Second Substitute S.B. 199

Senator Thomas V. Hatch proposes the following substitute bill:

1 OFFICE OF ENERGY - OVERSIGHT
2 2005 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Thomas V. Hatch
5
6 LONG TITLE
7 General Description:
8 This bill eliminates the Utah Energy Office, moves the Clean Fuels Vehicle program
9 and fund from the Department of Natural Resources to the Department of
10 Environmental Quality, and transfers authority for certain federally-related programs
11 and the Renewable Energy Tax Credit to the Utah Geological Survey.
12 Highlighted Provisions:
13 This bill:
14 . eliminates the Utah Energy Office;
15 . moves the Clean Fuels Vehicle program and fund from the Department of Natural
16 Resources to the Department of Environmental Quality;
17 . transfers authority for certain federally-related programs and the Renewable Energy
18 Tax Credit to the Utah Geological Survey; and
19 . makes technical amendments.
20 Monies Appropriated in this Bill:
21 None
22 Other Special Clauses:
23 This bill provides an effective date.
24 This bill provides a coordination clause.
25 Utah Code Sections Affected:

26 AMENDS:
27 59-7-605, as last amended by Chapter 90, Laws of Utah 2004
28 59-7-614, as enacted by Chapter 6, Laws of Utah 2001, First Special Session
29 59-10-127, as last amended by Chapter 90, Laws of Utah 2004
30 59-10-134, as enacted by Chapter 6, Laws of Utah 2001, First Special Session
31 63-65-2, as last amended by Chapter 313, Laws of Utah 2003
32 63-73-6, as last amended by Chapter 170, Laws of Utah 1995
33 63A-3-205, as last amended by Chapter 90, Laws of Utah 2004
34 RENUMBERS AND AMENDS:
35 19-1-401, (Renumbered from 63-34-201, as enacted by Chapter 231, Laws of Utah
36 2002)
37 19-1-402, (Renumbered from 63-34-202, as enacted by Chapter 231, Laws of Utah
38 2002)
39 19-1-403, (Renumbered from 63-34-203, as enacted by Chapter 231, Laws of Utah
40 2002)
41 19-1-404, (Renumbered from 63-34-204, as enacted by Chapter 231, Laws of Utah
42 2002)
43 REPEALS:
44 63-34-101, as last amended by Chapter 352, Laws of Utah 2004
45 Uncodified Material Affected:
46 ENACTS UNCODIFIED MATERIAL
47
48 Be it enacted by the Legislature of the state of Utah:
49 Section 1. Section 19-1-401 , which is renumbered from Section 63-34-201 is
50 renumbered and amended to read:
51 Part 4. Clean Fuels Conversion Program Act
52 [63-34-201]. 19-1-401. Title.
53 This part is known as the "Clean Fuels Conversion Program Act."
54 Section 2. Section 19-1-402 , which is renumbered from Section 63-34-202 is
55 renumbered and amended to read:
56 [63-34-202]. 19-1-402. Definitions.

