First Substitute S.B. 13

This document includes Senate Committee Amendments incorporated into the bill on Wed, Jan 24, 2007 at 10:43 AM by rday. -->

Senator Howard A. Stephenson proposes the following substitute bill:

1 TAX CREDITS FOR ALTERNATE POWER
2 GENERATION
3 2007 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Howard A. Stephenson
6 House Sponsor: Michael E. Noel
7
8 LONG TITLE
9 General Description:
10 This bill amends and extends the renewable energy tax credit.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . extends the availability of the renewable energy tax credit;
15 . provides for the Tax Review Commission to review the renewable energy tax credit;
16 . expands the renewable energy tax credit to include some geothermal sources;
17 . makes the renewable energy tax credit on some commercial energy systems a
18 refundable credit;
19 . changes the calculation of the tax credit for commercial energy systems;
20 . removes language reimbursing the Uniform School Fund for renewable energy tax
21 credits taken; and
22 . makes technical changes.
23 Monies Appropriated in this Bill:
24 None
25 Other Special Clauses:

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- 2 - 26 This bill provides retrospective operation.
27 Utah Code Sections Affected:
28 AMENDS:
29 59-10-1014, as renumbered and amended by Chapter 223, Laws of Utah 2006
30 ENACTS:
31 59-10-1106, Utah Code Annotated 1953
32 REPEALS AND REENACTS:
33 59-7-614, as last amended by Chapter 223, Laws of Utah 2006
34
35 Be it enacted by the Legislature of the state of Utah:
36 Section 1. Section 59-7-614 is repealed and reenacted to read:
37 59-7-614. Renewable energy systems tax credit -- Definitions -- Limitations --
38 State tax credit in addition to allowable federal credits -- Certification -- Rulemaking
39 authority.
40 (1) As used in this section:
41 (a) "Active solar system":
42 (i) means a system of equipment capable of collecting and converting incident solar
43 radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
44 by a separate apparatus to storage or to the point of use; and
45 (ii) includes water heating, space heating or cooling, and electrical or mechanical
46 energy generation.
47 (b) "Biomass system" means any system of apparatus and equipment for use in
48 converting material into biomass energy, as defined in Section 59-12-102 , and transporting that
49 energy by separate apparatus to the point of use or storage.
50 (c) "Business entity" means any sole proprietorship, estate, trust, partnership,
51 association, corporation, cooperative, or other entity under which business is conducted or
52 transacted.
53 (d) "Commercial energy system" means any active solar, passive solar, geothermal
54 electricity, direct-use geothermal, geothermal heat-pump system, wind, hydroenergy, or
55 biomass system used to supply energy to a commercial unit or as a commercial enterprise.
56 (e) "Commercial enterprise" means a business entity whose purpose is to produce

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- 3 - 57 electrical, mechanical, or thermal energy for sale from a commercial energy system.
58 (f) (i) "Commercial unit" means any building or structure that a business entity uses to
59 transact its business except as provided in Subsection (1)(f)(ii); and
60 (ii) (A) in the case of an active solar system used for agricultural water pumping or a
61 wind system, each individual energy generating device shall be a commercial unit; and
62 (B) if an energy system is the building or structure that a business entity uses to
63 transact its business, a commercial unit is the complete energy system itself.
64 (g) "Direct-use geothermal system" means a system of apparatus and equipment
65 enabling the direct use of thermal energy, generally between 100 and 300 degrees Fahrenheit,
66 that is contained in the earth to meet energy needs, including heating a building, an industrial
67 process, and aquaculture.
68 (h) "Geothermal electricity" means energy contained in heat that continuously flows
69 outward from the earth that is used as a sole source of energy to produce electricity.
70 (i) "Geothermal heat-pump system" means a system of apparatus and equipment
71 enabling the use of thermal properties contained in the earth at temperatures well below 100
72 degrees Fahrenheit to help meet heating and cooling needs of a structure.
73 (j) "Hydroenergy system" means a system of apparatus and equipment capable of
74 intercepting and converting kinetic water energy into electrical or mechanical energy and
75 transferring this form of energy by separate apparatus to the point of use or storage.
76 (k) "Individual taxpayer" means any person who is a taxpayer as defined in Section
77 59-10-103 and an individual as defined in Section 59-10-103 .
78 (l) "Passive solar system":
79 (i) means a direct thermal system that utilizes the structure of a building and its
80 operable components to provide for collection, storage, and distribution of heating or cooling
81 during the appropriate times of the year by utilizing the climate resources available at the site;
82 and
83 (ii) includes those portions and components of a building that are expressly designed
84 and required for the collection, storage, and distribution of solar energy.
85 (m) "Residential energy system" means any active solar, passive solar, biomass,
86 direct-use geothermal, geothermal heat-pump system, wind, or hydroenergy system used to
87 supply energy to or for any residential unit.

