S.B. 36

1

INCOME TAX - ENERGY SAVINGS TAX
2 CREDIT EXTENSION
3 1997 GENERAL SESSION
4 STATE OF UTAH
5 Sponsor: R. Mont Evans
6 AN ACT RELATING TO REVENUE AND TAXATION; REAUTHORIZING THE INCOME
7 TAX CREDIT FOR ENERGY SAVING SYSTEMS COSTS; MODIFYING THE MAXIMUM
8 AMOUNTS ALLOWABLE AS CREDITS FOR RESIDENTIAL AND COMMERCIAL
9 ENERGY SYSTEMS; MOVING THE CREDIT AUTHORIZED UNDER THE CORPORATE
10 FRANCHISE AND INCOME TAX PROVISIONS INTO TITLE 59, CHAPTER 7,
11 CORPORATE FRANCHISE AND INCOME TAXES; MOVING CERTIFICATION DUTIES
12 FROM THE OFFICE OF ENERGY SERVICES TO THE OFFICE OF ENERGY AND
13 RESOURCE PLANNING; MODIFYING CERTAIN DEFINITIONS; MAKING TECHNICAL
14 CHANGES; PROVIDING A REPEAL DATE; AND PROVIDING FOR RETROSPECTIVE
15 OPERATION.
16 This act affects sections of Utah Code Annotated 1953 as follows:
17 AMENDS:
18 59-10-601, as last amended by Chapter 12, Laws of Utah 1994
19 59-10-602, as last amended by Chapter 3, Laws of Utah 1991, First Special Session
20 59-10-603, as last amended by Chapter 4, Laws of Utah 1993
21 59-10-604, as last amended by Chapter 169, Laws of Utah 1988
22 ENACTS:
23 59-7-611, Utah Code Annotated 1953
24 63-55b-5901, Utah Code Annotated 1953
25 Be it enacted by the Legislature of the state of Utah:
26 Section 1. Section 59-7-611 is enacted to read:
27 59-7-611. Energy saving systems tax credit.

1 (1) As used in this section:
2 (a) "Active solar system":
3 (i) means a system of equipment capable of collecting and converting incident solar
4 radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy by
5 a separate apparatus to storage or to the point of use; and
6 (ii) includes water heating, space heating or cooling, and electrical or mechanical energy
7 generation.
8 (b) "Biomass system" means any system of apparatus and equipment capable of converting
9 organic plant, wood, or waste products into electrical and thermal energy and transferring these
10 forms of energy by a separate apparatus to the point of use or storage.
11 (c) "Business entity" means any sole proprietorship, estate, trust, partnership, association,
12 corporation, cooperative, or other entity under which business is conducted or transacted.
13 (d) "Commercial energy system" means any active solar, passive solar, wind, hydroenergy,
14 or biomass system used to supply energy to a commercial unit or as a commercial enterprise.
15 (e) "Commercial enterprise" means a business entity whose purpose is to produce
16 electrical, mechanical, or thermal energy for sale from a commercial energy system.
17 (f) (i) "Commercial unit" means any building or structure which a business entity uses to
18 transact its business except as provided in Subsection (1)(f)(ii); and
19 (ii) (A) in the case of an active solar system used for agricultural water pumping or a wind
20 system, each individual energy generating device shall be a commercial unit; and
21 (B) if an energy system is the building or structure which a business entity uses to transact
22 its business, a commercial unit is the complete energy system itself.
23 (g) "Office of Energy and Resource Planning" means the Office of Energy and Resource
24 Planning, Department of Natural Resources.
25 (h) "Hydroenergy system" means a system of apparatus and equipment capable of
26 intercepting and converting kinetic water energy into electrical or mechanical energy and
27 transferring this form of energy by separate apparatus to the point of use or storage.
28 (i) "Individual taxpayer" means any person who is a taxpayer as defined in Section
29 59-10-103 and a resident individual as defined in Section 59-10-103.
30 (j) "Passive solar system":
31 (i) means a direct thermal system which utilizes the structure of a building and its operable