57 As used in this part:
58 (1) "Certified by the Air Quality Board" means that a motor vehicle on which
59 conversion equipment has been installed meets the following criteria:
60 (a) before the installation of conversion equipment, the motor vehicle does not exceed
61 the emission cut points for a transient test driving cycle, as specified in 40 CFR 51, Appendix
62 E to Subpart S, or an equivalent test for the make, model, and year of the motor vehicle;
63 (b) the motor vehicle's emissions of regulated pollutants, when operating with clean
64 fuel, is less than the emissions were before the installation of conversion equipment; and
65 (c) a reduction in emissions under Subsection (1)(b) is demonstrated by:
66 (i) certification of the conversion equipment by the federal Environmental Protection
67 Agency or by a state whose certification standards are recognized by the Air Quality Board;
68 (ii) testing the motor vehicle, before and after the installation of the conversion
69 equipment, in accordance with 40 CFR 86, Control of Air Pollution from New and In-use
70 Motor Vehicle Engines: Certification and Test Procedures, using all fuel the motor vehicle is
71 capable of using; or
72 (iii) any other test or standard recognized by Air Quality Board rule.
73 (2) "Clean fuel" means:
74 (a) propane, compressed natural gas, or electricity;
75 (b) other fuel the Air Quality Board determines to be at least as effective as fuels under
76 Subsection (2)(a) in reducing air pollution; or
77 (c) other fuel that meets the clean-fuel vehicle standards in the federal Clean Air Act
78 Amendments of 1990, 42 U.S.C. Sec. 7521 et seq.
79 (3) "Clean-fuel vehicle" means a vehicle that:
80 (a) uses a clean fuel; and
81 (b) meets clean-fuel vehicle standards in the federal Clean Air Act Amendments of
82 1990, 42 U.S.C. Sec. 7521 et seq.
83 (4) "Fund" means the Clean Fuels Vehicle Fund created in Section [ 63-34-203 ]
84 19-1-403 .
85 (5) "Government vehicle" means a motor vehicle registered in Utah and owned and
86 operated by the state, a public trust authority, a school district, a county, a municipality, a town,
87 or a city, including a metropolitan rapid transit motor vehicle, bus, truck, law enforcement

88 vehicle, or emergency vehicle.
89 (6) "Incremental cost" means the difference between the cost of the OEM vehicle and
90 the same vehicle model manufactured without the clean-fuel fueling system.
91 (7) "OEM vehicle" means a vehicle manufactured by the original vehicle manufacturer
92 or its contractor to use a clean fuel.
93 (8) "Private sector business vehicle" means a motor vehicle registered in Utah that is
94 owned and operated solely in the conduct of a private business enterprise.
95 (9) "Refueling equipment" means compressors when used separately, compressors used
96 in combination with cascade tanks, and other equipment that constitute a central refueling
97 system capable of dispensing vehicle fuel.
98 Section 3. Section 19-1-403 , which is renumbered from Section 63-34-203 is
99 renumbered and amended to read:
100 [63-34-203]. 19-1-403. Clean Fuels Vehicle Fund -- Contents -- Loans or
101 grants made with fund monies.
102 (1) (a) There is created a revolving fund known as the Clean Fuels Vehicle Fund.
103 (b) The fund consists of:
104 (i) appropriations to the fund;
105 (ii) other public and private contributions made under Subsection (1)(d);
106 (iii) interest earnings on cash balances; and
107 (iv) all monies collected for loan repayments and interest on loans.
108 (c) All money appropriated to the fund is nonlapsing.
109 (d) The department may accept contributions from other public and private sources for
110 deposit into the fund.
111 (2) (a) The department may make loans or grants with monies available in the fund for:
112 (i) the conversion of private sector business vehicles and government vehicles to use a
113 clean fuel, if certified by the Air Quality Board; or
114 (ii) the purchase of OEM vehicles for use as private sector business vehicles or
115 government vehicles.
116 (b) The amount of a loan for any vehicle may not exceed:
117 (i) the actual cost of the vehicle conversion;
118 (ii) the incremental cost of purchasing the OEM vehicle; or

