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H.B. 1005

             1     

INDIVIDUAL INCOME TAX AND CORPORATE

             2     
FRANCHISE AND INCOME TAX -

             3     
RENEWABLE ENERGY SYSTEMS TAX

             4     
CREDITS

             5     
2001 FIRST SPECIAL SESSION

             6     
STATE OF UTAH

             7     
Sponsor: John E. Swallow

             8      This act amends the Individual Income Tax Act and Corporate Franchise and Income Taxes
             9      by reinstating tax credits for renewable energy systems for taxable years beginning on or
             10      after January 1, 2001, but beginning on or before December 31, 2006, repealing the
             11      requirement that an individual taxpayer must be a resident of the state to claim a credit,
             12      requiring the Public Utilities and Technology Interim Committee to study the tax credits,
             13      and making technical changes. This act has retrospective operation for taxable years
             14      beginning on or after January 1, 2001.
             15      This act affects sections of Utah Code Annotated 1953 as follows:
             16      AMENDS:
             17          63-55b-159, as last amended by Chapter 290, Laws of Utah 2001
             18      ENACTS:
             19          59-7-614, Utah Code Annotated 1953
             20          59-10-134, Utah Code Annotated 1953
             21      This act enacts uncodified material.
             22      Be it enacted by the Legislature of the state of Utah:
             23          Section 1. Section 59-7-614 is enacted to read:
             24          59-7-614. Renewable energy systems tax credit -- Definitions -- Tax credit in addition
             25      to other credits -- Limitations -- Certification -- Rulemaking authority -- Reimbursement of
             26      Uniform School Fund.
             27          (1) As used in this section:


             28          (a) "Active solar system":
             29          (i) means a system of equipment capable of collecting and converting incident solar
             30      radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy by
             31      a separate apparatus to storage or to the point of use; and
             32          (ii) includes water heating, space heating or cooling, and electrical or mechanical energy
             33      generation.
             34          (b) "Biomass system" means any system of apparatus and equipment capable of converting
             35      organic plant, wood, or waste products into electrical and thermal energy and transferring these
             36      forms of energy by a separate apparatus to the point of use or storage.
             37          (c) "Business entity" means any sole proprietorship, estate, trust, partnership, association,
             38      corporation, cooperative, or other entity under which business is conducted or transacted.
             39          (d) "Commercial energy system" means any active solar, passive solar, wind, hydroenergy,
             40      or biomass system used to supply energy to a commercial unit or as a commercial enterprise.
             41          (e) "Commercial enterprise" means a business entity whose purpose is to produce
             42      electrical, mechanical, or thermal energy for sale from a commercial energy system.
             43          (f) (i) "Commercial unit" means any building or structure which a business entity uses to
             44      transact its business except as provided in Subsection (1)(f)(ii); and
             45          (ii) (A) in the case of an active solar system used for agricultural water pumping or a wind
             46      system, each individual energy generating device shall be a commercial unit; and
             47          (B) if an energy system is the building or structure which a business entity uses to transact
             48      its business, a commercial unit is the complete energy system itself.
             49          (g) "Hydroenergy system" means a system of apparatus and equipment capable of
             50      intercepting and converting kinetic water energy into electrical or mechanical energy and
             51      transferring this form of energy by separate apparatus to the point of use or storage.
             52          (h) "Individual taxpayer" means any person who is a taxpayer as defined in Section
             53      59-10-103 and an individual as defined in Section 59-10-103 .
             54          (i) "Office of Energy and Resource Planning" means the Office of Energy and Resource
             55      Planning, Department of Natural Resources.
             56          (j) "Passive solar system":
             57          (i) means a direct thermal system which utilizes the structure of a building and its operable
             58      components to provide for collection, storage, and distribution of heating or cooling during the


