H.B. 1005 Enrolled

INDIVIDUAL INCOME TAX AND CORPORATE
FRANCHISE AND INCOME TAX -
RENEWABLE ENERGY SYSTEMS TAX
CREDITS
2001 FIRST SPECIAL SESSION
STATE OF UTAH
Sponsor: John E. Swallow
This act amends the Individual Income Tax Act and Corporate Franchise and Income Taxes
by reinstating tax credits for renewable energy systems for taxable years beginning on or
after January 1, 2001, but beginning on or before December 31, 2006, repealing the
requirement that an individual taxpayer must be a resident of the state to claim a credit,
requiring the Public Utilities and Technology Interim Committee to study the tax credits,
and making technical changes. This act has retrospective operation for taxable years
beginning on or after January 1, 2001.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
63-55b-159, as last amended by Chapter 290, Laws of Utah 2001
ENACTS:
59-7-614, Utah Code Annotated 1953
59-10-134, Utah Code Annotated 1953
This act enacts uncodified material.
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-7-614 is enacted to read:
59-7-614. Renewable energy systems tax credit -- Definitions -- Limitations -- State
tax credit in addition to allowable federal credits -- Certification -- Rulemaking authority --
Reimbursement of Uniform School Fund.
(1) As used in this section:
(a) "Active solar system":
(i) means a system of equipment capable of collecting and converting incident solar

radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy by a
separate apparatus to storage or to the point of use; and
(ii) includes water heating, space heating or cooling, and electrical or mechanical energy
generation.
(b) "Biomass system" means any system of apparatus and equipment capable of converting
organic plant, wood, or waste products into electrical and thermal energy and transferring these forms
of energy by a separate apparatus to the point of use or storage.
(c) "Business entity" means any sole proprietorship, estate, trust, partnership, association,
corporation, cooperative, or other entity under which business is conducted or transacted.
(d) "Commercial energy system" means any active solar, passive solar, wind, hydroenergy,
or biomass system used to supply energy to a commercial unit or as a commercial enterprise.
(e) "Commercial enterprise" means a business entity whose purpose is to produce electrical,
mechanical, or thermal energy for sale from a commercial energy system.
(f) (i) "Commercial unit" means any building or structure which a business entity uses to
transact its business except as provided in Subsection (1)(f)(ii); and
(ii) (A) in the case of an active solar system used for agricultural water pumping or a wind
system, each individual energy generating device shall be a commercial unit; and
(B) if an energy system is the building or structure which a business entity uses to transact
its business, a commercial unit is the complete energy system itself.
(g) "Hydroenergy system" means a system of apparatus and equipment capable of
intercepting and converting kinetic water energy into electrical or mechanical energy and transferring
this form of energy by separate apparatus to the point of use or storage.
(h) "Individual taxpayer" means any person who is a taxpayer as defined in Section 59-10-103
and an individual as defined in Section 59-10-103 .
(i) "Office of Energy and Resource Planning" means the Office of Energy and Resource
Planning, Department of Natural Resources.
(j) "Passive solar system":
(i) means a direct thermal system which utilizes the structure of a building and its operable

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components to provide for collection, storage, and distribution of heating or cooling during the
appropriate times of the year by utilizing the climate resources available at the site; and
(ii) includes those portions and components of a building that are expressly designed and
required for the collection, storage, and distribution of solar energy.
(k) "Residential energy system" means any active solar, passive solar, wind, or hydroenergy
system used to supply energy to or for any residential unit.
(l) "Residential unit" means any house, condominium, apartment, or similar dwelling unit
which serves as a dwelling for a person, group of persons, or a family but does not include property
subject to the fees in lieu of the ad valorem tax under:
(i) Section 59-2-404 ;
(ii) Section 59-2-405 ; or
(iii) Section 59-2-405.1 .
(m) "Wind system" means a system of apparatus and equipment capable of intercepting and
converting wind energy into mechanical or electrical energy and transferring these forms of energy
by a separate apparatus to the point of use or storage.
(2) (a) (i) For taxable years beginning on or after January 1, 2001, but beginning on or before
December 31, 2006, a business entity that purchases and completes or participates in the financing
of a residential energy system to supply all or part of the energy required for a residential unit owned
or used by the business entity and situated in Utah is entitled to a tax credit as provided in this
Subsection (2)(a).
(ii) (A) A business entity is entitled to a tax credit equal to 25% of the costs of a residential
energy system installed with respect to each residential unit it owns or uses, including installation
costs, against any tax due under this chapter for the taxable year in which the energy system is
completed and placed in service.
(B) The total amount of the credit under this Subsection (2)(a) may not exceed $2,000 per
residential unit.
(C) The credit under this Subsection (2)(a) is allowed for any residential energy system
completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.