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Senate Committee Amendments 1-24-2007 rd/crp 88

(n) "Residential unit" means any house, condominium, apartment, or similar dwelling
89 unit that serves as a dwelling for a person, group of persons, or a family but does not include
90 property subject to a fee under:
91 (i) Section 59-2-404 ;
92 (ii) Section 59-2-405 ;
93 (iii) Section 59-2-405.1 ;
94 (iv) Section 59-2-405.2 ; or
95 (v) Section 59-2-405.3 .
96 (o) "Utah Geological Survey" means the Utah Geological Survey established in Section
97 63-73-5 .
98 (p) "Wind system" means a system of apparatus and equipment capable of intercepting
99 and converting wind energy into mechanical or electrical energy and transferring these forms of
100 energy by a separate apparatus to the point of use, sale, or storage.
101 (2) (a) (i) For taxable years beginning on or after January 1, 2007, a business entity that
102 purchases and completes or participates in the financing of a residential energy system to
103 supply all or part of the energy required for a residential unit owned or used by the business
104 entity and situated in Utah is entitled to a nonrefundable tax credit as provided in this
105 Subsection (2)(a).
106 (ii) (A) A business entity is entitled to a tax credit equal to 25% of the reasonable costs
107 of each residential energy system installed with respect to each residential unit it owns or uses,
108 including installation costs, against any tax due under this chapter for the taxable year in which
109 the energy system is completed and placed in service.
110 (B) The total amount of each credit under this Subsection (2)(a) may not exceed $2,000
111 per residential unit S. [ , except that the credit may not exceed $1,000 per residential unit for a
112 geothermal heat-pump system ] .S .
113 (C) The credit under this Subsection (2)(a) is allowed for any residential energy system
114 completed and placed in service on or after January 1, 2007.
115 (iii) If a business entity sells a residential unit to an individual taxpayer before making
116 a claim for the tax credit under this Subsection (2)(a), the business entity may:
117 (A) assign its right to this tax credit to the individual taxpayer; and
118 (B) if the business entity assigns its right to the tax credit to an individual taxpayer

