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H.B. 430

             1     

ECONOMIC DEVELOPMENT INCENTIVES FOR

             2     
ALTERNATIVE ENERGY PROJECTS

             3     
2009 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Kevin S. Garn

             6     
Senate Sponsor: Sheldon L. Killpack

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill enacts the Renewable Energy Development Act within the Governor's Office
             11      of Economic Development.
             12      Highlighted Provisions:
             13          This bill:
             14          .    provides for the creation of renewable energy development zones by the Governor's
             15      Office of Economic Development and provides definitions related to renewable
             16      energy development zones and renewable energy development projects undertaken
             17      within those zones;
             18          .    provides for an economic development tax credit to business entities upon meeting
             19      standards set by the Governor's Office of Economic Development that are based on
             20      requirements established in the act;
             21          .    provides for the issuance of a renewable energy development tax credit certificate
             22      by the office, with certain restrictions and conditions, such as specifying the
             23      maximum amount of tax credit a business entity may earn over the life of a
             24      renewable energy project;
             25          .    provides that a renewable energy project must include direct investment within the
             26      boundaries of a zone, must bring new incremental jobs to the state, must include
             27      significant capital investment or the creation of high paying jobs or significant


             28      purchases from Utah vendors and providers, and must generate new state revenues;
             29          .    requires the business entity to submit to audits for verification of a claimed tax
             30      credit;
             31          .    provides for certification by the office of a business entity's eligibility for a claimed
             32      tax credit; and
             33          .    requires for an annual report to the Legislature and the Utah Tax Review
             34      Commission on the success of the renewable energy development project tax
             35      incentive program.
             36      Monies Appropriated in this Bill:
             37          None
             38      Other Special Clauses:
             39          This bill provides an effective date.
             40          This bill has retrospective operation for a taxable year beginning on or after January 1,
             41      2009.
             42      Utah Code Sections Affected:
             43      AMENDS:
             44          59-7-614.2, as enacted by Laws of Utah 2008, Chapter 372
             45          59-10-1107, as enacted by Laws of Utah 2008, Chapter 372
             46      ENACTS:
             47          63M-1-2801, Utah Code Annotated 1953
             48          63M-1-2802, Utah Code Annotated 1953
             49          63M-1-2803, Utah Code Annotated 1953
             50          63M-1-2804, Utah Code Annotated 1953
             51          63M-1-2805, Utah Code Annotated 1953
             52          63M-1-2806, Utah Code Annotated 1953
             53     
             54      Be it enacted by the Legislature of the state of Utah:
             55          Section 1. Section 59-7-614.2 is amended to read:
             56           59-7-614.2. Refundable economic development tax credit.
             57          (1) As used in this section:
             58          (a) "Business entity" means a taxpayer that meets the definition of "business entity" as


             59      defined in Section 63M-1-2403 or 63M-1-2803 .
             60          (b) "Office" means the Governor's Office of Economic Development.
             61          (2) [For taxable years beginning on or after January 1, 2008, a] A business entity may
             62      claim a refundable tax credit for economic development.
             63          (3) The tax credit under this section is the amount listed as the tax credit amount on the
             64      tax credit certificate that the office issues to the business entity for the taxable year.
             65          (4) (a) In accordance with any rules prescribed by the commission under Subsection
             66      (4)(b), the commission shall make a refund to a business entity that claims a tax credit under
             67      this section if the amount of the tax credit exceeds the business entity's tax liability for a
             68      taxable year.
             69          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             70      commission may make rules providing procedures for making a refund to a business entity as
             71      required by Subsection (4)(a).
             72          (5) (a) On or before October 1, 2013, and every five years after October 1, 2013, the
             73      Utah Tax Review Commission shall study the tax credit allowed by this section and make
             74      recommendations to the Revenue and Taxation Interim Committee and the Workforce Services
             75      and Community and Economic Development Interim Committee concerning whether the tax
             76      credit should be continued, modified, or repealed.
             77          (b) For purposes of the study required by this Subsection (5), the office shall provide
             78      the following information to the Utah Tax Review Commission:
             79          (i) the amount of tax credit that the office grants to each business entity for each
             80      calendar year;
             81          (ii) the criteria that the office uses in granting a tax credit;
             82          (iii) the new state revenues generated by each business entity for each calendar year;
             83          (iv) the information contained in the office's latest report to the Legislature under
             84      Section 63M-1-2406 or 63M-1-2806 ; and
             85          (v) any other information that the Utah Tax Review Commission requests.
             86          (c) The Utah Tax Review Commission shall ensure that its recommendations under
             87      Subsection (5)(a) include an evaluation of:
             88          (i) the cost of the tax credit to the state;
             89          (ii) the purpose and effectiveness of the tax credit; and