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(iii) If a business entity sells a residential unit to an individual taxpayer prior to making a
claim for the tax credit under this Subsection (2)(a), the business entity may:
(A) assign its right to this tax credit to the individual taxpayer; and
(B) if the business entity assigns its right to the tax credit to an individual taxpayer under
Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the individual taxpayer
had completed or participated in the costs of the residential energy system under Section 59-10-134 .
(b) (i) For taxable years beginning on or after January 1, 2001, but beginning on or before
December 31, 2006, a business entity that purchases or participates in the financing of a commercial
energy system is entitled to a tax credit as provided in this Subsection (2)(b) if:
(A) the commercial energy system supplies all or part of the energy required by commercial
units owned or used by the business entity; or
(B) the business entity sells all or part of the energy produced by the commercial energy
system as a commercial enterprise.
(ii) (A) A business entity is entitled to a tax credit equal to 10% of the costs of any
commercial energy system installed, including installation costs, against any tax due under this chapter
for the taxable year in which the commercial energy system is completed and placed in service.
(B) The total amount of the credit under this Subsection (2)(b) may not exceed $50,000 per
commercial unit.
(C) The credit under this Subsection (2)(b) is allowed for any commercial energy system
completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
(iii) A business entity that leases a commercial energy system installed on a commercial unit
is eligible for the tax credit under this Subsection (2)(b) if the lessee can confirm that the lessor
irrevocably elects not to claim the credit.
(iv) Only the principal recovery portion of the lease payments, which is the cost incurred by
a business entity in acquiring a commercial energy system, excluding interest charges and maintenance
expenses, is eligible for the tax credit under this Subsection (2)(b).
(v) A business entity that leases a commercial energy system is eligible to use the tax credit
under this Subsection (2)(b) for a period no greater than seven years from the initiation of the lease.

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(c) (i) A tax credit under this section may be claimed for the taxable year in which the energy
system is completed and placed in service.
(ii) Additional energy systems or parts of energy systems may be claimed for subsequent
years.
(iii) If the amount of a tax credit under this section exceeds a business entity's tax liability
under this chapter for a taxable year, the amount of the credit exceeding the liability may be carried
over for a period which does not exceed the next four taxable years.
(3) (a) The tax credits provided for under Subsection (2) are in addition to any tax credits
provided under the laws or rules and regulations of the United States.
(b) (i) The Office of Energy and Resource Planning may promulgate standards for residential
and commercial energy systems that cover the safety, reliability, efficiency, leasing, and technical
feasibility of the systems to ensure that the systems eligible for the tax credit use the state's renewable
and nonrenewable energy resources in an appropriate and economic manner.
(ii) A tax credit may not be taken under Subsection (2) until the Office of Energy and
Resource Planning has certified that the energy system has been completely installed and is a viable
system for saving or production of energy from renewable resources.
(c) The Office of Energy and Resource Planning and the commission are authorized to
promulgate rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
which are necessary to implement this section.
(d) The Uniform School Fund shall be reimbursed by transfers from the General Fund for any
credits taken under this section.
Section 2. Section 59-10-134 is enacted to read:
59-10-134. Renewable energy systems tax credit -- Definitions -- Individual tax credit
-- Limitations -- Business tax credit -- Limitations -- State tax credit in addition to allowable
federal credits -- Certification -- Rulemaking authority -- Reimbursement of Uniform School
Fund.
(1) As used in this part:
(a) "Active solar system":