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1 components to provide for collection, storage, and distribution of heating or cooling during the
2 appropriate times of the year by utilizing the climate resources available at the site; and
3 (ii) includes those portions and components of a building that are expressly designed and
4 required for the collection, storage, and distribution of solar energy.
5 (k) "Residential energy system" means any active solar, passive solar, wind, or
6 hydroenergy system used to supply energy to or for any residential unit.
7 (l) "Residential unit" means any house, condominium, apartment, or similar dwelling unit
8 which serves as a dwelling for a person, group of persons, or a family but does not include
9 property subject to the fees in lieu of the ad valorem tax under Sections 59-2-404 through
10 59-2-405.
11 (m) "Wind system" means a system of apparatus and equipment capable of intercepting
12 and converting wind energy into mechanical or electrical energy and transferring these forms of
13 energy by a separate apparatus to the point of use or storage.
14 (2) (a) (i) A business entity that purchases and completes or participates in the financing
15 of a residential energy system to supply all or part of the energy required for a residential unit
16 owned or used by the business entity and situated in Utah is entitled to a tax credit as provided in
17 this Subsection (2)(a).
18 (ii) (A) A business entity is entitled to a tax credit equal to 25% of the costs of a residential
19 energy system installed with respect to each residential unit it owns or uses, including installation
20 costs, against any tax due under this chapter for the taxable year in which the energy system is
21 completed and placed in service.
22 (B) The total amount of the credit under this Subsection (2)(a) may not exceed $2,000 S PER
22a RESIDENTIAL UNIT s .
23 (C) The credit under this Subsection (2)(a) is allowed for any residential energy system
24 completed and placed in service on or after January 1, 1997, but prior to January 1, 2001.
25 (iii) If a business entity sells a residential unit to an individual taxpayer prior to making
26 a claim for the tax credit under this Subsection (2)(a), the business entity may:
27 (A) assign its right to this tax credit to the individual taxpayer; and
28 (B) if the business entity assigns its right to the tax credit to an individual taxpayer under
29 Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the individual
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Amend on 2_goldenrod February 20, 1997 30 taxpayer had completed or participated in the costs of the residential energy system under Section
31 59-10-602.

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1 (b) (i) A business entity that purchases or participates in the financing of a commercial
2 energy system is entitled to a tax credit as provided in this Subsection (2)(b) if:
3 (A) the commercial energy system supplies all or part of the energy required by
4 commercial units owned or used by the business entity; or
5 (B) the business entity sells all or part of the energy produced by the commercial energy
6 system as a commercial enterprise.
7 (ii) (A) A business entity is entitled to a tax credit equal to 10% of the costs of any
8 commercial energy system installed, including installation costs, against any tax due under this
9 chapter for the taxable year in which the commercial energy system is completed and placed in
10 service.
11 (B) The total amount of the credit under this Subsection (2)(b) may not exceed $50,000
12 per commercial unit.
13 (C) The credit under this Subsection (2)(b) is allowed for any commercial energy system
14 completed and placed in service on or after January 1, 1997, but prior to January 1, 2001.
15 (iii) A business entity that leases a commercial energy system installed on a commercial
16 unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can confirm that the
17 lessor irrevocably elects not to claim the credit.
18 (iv) Only the principal recovery portion of the lease payments, which is the cost incurred
19 by a business entity in acquiring a commercial energy system, excluding interest charges and
20 maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
21 (v) A business entity that leases a commercial energy system is eligible to use the tax
22 credit under this Subsection (2)(b) for a period no greater than seven years from the initiation of
23 the lease.
24 (c) (i) A tax credit under this section may be claimed for the taxable year in which the
25 energy system is completed and placed in service.
26 (ii) Additional energy systems or parts of energy systems may be claimed for subsequent
27 years.
28 (iii) If the amount of a tax credit under this section exceeds a business entity's tax liability
29 under this chapter for a taxable year, the amount of the credit exceeding the liability may be carried
30 over for a period which does not exceed the next four taxable years.
31 (3) (a) The tax credits provided for under Subsection (2) are in addition to any tax credits

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1 provided under the laws or rules and regulations of the United States.
2 (b) (i) The Office of Energy and Resource Planning may promulgate standards for
3 residential and commercial energy systems that cover the safety, reliability, efficiency, leasing, and
4 technical feasibility of the systems to ensure that the systems eligible for the tax credit use the
5 state's renewable and nonrenewable energy resources in an appropriate and economic manner.
6 (ii) A tax credit may not be taken under Subsection (2) until the Office of Energy and
7 Resource Planning has certified that the energy system has been completely installed and is a
8 viable system for saving or production of energy from renewable resources.
9 (c) The Office of Energy and Resource Planning and the commission are authorized to
10 promulgate rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
11 which are necessary to implement this section.
12 (d) The Uniform School Fund shall be reimbursed by transfers from the General Fund for
13 any credits taken under this section.
14 Section 2. Section 59-10-601 is amended to read:
15 59-10-601. Definitions.
16 As used in this part:
17 (1) "Active solar system":
18 (a) means a system of equipment capable of collecting and converting incident solar
19 radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy by
20 a separate apparatus to storage or to the point of use[. It]; and
21 (b) includes water heating, space heating or cooling, and electrical or mechanical energy
22 generation.
23 (2) "Biomass system" means any system of apparatus and equipment capable of converting
24 organic plant, wood, or waste products into electrical and thermal energy and transferring these
25 forms of energy by a separate apparatus to the point of use or storage.
26 (3) "Business entity" means any sole proprietorship, estate, trust, partnership, association,
27 corporation, cooperative, or other entity under which business is conducted or transacted.
28 (4) "Commercial energy system" means any active solar, passive solar, wind, hydroenergy,
29 or biomass system used to supply energy to a commercial unit or as a commercial enterprise.
30 (5) "Commercial enterprise" means a business entity whose purpose is to produce
31 electrical, mechanical, or thermal energy for sale from a commercial energy system.