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- 5 - 119 under Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the
120 individual taxpayer had completed or participated in the costs of the residential energy system
121 under Section 59-10-1014 .
122 (b) (i) For taxable years beginning on or after January 1, 2007, a business entity that
123 purchases or participates in the financing of a commercial energy system situated in Utah is
124 entitled to a refundable tax credit as provided in this Subsection (2)(b) if the commercial
125 energy system does not use wind, geothermal electricity, or biomass equipment capable of
126 producing a total of 660 or more kilowatts of electricity and:
127 (A) the commercial energy system supplies all or part of the energy required by
128 commercial units owned or used by the business entity; or
129 (B) the business entity sells all or part of the energy produced by the commercial
130 energy system as a commercial enterprise.
131 (ii) (A) A business entity is entitled to a tax credit of up to 10% of the reasonable costs
132 of any commercial energy system installed, including installation costs, against any tax due
133 under this chapter for the taxable year in which the commercial energy system is completed and
134 placed in service.
135 (B) Notwithstanding Subsection (2)(b)(ii)(A), the total amount of the credit under this
136 Subsection (2)(b) may not exceed $50,000 per commercial unit.
137 (C) The credit under this Subsection (2)(b) is allowed for any commercial energy
138 system completed and placed in service on or after January 1, 2007.
139 (iii) A business entity that leases a commercial energy system installed on a
140 commercial unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can
141 confirm that the lessor irrevocably elects not to claim the credit.
142 (iv) Only the principal recovery portion of the lease payments, which is the cost
143 incurred by a business entity in acquiring a commercial energy system, excluding interest
144 charges and maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
145 (v) A business entity that leases a commercial energy system is eligible to use the tax
146 credit under this Subsection (2)(b) for a period no greater than seven years from the initiation
147 of the lease.
148 (c) (i) For taxable years beginning on or after January 1, 2007, a business entity that
149 owns a commercial energy system situated in Utah using wind, geothermal electricity, or

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- 6 - 150 biomass equipment capable of producing a total of 660 or more kilowatts of electricity is
151 entitled to a refundable tax credit as provided in this Subsection (2)(c) if:
152 (A) the commercial energy system supplies all or part of the energy required by
153 commercial units owned or used by the business entity; or
154 (B) the business entity sells all or part of the energy produced by the commercial
155 energy system as a commercial enterprise.
156 (ii) (A) A business entity is entitled to a tax credit under this section equal to the
157 product of:
158 (I) 0.35 cents; and
159 (II) the kilowatt hours of electricity produced and either used or sold during the taxable
160 year.
161 (B) (I) The credit calculated under Subsection (2)(c)(ii)(A) may be claimed for
162 production occurring during a period of 48 months beginning with the month in which the
163 commercial energy system is placed in commercial service.
164 (II) The credit allowed by this Subsection (2)(c) for each year may not be carried
165 forward or carried back.
166 (C) The credit under this Subsection (2)(c) is allowed for any commercial energy
167 system completed and placed in service on or after January 1, 2007.
168 (iii) A business entity that leases a commercial energy system installed on a
169 commercial unit is eligible for the tax credit under this Subsection (2)(c) if the lessee can
170 confirm that the lessor irrevocably elects not to claim the credit.
171 (d) (i) A tax credit under Subsection (2)(a) or (b) may be claimed for the taxable year
172 in which the energy system is completed and placed in service.
173 (ii) Additional energy systems or parts of energy systems may be claimed for
174 subsequent years.
175 (iii) If the amount of a tax credit under Subsection (2)(a) or (b) exceeds a business
176 entity's tax liability under this chapter for a taxable year, the amount of the credit exceeding the
177 liability may be carried over for a period which does not exceed the next four taxable years.
178 (3) (a) The tax credits provided for under Subsection (2) are in addition to any tax
179 credits provided under the laws or rules and regulations of the United States.
180 (b) (i) The Utah Geological Survey may set standards for residential and commercial