119 (iii) the cost of purchasing the OEM vehicle if there is no documented incremental
120 cost.
121 (c) The amount of a grant for any vehicle may not exceed:
122 (i) 50% of the actual cost of the vehicle conversion minus the amount of any tax credit
123 claimed under Section 59-7-605 or 59-10-127 for the vehicle for which a grant is requested; or
124 (ii) 50% of the incremental cost of purchasing an OEM vehicle minus the amount of
125 any tax credit claimed under Section 59-7-605 or 59-10-127 for the vehicle for which a grant is
126 requested.
127 (d) (i) Subject to the availability of monies in the fund, the department may make loans
128 for the purchase of vehicle refueling equipment for private sector business vehicles and
129 government vehicles.
130 (ii) The maximum amount loaned per installation of refueling equipment may not
131 exceed the actual cost of the refueling equipment.
132 (3) Administrative costs of the fund shall be paid from the fund.
133 (4) (a) The fund balance may not exceed $10,000,000.
134 (b) Interest on cash balances and repayment of loans in excess of the amount necessary
135 to maintain the fund balance at $10,000,000 shall be deposited in the General Fund.
136 (5) (a) Loans made from monies in the fund shall be supported by loan documents
137 evidencing the intent of the borrower to repay the loan.
138 (b) The original loan documents shall be filed with the Division of Finance and a copy
139 shall be filed with the department.
140 Section 4. Section 19-1-404 , which is renumbered from Section 63-34-204 is
141 renumbered and amended to read:
142 [63-34-204]. 19-1-404. Department duties -- Rulemaking -- Loan
143 repayment.
144 (1) The department shall:
145 (a) establish and administer the loan and grant program to encourage government
146 officials and private sector business vehicle owners and operators to obtain and use clean-fuel
147 vehicles; and
148 (b) make rules in accordance with Title 63, Chapter 46a, Utah Administrative
149 Rulemaking Act:

150 (i) specifying the amount of money in the fund to be dedicated annually for grants;
151 (ii) limiting the amount of a grant given to any person claiming a tax credit under
152 Section 59-7-605 or 59-10-127 for the motor vehicle for which a grant is requested to assure
153 that the sum of the tax credit and grant does not exceed:
154 (A) 50% of the incremental cost of the OEM vehicle; or
155 (B) 50% of the cost of conversion equipment;
156 (iii) limiting the number of motor vehicles per fleet operator that may be eligible for a
157 grant in a year;
158 (iv) specifying criteria the department shall consider in prioritizing and awarding loans
159 and grants;
160 (v) specifying repayment periods;
161 (vi) specifying procedures for:
162 (A) awarding loans and grants; and
163 (B) collecting loans; and
164 (vii) requiring all loan and grant applicants to:
165 (A) apply on forms provided by the department;
166 (B) agree in writing to use the clean fuel for which each vehicle is converted or
167 purchased using loan or grant proceeds for a minimum of 70% of the vehicle miles traveled
168 beginning from the time of conversion or purchase of the vehicle;
169 (C) agree in writing to notify the department if a vehicle converted or purchased using
170 loan or grant proceeds becomes inoperable through mechanical failure or accident and to
171 pursue a remedy outlined in department rules;
172 (D) provide reasonable data to the department on vehicles converted or purchased with
173 loan or grant proceeds; and
174 (E) submit vehicles converted or purchased with loan or grant proceeds to inspections
175 by the department as required in department rules and as necessary for administration of the
176 loan and grant program.
177 (2) (a) When developing repayment schedules for the loans, the department shall
178 consider the projected savings from use of the clean-fuel vehicle.
179 (b) A repayment schedule may not exceed ten years.
180 (c) Loans made from the fund for private sector vehicles shall be made at an interest

181 rate equal to the annual return earned in the state treasurer's Public Treasurer's Pool as
182 determined the month immediately preceding the closing date of the loan.
183 (d) Loans made from the fund for government vehicles shall be made at a zero interest
184 rate.
185 (3) The Division of Finance is responsible for collection of and accounting for the
186 loans and has custody of all loan documents, including all notes and contracts, evidencing the
187 indebtedness of the fund.
188 Section 5. Section 59-7-605 is amended to read:
189 59-7-605. Definitions -- Tax credit -- Cleaner burning fuels.
190 (1) As used in this section:
191 (a) "Board" means the Air Quality Board created under Title 19, Chapter 2, Air
192 Conservation Act.
193 (b) "Certified by the board" means that:
194 (i) a motor vehicle on which conversion equipment has been installed meets the
195 following criteria:
196 (A) before the installation of conversion equipment, the vehicle does not exceed the
197 emission cut points for a transient test driving cycle, as specified in 40 C.F.R. Part 51,
198 Appendix E to Subpart S, or an equivalent test for the make, model, and year of the vehicle;
199 (B) the motor vehicle's emissions of regulated pollutants, when operating on fuels
200 listed in Subsection (2)(b), is less than the emissions were before the installation of conversion
201 equipment; and
202 (C) a reduction in emissions under Subsection (1)(b)(i)(B) is demonstrated by:
203 (I) certification of the conversion equipment by the federal Environmental Protection
204 Agency or by a state whose certification standards are recognized by the board;
205 (II) testing the motor vehicle, before and after installation of the conversion equipment,
206 in accordance with 40 C.F.R. Part 86, Control of Emissions from New and In-use Highway
207 Vehicles and Engines, using all fuel the motor vehicle is capable of using; or
208 (III) any other test or standard recognized by board rule; or
209 (ii) special mobile equipment on which conversion equipment has been installed meets
210 the following criteria:
211 (A) the special mobile equipment's emissions of regulated pollutants, when operating