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1 (6) (a) "Commercial unit" means any building or structure which a business entity uses
2 to transact its business, except as provided in Subsection (6)(b); and
3 (b) (i) in the case of an active solar system used for agricultural water pumping or a wind
4 [energy] system [where], each individual [wind-generating] energy generating device shall be a
5 commercial unit[. When]; and
6 (ii) if an energy system is the building or structure which a business entity uses to transact
7 its business, a commercial unit is the complete energy system itself.
8 (7) "[Energy office] Office of Energy and Resource Planning" means the Office of Energy
9 [Services] and Resource Planning, Department of Natural Resources.
10 (8) "Hydroenergy system" means a system of apparatus and equipment capable of
11 intercepting and converting kinetic water energy into electrical or mechanical energy and
12 transferring this form of energy by separate apparatus to the point of use or storage.
13 (9) "Individual taxpayer" means any person who is a taxpayer as defined in Section
14 59-10-103 and a resident individual as defined in Section 59-10-103.
15 (10) "Passive solar system":
16 (a) means a direct thermal system which utilizes the structure of a building and its operable
17 components to provide for collection, storage, and distribution of heating or cooling during the
18 appropriate times of the year by utilizing the climate resources available at the site[. It]; and
19 (b) includes those portions and components of a building that are expressly designed and
20 required for the collection, storage, and distribution of solar energy.
21 (11) "Residential energy system" means any active solar, passive solar, wind, or
22 hydroenergy system used to supply energy to or for any residential unit.
23 (12) "Residential unit" means any house, condominium, apartment, or [other] similar
24 dwelling unit which serves as a [principal] dwelling for a person, group of persons, or a family but
25 does not include property subject to the fees in lieu of the ad valorem tax under Sections 59-2-404
26 through 59-2-405.
27 (13) "Wind system" means a system of apparatus and equipment capable of intercepting
28 and converting wind energy into mechanical or electrical energy and transferring these forms of
29 energy by a separate apparatus to the point of use or storage.
30 Section 3. Section 59-10-602 is amended to read:
31 59-10-602. Individual tax credit -- Limitations.

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1 (1) Any individual taxpayer [who purchases and completes or participates in the financing
2 of a residential energy system to supply all or part of the energy for the individual taxpayer's
3 residential unit in Utah is entitled to] may claim a tax credit as provided in this section[.] if:
4 (a) the individual taxpayer purchases and completes or participates in the financing of a
5 residential energy system to supply all or part of the energy for the individual taxpayer's
6 residential unit in the state; or
7 (b) (i) a business entity sells a residential unit to an individual taxpayer prior to making
8 a claim for a tax credit under Section 59-7-611 or 59-10-603; and
9 (ii) the business entity assigns its right to the tax credit to the individual taxpayer as
10 provided in Subsection 59-7-611(2)(a)(iii) or Subsection 59-10-603(1)(c).
11 (2) (a) [Except as provided in this subsection, the] An individual taxpayer meeting the
12 requirements of Subsection (1) is entitled to a tax credit equal to 25% of the costs of the energy
13 system, including installation costs, against any income tax liability of the individual taxpayer
14 under [Title 59, Chapter 10,] this chapter for the taxable year in which the residential energy
15 system is completed and placed in service.
16 (b) The total amount of the credit under this section may not exceed [$1,500] $2,000 S PER
16a RESIDENTIAL UNIT s .
17 [This]
18 (c) The credit under this section is allowed for any residential energy system completed
19 and placed in service on or after January 1, [1986] 1997, but prior to [December 31, 1995. For any
20 energy system completed and placed in service prior to the 1986 taxable year, the claim regarding
21 it shall be filed not later than when returns are due for the 1985 taxable year. The credit for
22 residential energy systems completed and installed prior to July 1, 1985, is equal to 10% of the
23 cost of the system, including installation costs. The total amount of the credit for residential
24 energy systems completed and installed prior to July 1, 1985, may not exceed $1,000] January 1,
25 2001.
26 (3) (a) The tax credit provided for in this section shall be claimed in the return for the
27 taxable year in which the energy system is completed and placed in service[, except as otherwise
28 provided in Subsection (2)].
29 (b) Additional residential energy systems or parts of residential energy systems may be
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Amend on 2_goldenrod February 20, 1997 30 similarly claimed in returns for subsequent taxable years as long as the total amount claimed does
31 not exceed [$1,500] $2,000 per residential unit.