             90          (iii) the extent to which the state benefits from the tax credit.
             91          Section 2. Section 59-10-1107 is amended to read:
             92           59-10-1107. Refundable economic development tax credit.
             93          (1) As used in this section:
             94          (a) "Business entity" means a claimant, estate, or trust that meets the definition of
             95      "business entity" as defined in Section 63M-1-2403 or 63M-1-2803 .
             96          (b) "Office" means the Governor's Office of Economic Development.
             97          (2) [For taxable years beginning on or after January 1, 2008, a] A business entity may
             98      claim a refundable tax credit for economic development.
             99          (3) The tax credit under this section is the amount listed as the tax credit amount on the
             100      tax credit certificate that the office issues to the business entity for the taxable year.
             101          (4) (a) In accordance with any rules prescribed by the commission under Subsection
             102      (4)(b), the commission shall make a refund to a business entity that claims a tax credit under
             103      this section if the amount of the tax credit exceeds the business entity's tax liability for a
             104      taxable year.
             105          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             106      commission may make rules providing procedures for making a refund to a business entity as
             107      required by Subsection (4)(a).
             108          (5) (a) On or before October 1, 2013, and every five years after October 1, 2013, the
             109      Utah Tax Review Commission shall study the tax credit allowed by this section and make
             110      recommendations to the Revenue and Taxation Interim Committee and the Workforce Services
             111      and Community and Economic Development Interim Committee concerning whether the tax
             112      credit should be continued, modified, or repealed.
             113          (b) For purposes of the study required by this Subsection (5), the office shall provide
             114      the following information to the Utah Tax Review Commission:
             115          (i) the amount of tax credit the office grants to each taxpayer for each calendar year;
             116          (ii) the criteria the office uses in granting a tax credit;
             117          (iii) the new state revenues generated by each taxpayer for each calendar year;
             118          (iv) the information contained in the office's latest report to the Legislature under
             119      Section 63M-1-2406 or 63M-1-2806 ; and
             120          (v) any other information that the Utah Tax Review Commission requests.


             121          (c) The Utah Tax Review Commission shall ensure that its recommendations under
             122      Subsection (5)(a) include an evaluation of:
             123          (i) the cost of the tax credit to the state;
             124          (ii) the purpose and effectiveness of the tax credit; and
             125          (iii) the extent to which the state benefits from the tax credit.
             126          Section 3. Section 63M-1-2801 is enacted to read:
             127     
Part 28. Renewable Energy Development Act

             128          63M-1-2801. Title.
             129          This part is known as the "Renewable Energy Development Act."
             130          Section 4. Section 63M-1-2802 is enacted to read:
             131          63M-1-2802. Findings.
             132          (1) The Legislature finds that:
             133          (a) to foster and develop the renewable energy industry in Utah, including generation
             134      and manufacturing, is a public purpose necessary to assure the health and welfare of Utah's
             135      citizens and the growth of the state's economy;
             136          (b) Utah loses prospective high paying jobs, new economic growth, and corresponding
             137      incremental new state and local revenues to competing states due to a wide variety of
             138      competing renewable energy incentives offered by those states; and
             139          (c) renewable energy initiatives and interests of state and local officials should be
             140      aligned and united in renewable energy generation and related manufacturing.
             141          (2) This part is enacted to:
             142          (a) increase generation of renewable energy and create high paying jobs in the
             143      renewable energy industry, thereby growing the state's economy and corresponding state and
             144      local revenues by providing tax credits to attract new renewable energy projects and assist in
             145      the expansion of existing renewable energy projects located within renewable energy
             146      development zones in the state; and
             147          (b) provide a cooperative and unified working relationship between state and local
             148      renewable energy development efforts.
             149          Section 5. Section 63M-1-2803 is enacted to read:
             150          63M-1-2803. Definitions.
             151          As used in this part:


             152          (1) "Business entity" means a person that:
             153          (a) conducts business in Utah; and
             154          (b) enters into an agreement with the office that qualifies the person to receive a tax
             155      credit under Section 59-7-614.2 or 59-10-1107 .
             156          (2) "High paying jobs" means the annual wages of employment positions in a business
             157      entity that compare favorably against the average wage of a community in which the
             158      employment positions will exist.
             159          (3) "New incremental jobs" means employment positions that are:
             160          (a) not shifted from one jurisdiction in the state to another jurisdiction in the state; and
             161          (b) created in addition to the baseline count of employment positions that existed
             162      within the business entity before the new commercial project.
             163          (4) "New state revenues" means:
             164          (a) incremental new state sales and use tax revenues generated as a result of a
             165      renewable energy project in a renewable energy development zone that a business entity pays
             166      under Title 59, Chapter 12, Sales and Use Tax Act;
             167          (b) incremental new state tax revenues that a business entity pays as a result of a
             168      renewable energy project in a renewable energy development zone under:
             169          (i) Title 59, Chapter 7, Corporate Franchise and Income Taxes;
             170          (ii) Title 59, Chapter 10, Part 1, Determination and Reporting of Tax Liability and
             171      Information;
             172          (iii) Title 59, Chapter 10, Part 2, Trusts and Estates;
             173          (iv) Title 59, Chapter 10, Part 4, Withholding of Tax; or
             174          (v) a combination of Subsections (4)(b)(i) through (4)(b)(iv);
             175          (c) incremental new state tax revenues generated as individual income taxes under
             176      Title 59, Chapter 10, Part 1, Determination and Reporting of Tax Liability and Information,
             177      paid by employees of the new commercial project as evidenced by payroll records from the
             178      business entity; or
             179          (d) a combination of Subsections (4)(a) through (4)(c).
             180          (5) "Office" means the Governor's Office of Economic Development.
             181          (6) "Renewable energy" means the energy generation as defined in Subsection
             182      10-19-102 (11).


             183          (7) "Renewable energy development zone" means a renewable energy development
             184      zone created under Section 63M-1-2804 .
             185          (8) "Renewable energy project" means a development opportunity that involves
             186      renewable energy generation or manufacturing of equipment used directly in renewable energy
             187      generation of increased energy efficiency.
             188          (9) "Tax credit" means an economic development tax credit created by Section
             189      59-7-614.2 or 59-10-1107 .
             190          (10) "Tax credit amount" means the amount the office lists as a tax credit on a tax
             191      credit certificate for a taxable year.
             192          (11) "Tax credit certificate" means a certificate issued by the office that:
             193          (a) lists the name of the applicant;
             194          (b) lists the applicant's taxpayer identification number;
             195          (c) lists the amount of the tax credit that the office awards the applicant for a taxable
             196      year; and
             197          (d) may include other information as determined by the office.
             198          Section 6. Section 63M-1-2804 is enacted to read:
             199          63M-1-2804. Creation of renewable energy development zones -- Tax credits.
             200          (1) The office, with advice from the board, may create a renewable energy
             201      development zone in the state that satisfies the following requirements:
             202          (a) the area is zoned commercial, industrial, manufacturing, business park, research
             203      park, or other appropriate use in a community approved master plan;
             204          (b) the request to create a renewable energy development zone has been forwarded to
             205      the office after first being approved by an appropriate local government entity; and
             206          (c) the local government entity has committed or will commit to provide incentives,
             207      which may include an abatement of some or all of the property taxes for up to 30 years for a
             208      renewable energy project qualified under this part.
             209          (2) (a) By following the procedures and requirements of Title 63G, Chapter 4,
             210      Administrative Procedures Act, the office shall set standards that a business entity must meet to
             211      qualify for a tax credit under this part.
             212          (b) The office shall ensure that those standards include the following requirements:
             213          (i) the renewable energy project must be within a renewable energy development zone;