212 on fuels listed in Subsection (2)(c), is less than the emissions were before the installation of
213 conversion equipment; and
214 (B) a reduction in emissions under Subsection (1)(b)(ii)(A) is demonstrated by:
215 (I) certification of the conversion equipment by the federal Environmental Protection
216 Agency or by a state whose certification standards are recognized by the board; or
217 (II) any other test or standard recognized by board rule.
218 (c) "Clean fuel grant" means a grant awarded under Title [63] 19, Chapter [34] 1, Part
219 [2] 4, Clean Fuels Conversion Program Act, for reimbursement of a portion of the incremental
220 cost of an OEM vehicle or the cost of conversion equipment.
221 (d) "Conversion equipment" means equipment referred to in Subsection (2)(b) or
222 (2)(c).
223 (e) "Incremental cost" has the same meaning as in Section [ 63-34-202 ] 19-1-402 .
224 (f) "OEM vehicle" has the same meaning as in Section [ 63-34-202 ] 19-1-402 .
225 (g) "Special mobile equipment":
226 (i) means any mobile equipment or vehicle that is not designed or used primarily for
227 the transportation of persons or property; and
228 (ii) includes construction or maintenance equipment.
229 (2) For taxable years beginning on or after January 1, 2001, but beginning on or before
230 December 31, 2005, a taxpayer may claim a tax credit against tax otherwise due under this
231 chapter or Chapter 8, Gross Receipts Tax on Certain Corporations Not Required to Pay
232 Corporate Franchise or Income Tax Act, in an amount equal to:
233 (a) 50% of the incremental cost of an OEM vehicle registered in Utah minus the
234 amount of any clean fuel grant received, up to a maximum tax credit of $3,000 per vehicle, if
235 the vehicle:
236 (i) is fueled by propane, natural gas, or electricity;
237 (ii) is fueled by other fuel the board determines annually on or before July 1 to be at
238 least as effective in reducing air pollution as fuels under Subsection (2)(a)(i); or
239 (iii) meets the clean-fuel vehicle standards in the federal Clean Air Act Amendments of
240 1990, 42 U.S.C. Sec. 7521 et seq.;
241 (b) 50% of the cost of equipment for conversion, if certified by the board, of a motor
242 vehicle registered in Utah minus the amount of any clean fuel grant received, up to a maximum