             59      appropriate times of the year by utilizing the climate resources available at the site; and
             60          (ii) includes those portions and components of a building that are expressly designed and
             61      required for the collection, storage, and distribution of solar energy.
             62          (k) "Residential energy system" means any active solar, passive solar, wind, or
             63      hydroenergy system used to supply energy to or for any residential unit.
             64          (l) "Residential unit" means any house, condominium, apartment, or similar dwelling unit
             65      which serves as a dwelling for a person, group of persons, or a family but does not include property
             66      subject to the fees in lieu of the ad valorem tax under:
             67          (i) Section 59-2-404 ;
             68          (ii) Section 59-2-405 ; or
             69          (iii) Section 59-2-405.1 .
             70          (m) "Wind system" means a system of apparatus and equipment capable of intercepting
             71      and converting wind energy into mechanical or electrical energy and transferring these forms of
             72      energy by a separate apparatus to the point of use or storage.
             73          (2) (a) (i) For taxable years beginning on or after January 1, 2001, but beginning on or
             74      before December 31, 2006, a business entity that purchases and completes or participates in the
             75      financing of a residential energy system to supply all or part of the energy required for a residential
             76      unit owned or used by the business entity and situated in Utah is entitled to a tax credit as provided
             77      in this Subsection (2)(a).
             78          (ii) (A) A business entity is entitled to a tax credit equal to 25% of the costs of a residential
             79      energy system installed with respect to each residential unit it owns or uses, including installation
             80      costs, against any tax due under this chapter for the taxable year in which the energy system is
             81      completed and placed in service.
             82          (B) The total amount of the credit under this Subsection (2)(a) may not exceed $2,000 per
             83      residential unit.
             84          (C) The credit under this Subsection (2)(a) is allowed for any residential energy system
             85      completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
             86          (iii) If a business entity sells a residential unit to an individual taxpayer prior to making
             87      a claim for the tax credit under this Subsection (2)(a), the business entity may:
             88          (A) assign its right to this tax credit to the individual taxpayer; and
             89          (B) if the business entity assigns its right to the tax credit to an individual taxpayer under


             90      Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the individual
             91      taxpayer had completed or participated in the costs of the residential energy system under Section
             92      59-10-134 .
             93          (b) (i) For taxable years beginning on or after January 1, 2001, but beginning on or before
             94      December 31, 2006, a business entity that purchases or participates in the financing of a
             95      commercial energy system is entitled to a tax credit as provided in this Subsection (2)(b) if:
             96          (A) the commercial energy system supplies all or part of the energy required by
             97      commercial units owned or used by the business entity; or
             98          (B) the business entity sells all or part of the energy produced by the commercial energy
             99      system as a commercial enterprise.
             100          (ii) (A) A business entity is entitled to a tax credit equal to 10% of the costs of any
             101      commercial energy system installed, including installation costs, against any tax due under this
             102      chapter for the taxable year in which the commercial energy system is completed and placed in
             103      service.
             104          (B) The total amount of the credit under this Subsection (2)(b) may not exceed $50,000
             105      per commercial unit.
             106          (C) The credit under this Subsection (2)(b) is allowed for any commercial energy system
             107      completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
             108          (iii) A business entity that leases a commercial energy system installed on a commercial
             109      unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can confirm that the
             110      lessor irrevocably elects not to claim the credit.
             111          (iv) Only the principal recovery portion of the lease payments, which is the cost incurred
             112      by a business entity in acquiring a commercial energy system, excluding interest charges and
             113      maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
             114          (v) A business entity that leases a commercial energy system is eligible to use the tax credit
             115      under this Subsection (2)(b) for a period no greater than seven years from the initiation of the lease.
             116          (c) (i) A tax credit under this section may be claimed for the taxable year in which the
             117      energy system is completed and placed in service.
             118          (ii) Additional energy systems or parts of energy systems may be claimed for subsequent
             119      years.
             120          (iii) If the amount of a tax credit under this section exceeds a business entity's tax liability