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- 7 - 181 energy systems claiming a credit under Subsections (2)(a) and (b) that cover the safety,
182 reliability, efficiency, leasing, and technical feasibility of the systems to ensure that the systems
183 eligible for the tax credit use the state's renewable and nonrenewable energy resources in an
184 appropriate and economic manner.
185 (ii) The Utah Geological Survey may set standards for residential and commercial
186 energy systems that establish the reasonable costs of an energy system, as used in Subsections
187 (2)(a)(ii)(A) and (2)(b)(ii)(A), as an amount per unit of energy production.
188 (iii) A tax credit may not be taken under Subsection (2) until the Utah Geological
189 Survey has certified that the energy system has been completely installed and is a viable system
190 for saving or production of energy from renewable resources.
191 (c) The Utah Geological Survey and the commission may make rules in accordance
192 with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, that are necessary to
193 implement this section.
194 (4) (a) On or before October 1, 2012, and every five years thereafter, the Tax Review
195 Commission shall review the tax credits provided by this section and make recommendations
196 to the Revenue and Taxation Interim Committee concerning whether the credit should be
197 continued, modified, or repealed.
198 (b) The Tax Review Commission's report under Subsection (4)(a) shall include
199 information concerning the cost of the credit, the purpose and effectiveness of the credit, and
200 the state's benefit from the credit.
201 Section 2. Section 59-10-1014 is amended to read:
202 59-10-1014. Renewable energy systems tax credit -- Definitions -- Limitations --
203 State tax credit in addition to allowable federal credits -- Certification -- Rulemaking
204 authority.
205 (1) As used in this part:
206 (a) "Active solar system":
207 (i) means a system of equipment capable of collecting and converting incident solar
208 radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
209 by a separate apparatus to storage or to the point of use; and
210 (ii) includes water heating, space heating or cooling, and electrical or mechanical
211 energy generation.

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- 8 - 212 (b) "Biomass system" means any system of apparatus and equipment [capable of
213 converting organic plant, wood, or waste products into electrical and thermal energy and
214 transferring these forms of energy by a separate apparatus to the point of use or storage] for use
215 in converting material into biomass energy, as defined in Section 59-12-102 , and transporting
216 that energy by separate apparatus to the point of use or storage.
217 (c) "Business entity" means any entity under which business is conducted or transacted.
218 [(d) "Commercial energy system" means any active solar, passive solar, wind,
219 hydroenergy, or biomass system used to supply energy to a commercial unit or as a commercial
220 enterprise.]
221 [(e) "Commercial enterprise" means a business entity whose purpose is to produce
222 electrical, mechanical, or thermal energy for sale from a commercial energy system.]
223 [(f) (i) "Commercial unit" means any building or structure which that a business entity
224 uses to transact its business, except as provided in Subsection (1)(f)(ii); and]
225 [(ii) (A) in the case of an active solar system used for agricultural water pumping or a
226 wind system, each individual energy generating device shall be a commercial unit; and]
227 [(B) if an energy system is the building or structure which a business entity uses to
228 transact its business, a commercial unit is the complete energy system itself.]
229 (d) "Direct-use geothermal system" means a system of apparatus and equipment
230 enabling the direct use of thermal energy, generally between 100 and 300 degrees Fahrenheit,
231 that is contained in the earth to meet energy needs, including heating a building, an industrial
232 process, and aquaculture.
233 (e) "Geothermal electricity" means energy contained in heat that continuously flows
234 outward from the earth that is used as a sole source of energy to produce electricity.
235 (f) "Geothermal heat-pump system" means a system of apparatus and equipment
236 enabling the use of thermal properties contained in the earth at temperatures well below 100
237 degrees Fahrenheit to help meet heating and cooling needs of a structure.
238 (g) "Hydroenergy system" means a system of apparatus and equipment capable of
239 intercepting and converting kinetic water energy into electrical or mechanical energy and
240 transferring this form of energy by separate apparatus to the point of use or storage.
241 (h) "Passive solar system":
242 (i) means a direct thermal system [which] that utilizes the structure of a building and its