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1 (c) If the amount of the tax credit under this section exceeds the income tax liability of the
2 individual taxpayer for that taxable year, then the amount not used may be carried over for a period
3 which does not exceed the next four taxable years.
4 (4) (a) Individual taxpayers who lease a residential energy system installed on a residential
5 unit are eligible for the residential energy tax credits if the lessee can confirm that the lessor
6 irrevocably elects not to claim the state tax credit.
7 (b) Only the principal recovery portion of the lease payments, which is the cost incurred
8 by the taxpayer in acquiring the residential energy system excluding interest charges and
9 maintenance expenses, is eligible for the tax credits.
10 (c) Individual taxpayers who lease residential energy systems are eligible to use the tax
11 credits for a period no greater than seven years from the initiation of the lease.
12 Section 4. Section 59-10-603 is amended to read:
13 59-10-603. Business tax credit -- Limitations.
14 (1) [Any] (a) A business entity [subject to the provisions of Title 59] that purchases and
15 completes or participates in the financing of a residential energy system to supply all or part of the
16 energy required for a residential unit owned or used by the business entity and situated in Utah is
17 entitled to a tax [credits] credit as provided in this [section] Subsection (1).
18 [(2) (a) Except as provided in this subsection, the] (b) (i) A business entity is entitled to
19 a tax credit equal to 25% of the costs of [the] a residential energy system installed with respect to
20 each residential unit it owns or uses, including installation costs, against any [income tax or
21 franchise tax liability of the business entity under Title 59] tax due under this chapter for the
22 taxable year in which the energy system is completed and placed in service.
23 (ii) The total amount of the credit under this Subsection (1) may not exceed $[1,500]
24 $2,000 S PER RESIDENTIAL UNIT s . [This]
25 (iii) The credit under this Subsection (1) is allowed for any residential energy system
26 completed and placed in service on or after January 1, [1986] 1997, but prior to [December 31,
27 1995. For any residential energy system completed and placed in service prior to the 1986 taxable
28 year, the claim regarding it shall be filed not later than when returns are due for the 1985 taxable
29 year. The credit for residential energy systems completed and installed prior to July 1, 1985, is
30 equal to 10% of the cost of the system, including installation costs. The total amount of the credit
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Amend on 2_goldenrod February 20, 1997 31 for residential energy systems completed and installed prior to July 1, 1985, may not exceed

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1 $1,000 per residential unit] January 1, 2001.
2 [(b)] (c) If [the] a business entity sells a residential unit to an individual taxpayer prior to
3 making a claim for the tax credit [provided for in Subsection (2)(a)] under this Subsection (1), the
4 business entity may:
5 (i) assign its right to this tax credit to the individual taxpayer[. The]; and
6 (ii) if the business entity assigns its right to the tax credit to an individual taxpayer under
7 Subsection (1)(c)(i), the individual taxpayer [is then entitled to the amount of this] may claim the
8 tax credit as if the individual taxpayer had completed or participated in the costs of the residential
9 energy system under Section 59-10-602.
10 [(3)] (2) (a) [Any] A business entity [subject to the provisions of Title 59] that purchases
11 or participates in the financing of a commercial energy system is entitled to [the] a tax [credits]
12 credit as provided in this [chapter] Subsection (2) if [it]:
13 (i) the commercial energy system supplies all or part of the energy required [to] by
14 commercial units owned or used by the business entity; or
15 (ii) the business entity sells all or part of the energy produced by the commercial energy
16 system as a commercial enterprise.
17 (b) [The] (i) A business entity is entitled to a tax credit equal to 10% of the costs of any
18 commercial energy system installed, including installation costs, against any [income tax or
19 franchise tax liability of the business entity under Title 59] tax due under this chapter for the
20 taxable year in which the commercial energy system is completed and placed in service.
21 (ii) The total amount of the [credits] credit under this Subsection (2) may not exceed
22 [$25,000] $50,000 per commercial unit. [This]
23 (iii) The credit under this Subsection (2) is allowed for any commercial energy system
24 completed and placed in service on or after January 1, [1986] 1997, but prior to [December 31,
25 1995. For any commercial energy system completed and placed in service prior to the 1986
26 taxable year, the claim regarding it shall be filed no later than when returns are due for the 1985
27 taxable year. The credit for any commercial energy system completed and placed in service prior
28 to July 1, 1985, is equal to 10% of the costs of the commercial energy system installed on each of
29 the business entity's commercial units only, including installation costs. The total amount of the
30 credit for any commercial energy system completed and placed in service prior to July 1, 1985,
31 may not exceed $3,000 per commercial unit] January 1, 2001.