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(i) means a system of equipment capable of collecting and converting incident solar radiation
into thermal, mechanical, or electrical energy, and transferring these forms of energy by a separate
apparatus to storage or to the point of use; and
(ii) includes water heating, space heating or cooling, and electrical or mechanical energy
generation.
(b) "Biomass system" means any system of apparatus and equipment capable of converting
organic plant, wood, or waste products into electrical and thermal energy and transferring these forms
of energy by a separate apparatus to the point of use or storage.
(c) "Business entity" means any sole proprietorship, estate, trust, partnership, association,
corporation, cooperative, or other entity under which business is conducted or transacted.
(d) "Commercial energy system" means any active solar, passive solar, wind, hydroenergy,
or biomass system used to supply energy to a commercial unit or as a commercial enterprise.
(e) "Commercial enterprise" means a business entity whose purpose is to produce electrical,
mechanical, or thermal energy for sale from a commercial energy system.
(f) (i) "Commercial unit" means any building or structure which a business entity uses to
transact its business, except as provided in Subsection (1)(f)(ii); and
(ii) (A) in the case of an active solar system used for agricultural water pumping or a wind
system, each individual energy generating device shall be a commercial unit; and
(B) if an energy system is the building or structure which a business entity uses to transact
its business, a commercial unit is the complete energy system itself.
(g) "Hydroenergy system" means a system of apparatus and equipment capable of
intercepting and converting kinetic water energy into electrical or mechanical energy and transferring
this form of energy by separate apparatus to the point of use or storage.
(h) "Individual taxpayer" means any person who is a taxpayer as defined in Section 59-10-103
and an individual as defined in Section 59-10-103 .
(i) "Office of Energy and Resource Planning" means the Office of Energy and Resource
Planning, Department of Natural Resources.
(j) "Passive solar system":

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(i) means a direct thermal system which utilizes the structure of a building and its operable
components to provide for collection, storage, and distribution of heating or cooling during the
appropriate times of the year by utilizing the climate resources available at the site; and
(ii) includes those portions and components of a building that are expressly designed and
required for the collection, storage, and distribution of solar energy.
(k) "Residential energy system" means any active solar, passive solar, wind, or hydroenergy
system used to supply energy to or for any residential unit.
(l) "Residential unit" means any house, condominium, apartment, or similar dwelling unit
which serves as a dwelling for a person, group of persons, or a family but does not include property
subject to the fees in lieu of the ad valorem tax under:
(i) Section 59-2-404 ;
(ii) Section 59-2-405 ; or
(iii) Section 59-2-405.1 .
(m) "Wind system" means a system of apparatus and equipment capable of intercepting and
converting wind energy into mechanical or electrical energy and transferring these forms of energy
by a separate apparatus to the point of use or storage.
(2) For taxable years beginning on or after January 1, 2001, but beginning on or before
December 31, 2006, any individual taxpayer may claim a tax credit as provided in this section if:
(a) the individual taxpayer purchases and completes or participates in the financing of a
residential energy system to supply all or part of the energy for the individual taxpayer's residential
unit in the state; or
(b) (i) a business entity sells a residential unit to an individual taxpayer prior to making a
claim for a tax credit under Subsection (6) or Section 59-7-614 ; and
(ii) the business entity assigns its right to the tax credit to the individual taxpayer as provided
in Subsection (6)(c) or Subsection 59-7-614 (2)(a)(iii).
(3) (a) An individual taxpayer meeting the requirements of Subsection (2) is entitled to a tax
credit equal to 25% of the costs of the energy system, including installation costs, against any income
tax liability of the individual taxpayer under this chapter for the taxable year in which the residential

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energy system is completed and placed in service.
(b) The total amount of the credit under this section may not exceed $2,000 per residential
unit.
(c) The credit under this section is allowed for any residential energy system completed and
placed in service on or after January 1, 2001, but on or before December 31, 2006.
(4) (a) The tax credit provided for in this section shall be claimed in the return for the taxable
year in which the energy system is completed and placed in service.
(b) Additional residential energy systems or parts of residential energy systems may be
similarly claimed in returns for subsequent taxable years as long as the total amount claimed does not
exceed $2,000 per residential unit.
(c) If the amount of the tax credit under this section exceeds the income tax liability of the
individual taxpayer for that taxable year, then the amount not used may be carried over for a period
which does not exceed the next four taxable years.
(5) (a) Individual taxpayers who lease a residential energy system installed on a residential
unit are eligible for the residential energy tax credits if the lessee can confirm that the lessor
irrevocably elects not to claim the state tax credit.
(b) Only the principal recovery portion of the lease payments, which is the cost incurred by
the taxpayer in acquiring the residential energy system excluding interest charges and maintenance
expenses, is eligible for the tax credits.
(c) Individual taxpayers who lease residential energy systems are eligible to use the tax credits
for a period no greater than seven years from the initiation of the lease.
(6) (a) A business entity that purchases and completes or participates in the financing of a
residential energy system to supply all or part of the energy required for a residential unit owned or
used by the business entity and situated in Utah is entitled to a tax credit as provided in this
Subsection (6).
(b) (i) For taxable years beginning on or after January 1, 2001, but beginning on or before
December 31, 2006, a business entity is entitled to a tax credit equal to 25% of the costs of a
residential energy system installed with respect to each residential unit it owns or uses, including