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- 9 - 243 operable components to provide for collection, storage, and distribution of heating or cooling
244 during the appropriate times of the year by utilizing the climate resources available at the site;
245 and
246 (ii) includes those portions and components of a building that are expressly designed
247 and required for the collection, storage, and distribution of solar energy.
248 (i) "Residential energy system" means any active solar, passive solar, biomass,
249 direct-use geothermal, geothermal heat-pump system, wind, or hydroenergy system used to
250 supply energy to or for any residential unit.
251 (j) "Residential unit" means any house, condominium, apartment, or similar dwelling
252 unit [which] that serves as a dwelling for a person, group of persons, or a family but does not
253 include property subject to a fee under:
254 (i) Section 59-2-404 ;
255 (ii) Section 59-2-405 ;
256 (iii) Section 59-2-405.1 ;
257 (iv) Section 59-2-405.2 ; or
258 (v) Section 59-2-405.3 .
259 (k) "Utah Geological Survey" means the Utah Geological Survey established in Section
260 63-73-5 .
261 (l) "Wind system" means a system of apparatus and equipment capable of intercepting
262 and converting wind energy into mechanical or electrical energy and transferring these forms of
263 energy by a separate apparatus to the point of use or storage.
264 (2) For taxable years beginning on or after January 1, [2001] 2007, [but beginning on
265 or before December 31, 2006,] a claimant, estate, or trust may claim a nonrefundable tax credit
266 as provided in this section if:
267 (a) a claimant, estate, or trust that is not a business entity purchases and completes or
268 participates in the financing of a residential energy system to supply all or part of the energy for
269 the claimant's, estate's, or trust's residential unit in the state; or
270 (b) (i) a claimant, estate, or trust that is a business entity sells a residential unit to
271 another claimant, estate, or trust that is not a business entity [prior to] before making a claim
272 for a tax credit under Subsection (6) or Section 59-7-614 ; and
273 (ii) the claimant, estate, or trust that is a business entity assigns its right to the tax credit

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to the claimant, estate, or trust that is not a business entity as provided in Subsection (6)(c) or
275 Subsection 59-7-614 (2)(a)(iii).
276 (3) (a) The tax credit described in Subsection (2) is equal to 25% of the reasonable
277 costs of [the] each residential energy system, including installation costs, against any income
278 tax liability of the claimant, estate, or trust under this chapter for the taxable year in which the
279 residential energy system is completed and placed in service.
280 (b) The total amount of [the] each tax credit under this section may not exceed $2,000
281 per residential unit S. [ , except that the credit may not exceed $1,000 per residential unit for a
282 geothermal heat-pump system ] .S .
283 (c) The tax credit under this section is allowed for any residential energy system
284 completed and placed in service on or after January 1, [2001] 2007[, but on or before
285 December 31, 2006].
286 (4) (a) The tax credit provided for in this section shall be claimed in the return for the
287 taxable year in which the residential energy system is completed and placed in service.
288 (b) Additional residential energy systems or parts of residential energy systems may be
289 similarly claimed in returns for subsequent taxable years as long as the total amount claimed
290 does not exceed $2,000 per residential unit.
291 (c) If the amount of the tax credit under this section exceeds the income tax liability of
292 the claimant, estate, or trust claiming the tax credit under this section for that taxable year, then
293 the amount not used may be carried over for a period [which] that does not exceed the next
294 four taxable years.
295 (5) (a) A claimant, estate, or trust that is not a business entity that leases a residential
296 energy system installed on a residential unit is eligible for the residential energy tax [credits]
297 credit if that claimant, estate, or trust confirms that the lessor irrevocably elects not to claim the
298 tax credit.
299 (b) Only the principal recovery portion of the lease payments, which is the cost
300 incurred by the claimant, estate, or trust in acquiring the residential energy system excluding
301 interest charges and maintenance expenses, is eligible for the tax credits.
302 (c) A claimant, estate, or trust described in this Subsection (5) may use the tax credits
303 for a period that does not exceed seven years from the initiation of the lease.
304 (6) (a) A claimant, estate, or trust that is a business entity that purchases and completes