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1 [(4) (a) Business entities who lease] (c) A business entity that leases a commercial energy
2 system installed on a commercial unit [are] is eligible for the [commercial energy] tax [credits
3 described in this part] credit under this Subsection (2) if the lessee can confirm that the lessor
4 irrevocably elects not to claim the [state tax credits] credit.
5 [(b)] (d) Only the principal recovery portion of the lease payments, which is the cost
6 incurred by [the taxpayer] a business entity in acquiring [the] a commercial energy system,
7 excluding interest charges and maintenance expenses, is eligible for the tax [credits] credit under
8 this Subsection (2).
9 [(c) Business entities who lease] (e) A business entity that leases a commercial energy
10 [systems are] system is eligible to use the tax [credits] credit under this Subsection (2) for a period
11 no greater than seven years from the initiation of the lease.
12 [(5) The] (3) (a) A tax [credits provided for in this section can] credit under this section
13 may be claimed [by either the business entity, or if assigned as provided in Subsection (2) (b), the
14 individual taxpayer, in the return] for the taxable year in which the energy system is completed and
15 placed in service [except as provided in Subsection (2)].
16 (b) Additional energy systems or parts of energy systems may be claimed [in returns] for
17 subsequent years [as long as the total amount claimed does not exceed the maximum credit
18 allowed for in Subsection (2)].
19 (c) If the amount of [the] a tax credit under this section exceeds [the income] a business
20 entity's tax liability [of the business entity] under this chapter for [that] a taxable year, [or
21 individual taxpayer if assigned as provided in Subsection (2)(b), then] the amount [not used as a]
22 of the credit exceeding the liability may be carried over for a period which does not exceed the
23 next four taxable years.
24 Section 5. Section 59-10-604 is amended to read:
25 59-10-604. Tax credit as additional to other credits -- Certification -- Rules -- Source
26 of funds.
27 (1) The tax [credit] credits provided [in this part is] for under Sections 59-10-602 and
28 59-10-603 are in addition to any tax credits provided under the laws or rules and regulations of the
29 United States.
30 (2) (a) The [energy office] Office of Energy and Resource Planning may promulgate
31 standards for residential and commercial energy systems that cover the safety, reliability,

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1 efficiency, leasing, and technical feasibility of the systems to ensure that the systems eligible for
2 the tax credit [provided in this part] use the state's renewable and nonrenewable energy resources
3 in an appropriate and economic manner. [No]
4 (b) A tax credit [can] may not be taken under [this part] Section 59-10-602 or 59-10-603
5 until the [energy office] Office of Energy and Resource Planning has certified that the energy
6 system has been completely installed and is a viable system for saving or production of energy
7 from renewable resources.
8 (3) The [energy office] Office of Energy and Resource Planning and the commission are
9 authorized to promulgate rules in accordance with Title 63, Chapter 46a, [the] Utah Administrative
10 Rulemaking Act, which are necessary [for purposes of] to implement this part.
11 (4) The [amount of the credits allowed by this part is derived from the General] Uniform
12 School Fund [with appropriate] shall be reimbursed by transfers [made] from [it to reimburse] the
13 [Uniform School] General Fund [to effectuate this chapter] for any credits taken under this part.
14 Section 6. Section 63-55b-5901 is enacted to read:
15 63-55b-5901. Repeal Date -- Title 59.
16 Section 59-7-611 and Sections 59-10-601 through 59-10-604 are repealed January 1, 2001.
17 Section 7. Retrospective operation.
18 This act has retrospective operation for taxable years beginning on or after January 1, 1997.




Legislative Review Note
as of 1-20-97 7:08 AM

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

Office of Legislative Research and General Counsel

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