             214          (ii) the renewable energy project includes direct investment within the geographic
             215      boundaries of the renewable energy development zone;
             216          (iii) the renewable energy project brings new incremental jobs to Utah;
             217          (iv) the renewable energy project includes significant capital investment, the creation
             218      of high paying jobs, or significant purchases from Utah vendors and providers, or any
             219      combination of these three economic factors;
             220          (v) the renewable energy project generates new state revenues; and
             221          (vi) the business entity qualifying for the tax credit meets the requirements of Section
             222      63M-1-2405 .
             223          (3) (a) The office, with advice from the board, may enter into an agreement with a
             224      business entity authorizing a tax credit to a business entity that meets the standards established
             225      under Subsection (2).
             226          (b) The office may not authorize or commit a tax credit to a business entity that
             227      exceeds 100% of the new state revenues generated by the business entity's renewable energy
             228      project over the life of a renewable energy project or 20 years, whichever is less.
             229          (4) The office shall ensure that the agreement with the business entity that is described
             230      in Subsection (3):
             231          (a) details the requirements that the business entity must meet to qualify for a tax credit
             232      under this part;
             233          (b) specifies the maximum amount of tax credit that the business entity may earn over
             234      the life of the renewable energy project;
             235          (c) establishes the length of time the business entity may claim a tax credit;
             236          (d) requires the business entity to retain records supporting its claim for a tax credit for
             237      at least four years after the business entity claims a tax credit under this part; and
             238          (e) requires the business entity to submit to audits for verification of the tax credit
             239      claimed.
             240          Section 7. Section 63M-1-2805 is enacted to read:
             241          63M-1-2805. Qualifications for tax credit -- Procedure.
             242          (1) The office shall certify a business entity's eligibility for a tax credit as provided in
             243      this section.
             244          (2) A business entity seeking to receive a tax credit shall provide the office with:


             245          (a) an application for the tax credit certificate;
             246          (b) documentation of the new state revenues generated from the business entity's
             247      renewable energy project that were paid during the preceding calendar year; and
             248          (c) a document that expressly directs and authorizes the State Tax Commission to
             249      disclose to the office the business entity's returns and other information concerning the business
             250      entity that would otherwise be subject to confidentiality under Section 59-1-403 or Section
             251      6103 of the Internal Revenue Code.
             252          (3) (a) The office shall submit the document referred to in Subsection (2)(c) to the
             253      State Tax Commission.
             254          (b) Upon receipt of the document, the State Tax Commission shall provide the office
             255      with the information requested by the office that the business entity directed or authorized the
             256      State Tax Commission to provide to the office in the document referred to in Subsection (2)(c).
             257          (4) If after review of the information provided by the business entity and the State Tax
             258      Commission the office determines that the documentation provided by the business entity is
             259      not substantially accurate, the office shall either:
             260          (a) deny the tax credit; or
             261          (b) inform the business entity that the documentation was inadequate and ask the
             262      business entity to submit new documentation.
             263          (5) If after review of the information provided by the entity and the State Tax
             264      Commission the office determines that the documentation provided by the business entity is
             265      substantially accurate, the office shall, based upon the documentation:
             266          (a) determine the amount of the tax credit to be granted to the business entity;
             267          (b) issue a tax credit certificate to the business entity; and
             268          (c) provide a duplicate copy of the tax credit certificate to the State Tax Commission.
             269          (6) A business entity may not claim a tax credit under this part unless the business
             270      entity has a tax credit certificate issued by the office.
             271          (7) A business entity that claims the credit under this section shall retain the tax credit
             272      certificate in accordance with Section 59-7-614.2 or 59-10-1107 .
             273          Section 8. Section 63M-1-2806 is enacted to read:
             274          63M-1-2806. Report to the Legislature.
             275          The office shall report annually to the Legislature's Workforce Services and Community


             276      and Economic Development Interim Committee and the Utah Tax Review Commission
             277      describing:
             278          (1) its success in attracting renewable energy projects to renewable energy
             279      development zones under this part and the corresponding increase in new increment jobs;
             280          (2) the amount of tax credits promised and the period of time over which the tax credits
             281      will be paid; and
             282          (3) the economic impact on the state related to generating new state revenues and
             283      providing tax credits under this part.
             284          Section 9. Effective date -- Retrospective operation.
             285          (1) Except as provided in Subsection (2), this bill takes effect on May 12, 2009.
             286          (2) The amendments to Sections 59-7-614.2 and 59-10-1107 have retrospective
             287      operation for a taxable year beginning on or after January 1, 2009.




Legislative Review Note
    as of 2-24-09 10:01 AM


Office of Legislative Research and General Counsel


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