             121      under this chapter for a taxable year, the amount of the credit exceeding the liability may be carried
             122      over for a period which does not exceed the next four taxable years.
             123          (3) (a) The tax credits provided for under Subsection (2) are in addition to any tax credits
             124      provided under the laws or rules and regulations of the United States.
             125          (b) (i) The Office of Energy and Resource Planning may promulgate standards for
             126      residential and commercial energy systems that cover the safety, reliability, efficiency, leasing, and
             127      technical feasibility of the systems to ensure that the systems eligible for the tax credit use the
             128      state's renewable and nonrenewable energy resources in an appropriate and economic manner.
             129          (ii) A tax credit may not be taken under Subsection (2) until the Office of Energy and
             130      Resource Planning has certified that the energy system has been completely installed and is a
             131      viable system for saving or production of energy from renewable resources.
             132          (c) The Office of Energy and Resource Planning and the commission are authorized to
             133      promulgate rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             134      which are necessary to implement this section.
             135          (d) The Uniform School Fund shall be reimbursed by transfers from the General Fund for
             136      any credits taken under this section.
             137          Section 2. Section 59-10-134 is enacted to read:
             138          59-10-134. Renewable energy systems tax credit -- Definitions -- Individual tax credit
             139      -- Limitations -- Business tax credit -- Limitations -- Tax credit in addition to other credits
             140      -- Certification -- Rulemaking authority -- Reimbursement of Uniform School Fund.
             141          (1) As used in this part:
             142          (a) "Active solar system":
             143          (i) means a system of equipment capable of collecting and converting incident solar
             144      radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy by
             145      a separate apparatus to storage or to the point of use; and
             146          (ii) includes water heating, space heating or cooling, and electrical or mechanical energy
             147      generation.
             148          (b) "Biomass system" means any system of apparatus and equipment capable of converting
             149      organic plant, wood, or waste products into electrical and thermal energy and transferring these
             150      forms of energy by a separate apparatus to the point of use or storage.
             151          (c) "Business entity" means any sole proprietorship, estate, trust, partnership, association,


             152      corporation, cooperative, or other entity under which business is conducted or transacted.
             153          (d) "Commercial energy system" means any active solar, passive solar, wind, hydroenergy,
             154      or biomass system used to supply energy to a commercial unit or as a commercial enterprise.
             155          (e) "Commercial enterprise" means a business entity whose purpose is to produce
             156      electrical, mechanical, or thermal energy for sale from a commercial energy system.
             157          (f) (i) "Commercial unit" means any building or structure which a business entity uses to
             158      transact its business, except as provided in Subsection (1)(f)(ii); and
             159          (ii) (A) in the case of an active solar system used for agricultural water pumping or a wind
             160      system, each individual energy generating device shall be a commercial unit; and
             161          (B) if an energy system is the building or structure which a business entity uses to transact
             162      its business, a commercial unit is the complete energy system itself.
             163          (g) "Hydroenergy system" means a system of apparatus and equipment capable of
             164      intercepting and converting kinetic water energy into electrical or mechanical energy and
             165      transferring this form of energy by separate apparatus to the point of use or storage.
             166          (h) "Individual taxpayer" means any person who is a taxpayer as defined in Section
             167      59-10-103 and an individual as defined in Section 59-10-103 .
             168          (i) "Office of Energy and Resource Planning" means the Office of Energy and Resource
             169      Planning, Department of Natural Resources.
             170          (j) "Passive solar system":
             171          (i) means a direct thermal system which utilizes the structure of a building and its operable
             172      components to provide for collection, storage, and distribution of heating or cooling during the
             173      appropriate times of the year by utilizing the climate resources available at the site; and
             174          (ii) includes those portions and components of a building that are expressly designed and
             175      required for the collection, storage, and distribution of solar energy.
             176          (k) "Residential energy system" means any active solar, passive solar, wind, or
             177      hydroenergy system used to supply energy to or for any residential unit.
             178          (l) "Residential unit" means any house, condominium, apartment, or similar dwelling unit
             179      which serves as a dwelling for a person, group of persons, or a family but does not include property
             180      subject to the fees in lieu of the ad valorem tax under:
             181          (i) Section 59-2-404 ;
             182          (ii) Section 59-2-405 ; or


