,300 in return for help in getting new business. To receive the payment, buyers must conduct up to four all-day open houses and as many as 12 shorter tours, display a sign with the company name and keep energy-use records. The company says it is switching to a new practice, at least in some markets.
The Internal Revenue Service has been investigating the use of refunds, rebates and other payments in the solar-energy-systems industry. If the services provided are not worth the money, the IRS wants the payment deducted from the sales price when customers calculate the 40 percent federal credit and, by inference, the 25 percent Virginia state credit, according to IRS investigators.
The IRS also is searching for customers who fail to declare any payments for such work. Atlantic Solar Executive Vice President S. Steven Friedland said his company issues earnings statements on the payments for customers to send to the IRS.
Nevertheless, MD-DC SEIA suspended Atlantic Solar in September after the company's president, Randy Blum, said he continued the controversial practice because he was unable to find a substitute that would be as successful. Tom Leyden, MD-DC SEIA president and president of an Annapolis firm that markets solar energy systems, said he realizes there was "no malicious intent" on Atlantic Solar's part. He noted that the company was frank about its inability at the time to find another good strategy.
More recently, Blum said his company's new plan to pay customers a commission only if they make a sale "looks promising" as a marketing tool and as a way to avoid questions about the present program. "We are currently phasing out the old program in Virginia," Blum said. "We will drop it within 30 days."
Although Atlantic Solar's attitude is being viewed favorably, the response from another firm to similar complaints about rebates that violate the group's ethics code has been discouraging, according to David Gorin, SEIA executive vice president. The officers of General Solar Energy Inc. of Falls Church "were totally and completely unsympathetic to the notion that their actions violate SEIA's ethics code," Gorin said. General Solar Vice President Don Hyre insisted to a reporter that he is operating within the law, but claimed that his competitors are cutting ethical corners.
He refused to say whether he offers to pay customers for holding open houses and tours or for installing advertising signs. However, he stressed that his salespeople always provide buyers with information on federal and state tax credits and suggest that they consult a tax adviser. "We're not tax attorneys," he said.
Asked about the potential for abuse from such payment practices, Hyre replied, "It's not my concern. We have no problems, we're not willing to publicize it, and any damaging misinformation is coming from elsewhere. . . . "
Ron Wilder, executive vice president of Solar Age Industries, a supplier for Atlantic Solar based in Albuquerque, said that his company had "strongly advised them in person and in writing" to discontinue the payment marketing practice. "We don't condone it," Wilder said.