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- 11 - 305 or participates in the financing of a residential energy system to supply all or part of the energy
306 required for a residential unit owned or used by the claimant, estate, or trust that is a business
307 entity and situated in Utah is entitled to a nonrefundable tax credit as provided in this
308 Subsection (6).
309 (b) (i) For taxable years beginning on or after January 1, [2001] 2007, [but beginning
310 on or before December 31, 2006,] a claimant, estate, or trust that is a business entity is entitled
311 to a nonrefundable tax credit equal to 25% of the reasonable costs of a residential energy
312 system installed with respect to each residential unit it owns or uses, including installation
313 costs, against any tax due under this chapter for the taxable year in which the energy system is
314 completed and placed in service.
315 (ii) The total amount of the tax credit under this Subsection (6) may not exceed $2,000
316 per residential unit.
317 (iii) The tax credit under this Subsection (6) is allowed for any residential energy
318 system completed and placed in service on or after January 1, [2001] 2007[, but on or before
319 December 31, 2006].
320 (c) If a claimant, estate, or trust that is a business entity sells a residential unit to a
321 claimant, estate, or trust that is not a business entity [prior to] before making a claim for the tax
322 credit under this Subsection (6), the claimant, estate, or trust that is a business entity may:
323 (i) assign its right to this tax credit to the claimant, estate, or trust that is not a business
324 entity; and
325 (ii) if the claimant, estate, or trust that is a business entity assigns its right to the tax
326 credit to a claimant, estate, or trust that is not a business entity under Subsection (6)(c)(i), the
327 claimant, estate, or trust that is not a business entity may claim the tax credit as if that claimant,
328 estate, or trust that is not a business entity had completed or participated in the costs of the
329 residential energy system under this section.
330 [(7) (a) A claimant, estate, or trust that is a business entity that purchases or
331 participates in the financing of a commercial energy system is entitled to a nonrefundable tax
332 credit as provided in this Subsection (7) if:]
333 [(i) the commercial energy system supplies all or part of the energy required by
334 commercial units owned or used by the claimant, estate, or trust that is a business entity; or]
335 [(ii) the claimant, estate, or trust that is a business entity sells all or part of the energy

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- 12 - 336 produced by the commercial energy system as a commercial enterprise.]
337 [(b) (i) A claimant, estate, or trust that is a business entity is entitled to a tax credit
338 equal to 10% of the costs of any commercial energy system installed, including installation
339 costs, against any tax due under this chapter for the taxable year in which the commercial
340 energy system is completed and placed in service.]
341 [(ii) The total amount of the tax credit under this Subsection (7) may not exceed
342 $50,000 per commercial unit.]
343 [(iii) The tax credit under this Subsection (7) is allowed for any commercial energy
344 system completed and placed in service on or after January 1, 2001 , but on or before
345 December 31, 2006 .]
346 [(c) A claimant, estate, or trust that is a business entity that leases a commercial energy
347 system installed on a commercial unit is eligible for the tax credit under this Subsection (7) if
348 the claimant, estate, or trust confirms that the lessor irrevocably elects not to claim the tax
349 credit.]
350 [(d) Only the principal recovery portion of the lease payments, which is the cost
351 incurred by a claimant, estate, or trust that is not a business entity in acquiring a commercial
352 energy system, excluding interest charges and maintenance expenses, is eligible for the tax
353 credit under this Subsection (7).]
354 [(e) A claimant, estate, or trust that is a business entity that leases a commercial energy
355 system is eligible to use the tax credit under this Subsection (7) for a period that does not
356 exceed seven years from the initiation of the lease.]
357 [(8)] (7) (a) A tax credit under this section may be claimed for the taxable year in
358 which the residential energy system is completed and placed in service.
359 (b) Additional residential energy systems or parts of residential energy systems may be
360 claimed for subsequent years.
361 (c) If the amount of a tax credit under this section exceeds the tax liability of the
362 claimant, estate, or trust claiming the tax credit under this section for a taxable year, the amount
363 of the tax credit exceeding the tax liability may be carried over for a period which does not
364 exceed the next four taxable years.
365 [(9)] (8) The tax credits provided for under this section are in addition to any tax
366 credits provided under the laws or rules and regulations of the United States.