             183          (iii) Section 59-2-405.1 .
             184          (m) "Wind system" means a system of apparatus and equipment capable of intercepting
             185      and converting wind energy into mechanical or electrical energy and transferring these forms of
             186      energy by a separate apparatus to the point of use or storage.
             187          (2) For taxable years beginning on or after January 1, 2001, but beginning on or before
             188      December 31, 2006, any individual taxpayer may claim a tax credit as provided in this section if:
             189          (a) the individual taxpayer purchases and completes or participates in the financing of a
             190      residential energy system to supply all or part of the energy for the individual taxpayer's residential
             191      unit in the state; or
             192          (b) (i) a business entity sells a residential unit to an individual taxpayer prior to making
             193      a claim for a tax credit under Subsection (6) or Section 59-7-614 ; and
             194          (ii) the business entity assigns its right to the tax credit to the individual taxpayer as
             195      provided in Subsection (6)(c) or Subsection 59-7-614 (2)(a)(iii).
             196          (3) (a) An individual taxpayer meeting the requirements of Subsection (2) is entitled to a
             197      tax credit equal to 25% of the costs of the energy system, including installation costs, against any
             198      income tax liability of the individual taxpayer under this chapter for the taxable year in which the
             199      residential energy system is completed and placed in service.
             200          (b) The total amount of the credit under this section may not exceed $2,000 per residential
             201      unit.
             202          (c) The credit under this section is allowed for any residential energy system completed
             203      and placed in service on or after January 1, 2001, but on or before December 31, 2006.
             204          (4) (a) The tax credit provided for in this section shall be claimed in the return for the
             205      taxable year in which the energy system is completed and placed in service.
             206          (b) Additional residential energy systems or parts of residential energy systems may be
             207      similarly claimed in returns for subsequent taxable years as long as the total amount claimed does
             208      not exceed $2,000 per residential unit.
             209          (c) If the amount of the tax credit under this section exceeds the income tax liability of the
             210      individual taxpayer for that taxable year, then the amount not used may be carried over for a period
             211      which does not exceed the next four taxable years.
             212          (5) (a) Individual taxpayers who lease a residential energy system installed on a residential
             213      unit are eligible for the residential energy tax credits if the lessee can confirm that the lessor


             214      irrevocably elects not to claim the state tax credit.
             215          (b) Only the principal recovery portion of the lease payments, which is the cost incurred
             216      by the taxpayer in acquiring the residential energy system excluding interest charges and
             217      maintenance expenses, is eligible for the tax credits.
             218          (c) Individual taxpayers who lease residential energy systems are eligible to use the tax
             219      credits for a period no greater than seven years from the initiation of the lease.
             220          (6) (a) A business entity that purchases and completes or participates in the financing of
             221      a residential energy system to supply all or part of the energy required for a residential unit owned
             222      or used by the business entity and situated in Utah is entitled to a tax credit as provided in this
             223      Subsection (6).
             224          (b) (i) For taxable years beginning on or after January 1, 2001, but beginning on or before
             225      December 31, 2006, a business entity is entitled to a tax credit equal to 25% of the costs of a
             226      residential energy system installed with respect to each residential unit it owns or uses, including
             227      installation costs, against any tax due under this chapter for the taxable year in which the energy
             228      system is completed and placed in service.
             229          (ii) The total amount of the credit under this Subsection (6) may not exceed $2,000 per
             230      residential unit.
             231          (iii) The credit under this Subsection (6) is allowed for any residential energy system
             232      completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
             233          (c) If a business entity sells a residential unit to an individual taxpayer prior to making a
             234      claim for the tax credit under this Subsection (6), the business entity may:
             235          (i) assign its right to this tax credit to the individual taxpayer; and
             236          (ii) if the business entity assigns its right to the tax credit to an individual taxpayer under
             237      Subsection (6)(c)(i), the individual taxpayer may claim the tax credit as if the individual taxpayer
             238      had completed or participated in the costs of the residential energy system under this section.
             239          (7) (a) A business entity that purchases or participates in the financing of a commercial
             240      energy system is entitled to a tax credit as provided in this Subsection (7) if:
             241          (i) the commercial energy system supplies all or part of the energy required by commercial
             242      units owned or used by the business entity; or
             243          (ii) the business entity sells all or part of the energy produced by the commercial energy
             244      system as a commercial enterprise.