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installation costs, against any tax due under this chapter for the taxable year in which the energy
system is completed and placed in service.
(ii) The total amount of the credit under this Subsection (6) may not exceed $2,000 per
residential unit.
(iii) The credit under this Subsection (6) is allowed for any residential energy system
completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
(c) If a business entity sells a residential unit to an individual taxpayer prior to making a claim
for the tax credit under this Subsection (6), the business entity may:
(i) assign its right to this tax credit to the individual taxpayer; and
(ii) if the business entity assigns its right to the tax credit to an individual taxpayer under
Subsection (6)(c)(i), the individual taxpayer may claim the tax credit as if the individual taxpayer had
completed or participated in the costs of the residential energy system under this section.
(7) (a) A business entity that purchases or participates in the financing of a commercial
energy system is entitled to a tax credit as provided in this Subsection (7) if:
(i) the commercial energy system supplies all or part of the energy required by commercial
units owned or used by the business entity; or
(ii) the business entity sells all or part of the energy produced by the commercial energy
system as a commercial enterprise.
(b) (i) A business entity is entitled to a tax credit equal to 10% of the costs of any commercial
energy system installed, including installation costs, against any tax due under this chapter for the
taxable year in which the commercial energy system is completed and placed in service.
(ii) The total amount of the credit under this Subsection (7) may not exceed $50,000 per
commercial unit.
(iii) The credit under this Subsection (7) is allowed for any commercial energy system
completed and placed in service on or after January 1, 2001, but on or before December 31, 2006.
(c) A business entity that leases a commercial energy system installed on a commercial unit
is eligible for the tax credit under this Subsection (7) if the lessee can confirm that the lessor
irrevocably elects not to claim the credit.

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(d) Only the principal recovery portion of the lease payments, which is the cost incurred by
a business entity in acquiring a commercial energy system, excluding interest charges and maintenance
expenses, is eligible for the tax credit under this Subsection (7).
(e) A business entity that leases a commercial energy system is eligible to use the tax credit
under this Subsection (7) for a period no greater than seven years from the initiation of the lease.
(8) (a) A tax credit under this section may be claimed for the taxable year in which the energy
system is completed and placed in service.
(b) Additional energy systems or parts of energy systems may be claimed for subsequent
years.
(c) If the amount of a tax credit under this section exceeds a business entity's tax liability
under this chapter for a taxable year, the amount of the credit exceeding the liability may be carried
over for a period which does not exceed the next four taxable years.
(9) The tax credits provided for under this section are in addition to any tax credits provided
under the laws or rules and regulations of the United States.
(10) (a) The Office of Energy and Resource Planning may promulgate standards for
residential and commercial energy systems that cover the safety, reliability, efficiency, leasing, and
technical feasibility of the systems to ensure that the systems eligible for the tax credit use the state's
renewable and nonrenewable energy resources in an appropriate and economic manner.
(b) A tax credit may not be taken under this section until the Office of Energy and Resource
Planning has certified that the energy system has been completely installed and is a viable system for
saving or production of energy from renewable resources.
(11) The Office of Energy and Resource Planning and the commission are authorized to
promulgate rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
which are necessary to implement this section.
(12) The Uniform School Fund shall be reimbursed by transfers from the General Fund for
any credits taken under this section.
Section 3. Section 63-55b-159 is amended to read:
63-55b-159. Repeal dates -- Title 59.

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(1) Section 59-7-604 is repealed January 1, 2002.
[(2) Section 59-7-611 and Sections 59-10-601 through 59-10-604 are repealed January 1,
2001.]
[(3)] (2) Section 59-9-101.3 is repealed January 1, 2005, and the Labor Commission may not
impose an assessment under Section 59-9-101.3 after December 31, 2004.
Section 4. Study of renewable energy systems tax credits.
(1) The Public Utilities and Technology Interim Committee shall study the renewable energy
systems tax credits provided for in Sections 59-7-614 and 59-10-134 during the 2001 interim,
including an analysis of the appropriate credit amounts.
(2) The Public Utilities and Technology Interim Committee:
(a) shall consider on or before the October 2001interim meeting whether the renewable
energy systems tax credits provided for in Sections 59-7-614 and 59-10-134 should be modified; and
(b) may coordinate with the Revenue and Taxation Interim Committee and the Government
Revenue and Tax System Task Force in conducting the study required by this section.
Section 5. Retrospective operation.
This act has retrospective operation for taxable years beginning on or after January 1, 2001.

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