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- 13 - 367 [(10)] (9) (a) The Utah Geological Survey may set standards for residential [and
368 commercial] energy systems that cover the safety, reliability, efficiency, leasing, and technical
369 feasibility of the systems to ensure that the systems eligible for the tax credit use the state's
370 renewable and nonrenewable energy resources in an appropriate and economic manner.
371 (b) The Utah Geological Survey may set standards for residential and commercial
372 energy systems that establish the reasonable costs of an energy system, as used in Subsections
373 (3)(a) and (6)(b)(i), as an amount per unit of energy production.
374 [(b)] (c) A tax credit may not be taken under this section until the Utah Geological
375 Survey has certified that the energy system has been completely installed and is a viable system
376 for saving or production of energy from renewable resources.
377 [(11)] (10) The Utah Geological Survey and the commission [are authorized to
378 promulgate] may make rules in accordance with Title 63, Chapter 46a, Utah Administrative
379 Rulemaking Act, [which] that are necessary to implement this section.
380 [(12) The Uniform School Fund shall be reimbursed by transfers from the General
381 Fund for any tax credits taken under this section.]
382 (11) (a) On or before October 1, 2012, and every five years thereafter, the Tax Review
383 Commission shall review the tax credits provided by this section and make recommendations
384 to the Revenue and Taxation Interim Committee concerning whether the credit should be
385 continued, modified, or repealed.
386 (b) The Tax Review Commission's report under Subsection (11)(a) shall include
387 information concerning the cost of the credit, the purpose and effectiveness of the credit, and
388 the state's benefit from the credit.
389 Section 3. Section 59-10-1106 is enacted to read:
390 59-10-1106. Renewable energy tax credit.
391 (1) As used in this section:
392 (a) "Active solar system" is as defined in Section 59-10-1014 .
393 (b) "Biomass system" is as defined in Section 59-10-1014 .
394 (c) "Business entity" is as defined in Section 59-10-1014 .
395 (d) "Commercial energy system" means any active solar, passive solar, geothermal
396 electricity, direct-use geothermal, geothermal heat-pump system, wind, hydroenergy, or
397 biomass system used to supply energy to a commercial unit or as a commercial enterprise.

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- 14 - 398 (e) "Commercial enterprise" means a business entity whose purpose is to produce
399 electrical, mechanical, or thermal energy for sale from a commercial energy system.
400 (f) (i) "Commercial unit" means any building or structure that a business entity uses to
401 transact its business except as provided in Subsection (1)(f)(ii); and
402 (ii) (A) in the case of an active solar system used for agricultural water pumping or a
403 wind system, each individual energy generating device shall be a commercial unit; and
404 (B) if an energy system is the building or structure that a business entity uses to
405 transact its business, a commercial unit is the complete energy system itself.
406 (g) "Direct-use geothermal system" is as defined in Section 59-10-1014 .
407 (h) "Geothermal electricity" is as defined in Section 59-10-1014 .
408 (i) "Geothermal heat-pump system" is as defined in Section 59-10-1014 .
409 (j) "Hydroenergy system" is as defined in Section 59-10-1014 .
410 (k) "Individual taxpayer" means any person who is a taxpayer as defined in Section
411 59-10-103 and an individual as defined in Section 59-10-103 .
412 (l) "Passive solar system" is as defined in Section 59-10-1014 .
413 (m) "Utah Geological Survey" means the Utah Geological Survey established in
414 Section 63-73-5 .
415 (n) "Wind system" is as defined in Section 59-10-1014 .
416 (2) (a) (i) For taxable years beginning on or after January 1, 2007, a business entity that
417 purchases or participates in the financing of a commercial energy system situated in Utah is
418 entitled to a tax credit as provided in this Subsection (2)(a) if the commercial energy system
419 does not use wind, geothermal electricity, or biomass equipment capable of producing a total of
420 660 or more kilowatts of electricity and:
421 (A) the commercial energy system supplies all or part of the energy required by
422 commercial units owned or used by the business entity; or
423 (B) the business entity sells all or part of the energy produced by the commercial
424 energy system as a commercial enterprise.
425 (ii) (A) A business entity is entitled to a tax credit of up to 10% of the reasonable costs
426 of any commercial energy system installed, including installation costs, against any tax due
427 under this chapter for the taxable year in which the commercial energy system is completed and
428 placed in service.