             245          (b) (i) A business entity is entitled to a tax credit equal to 10% of the costs of any
             246      commercial energy system installed, including installation costs, against any tax due under this
             247      chapter for the taxable year in which the commercial energy system is completed and placed in
             248      service.
             249          (ii) The total amount of the credit under this Subsection (7) may not exceed $50,000 per
             250      commercial unit.
             251          (iii) The credit under this Subsection (7) is allowed for any commercial energy system
             252      completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
             253          (c) A business entity that leases a commercial energy system installed on a commercial
             254      unit is eligible for the tax credit under this Subsection (7) if the lessee can confirm that the lessor
             255      irrevocably elects not to claim the credit.
             256          (d) Only the principal recovery portion of the lease payments, which is the cost incurred
             257      by a business entity in acquiring a commercial energy system, excluding interest charges and
             258      maintenance expenses, is eligible for the tax credit under this Subsection (7).
             259          (e) A business entity that leases a commercial energy system is eligible to use the tax credit
             260      under this Subsection (7) for a period no greater than seven years from the initiation of the lease.
             261          (8) (a) A tax credit under this section may be claimed for the taxable year in which the
             262      energy system is completed and placed in service.
             263          (b) Additional energy systems or parts of energy systems may be claimed for subsequent
             264      years.
             265          (c) If the amount of a tax credit under this section exceeds a business entity's tax liability
             266      under this chapter for a taxable year, the amount of the credit exceeding the liability may be carried
             267      over for a period which does not exceed the next four taxable years.
             268          (9) The tax credits provided for under this section are in addition to any tax credits
             269      provided under the laws or rules and regulations of the United States.
             270          (10) (a) The Office of Energy and Resource Planning may promulgate standards for
             271      residential and commercial energy systems that cover the safety, reliability, efficiency, leasing, and
             272      technical feasibility of the systems to ensure that the systems eligible for the tax credit use the
             273      state's renewable and nonrenewable energy resources in an appropriate and economic manner.
             274          (b) A tax credit may not be taken under this section until the Office of Energy and
             275      Resource Planning has certified that the energy system has been completely installed and is a


             276      viable system for saving or production of energy from renewable resources.
             277          (11) The Office of Energy and Resource Planning and the commission are authorized to
             278      promulgate rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             279      which are necessary to implement this section.
             280          (12) The Uniform School Fund shall be reimbursed by transfers from the General Fund
             281      for any credits taken under this section.
             282          Section 3. Section 63-55b-159 is amended to read:
             283           63-55b-159. Repeal dates -- Title 59.
             284          (1) Section 59-7-604 is repealed January 1, 2002.
             285          [(2) Section 59-7-611 and Sections 59-10-601 through 59-10-604 are repealed January 1,
             286      2001.]
             287          [(3)] (2) Section 59-9-101.3 is repealed January 1, 2005, and the Labor Commission may
             288      not impose an assessment under Section 59-9-101.3 after December 31, 2004.
             289          Section 4. Study of renewable energy systems tax credits.
             290          (1) The Public Utilities and Technology Interim Committee shall study the renewable
             291      energy systems tax credits provided for in Sections 59-7-614 and 59-10-134 during the 2001
             292      interim h , INCLUDING AN ANALYSIS OF THE APPROPRIATE CREDIT AMOUNTS h .
             293          (2) The Public Utilities and Technology Interim Committee:
             294          (a) shall consider on or before the October 2001interim meeting whether the renewable
             295      energy systems tax credits provided for in Sections 59-7-614 and 59-10-134 should be modified;
             296      and
             297          (b) may coordinate with the Revenue and Taxation Interim Committee h AND THE
             297a      GOVERNMENT REVENUE AND TAX SYSTEM TASK FORCE h in conducting the
             298      study required by this section.
             299          Section 5. Retrospective operation.
             300          This act has retrospective operation for taxable years beginning on or after January 1, 2001.




Legislative Review Note
    as of 6-19-01 9:11 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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