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(B) Notwithstanding Subsection (2)(a)(ii)(A), the total amount of the credit under this
430 Subsection (2)(a) may not exceed $50,000 per commercial unit.
431 (C) The credit under this Subsection (2)(a) is allowed for any commercial energy
432 system completed and placed in service on or after January 1, 2007.
433 (iii) A business entity that leases a commercial energy system installed on a
434 commercial unit is eligible for the tax credit under this Subsection (2)(a) if the lessee can
435 confirm that the lessor irrevocably elects not to claim the credit.
436 (iv) Only the principal recovery portion of the lease payments, which is the cost
437 incurred by a business entity in acquiring a commercial energy system, excluding interest
438 charges and maintenance expenses, is eligible for the tax credit under this Subsection (2)(a).
439 (v) A business entity that leases a commercial energy system is eligible to use the tax
440 credit under this Subsection (2)(a) for a period no greater than seven years from the initiation of
441 the lease.
442 (b) (i) For taxable years beginning on or after January 1, 2007, S. [ but beginning on or
443 before December 31, 2012, ] .S a business entity that owns a commercial energy system situated in
444 Utah using wind, geothermal electricity, or biomass equipment capable of producing a total of
445 660 or more kilowatts of electricity is entitled to a refundable tax credit as provided in this
446 section if:
447 (A) the commercial energy system supplies all or part of the energy required by
448 commercial units owned or used by the business entity; or
449 (B) the business entity sells all or part of the energy produced by the commercial
450 energy system as a commercial enterprise.
451 (ii) A business entity is entitled to a tax credit under Subsection (2)(b) equal to the
452 product of:
453 (A) 0.35 cents; and
454 (B) the kilowatt hours of electricity produced and either used or sold during the taxable
455 year.
456 (iii) The credit allowed by this Subsection (2)(b):
457 (A) may be claimed for production occurring during a period of 48 months beginning
458 with the month in which the commercial energy system is placed in service; and
459 (B) may not be carried forward or back.

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- 16 - 460 (iv) A business entity that leases a commercial energy system installed on a
461 commercial unit is eligible for the tax credit under this section if the lessee can confirm that the
462 lessor irrevocably elects not to claim the credit.
463 (3) The tax credits provided for under this section are in addition to any tax credits
464 provided under the laws or rules and regulations of the United States.
465 (4) (a) The Utah Geological Survey may set standards for commercial energy systems
466 claiming a tax credit under Subsection (2)(a) that cover the safety, reliability, efficiency,
467 leasing, and technical feasibility of the systems to ensure that the systems eligible for the tax
468 credit use the state's renewable and nonrenewable energy resources in an appropriate and
469 economic manner.
470 (b) A tax credit may not be taken under this section until the Utah Geological Survey
471 has certified that the commercial energy system has been completely installed and is a viable
472 system for saving or production of energy from renewable resources.
473 (5) The Utah Geological Survey and the commission may make rules in accordance
474 with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, that are necessary to
475 implement this section.
476 (6) (a) On or before October 1, 2012, and every five years thereafter, the Tax Review
477 Commission shall review the tax credits provided by this section and make recommendations
478 to the Revenue and Taxation Interim Committee concerning whether the credit should be
479 continued, modified, or repealed.
480 (b) The Tax Review Commission's report under Subsection (6)(a) shall include
481 information concerning the cost of the credit, the purpose and effectiveness of the credit, and
482 the state's benefit from the credit.
483 Section 4. Retrospective operation.
484 This bill has retrospective operation for taxable years beginning on or after January 1,
485 2007.