243 tax credit of $2,500 per motor vehicle, if the motor vehicle is to:
244 (i) be fueled by propane, natural gas, or electricity;
245 (ii) be fueled by other fuel the board determines annually on or before July 1 to be at
246 least as effective in reducing air pollution as fuels under Subsection (2)(b)(i); or
247 (iii) meet the federal clean-fuel vehicle standards in the federal Clean Air Act
248 Amendments of 1990, 42 U.S.C. Sec. 7521 et seq.; and
249 (c) 50% of the cost of equipment for conversion, if certified by the board, of a special
250 mobile equipment engine minus the amount of any clean fuel grant received, up to a maximum
251 tax credit of $1,000 per special mobile equipment engine, if the special mobile equipment is to
252 be fueled by:
253 (i) propane, natural gas, or electricity; or
254 (ii) other fuel the board determines annually on or before July 1 to be:
255 (A) at least as effective in reducing air pollution as the fuels under Subsection (2)(c)(i);
256 or
257 (B) substantially more effective in reducing air pollution than the fuel for which the
258 engine was originally designed.
259 (3) A taxpayer shall provide proof of the purchase of an item for which a tax credit is
260 allowed under this section by:
261 (a) providing proof to the board in the form the board requires by rule;
262 (b) receiving a written statement from the board acknowledging receipt of the proof;
263 and
264 (c) retaining the written statement described in Subsection (3)(b).
265 (4) Except as provided by Subsection (5), the tax credit under this section is allowed
266 only:
267 (a) against any Utah tax owed in the taxable year by the taxpayer;
268 (b) in the taxable year in which the item is purchased for which the tax credit is
269 claimed; and
270 (c) once per vehicle.
271 (5) If the amount of a tax credit claimed by a taxpayer under this section exceeds the
272 taxpayer's tax liability under this chapter for a taxable year, the amount of the tax credit
273 exceeding the tax liability may be carried forward for a period that does not exceed the next

274 five taxable years.
275 Section 6. Section 59-7-614 is amended to read:
276 59-7-614. Renewable energy systems tax credit -- Definitions -- Limitations --
277 State tax credit in addition to allowable federal credits -- Certification -- Rulemaking
278 authority -- Reimbursement of Uniform School Fund.
279 (1) As used in this section:
280 (a) "Active solar system":
281 (i) means a system of equipment capable of collecting and converting incident solar
282 radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
283 by a separate apparatus to storage or to the point of use; and
284 (ii) includes water heating, space heating or cooling, and electrical or mechanical
285 energy generation.
286 (b) "Biomass system" means any system of apparatus and equipment capable of
287 converting organic plant, wood, or waste products into electrical and thermal energy and
288 transferring these forms of energy by a separate apparatus to the point of use or storage.
289 (c) "Business entity" means any sole proprietorship, estate, trust, partnership,
290 association, corporation, cooperative, or other entity under which business is conducted or
291 transacted.
292 (d) "Commercial energy system" means any active solar, passive solar, wind,
293 hydroenergy, or biomass system used to supply energy to a commercial unit or as a commercial
294 enterprise.
295 (e) "Commercial enterprise" means a business entity whose purpose is to produce
296 electrical, mechanical, or thermal energy for sale from a commercial energy system.
297 (f) (i) "Commercial unit" means any building or structure which a business entity uses
298 to transact its business except as provided in Subsection (1)(f)(ii); and
299 (ii) (A) in the case of an active solar system used for agricultural water pumping or a
300 wind system, each individual energy generating device shall be a commercial unit; and
301 (B) if an energy system is the building or structure which a business entity uses to
302 transact its business, a commercial unit is the complete energy system itself.
303 (g) "Hydroenergy system" means a system of apparatus and equipment capable of
304 intercepting and converting kinetic water energy into electrical or mechanical energy and

305 transferring this form of energy by separate apparatus to the point of use or storage.
306 (h) "Individual taxpayer" means any person who is a taxpayer as defined in Section
307 59-10-103 and an individual as defined in Section 59-10-103 .
308 [(i) "Office of Energy and Resource Planning" means the Office of Energy and
309 Resource Planning, Department of Natural Resources.]
310 [(j)] (i) "Passive solar system":
311 (i) means a direct thermal system which utilizes the structure of a building and its
312 operable components to provide for collection, storage, and distribution of heating or cooling
313 during the appropriate times of the year by utilizing the climate resources available at the site;
314 and
315 (ii) includes those portions and components of a building that are expressly designed
316 and required for the collection, storage, and distribution of solar energy.
317 [(k)] (j) "Residential energy system" means any active solar, passive solar, wind, or
318 hydroenergy system used to supply energy to or for any residential unit.
319 [(l)] (k) "Residential unit" means any house, condominium, apartment, or similar
320 dwelling unit which serves as a dwelling for a person, group of persons, or a family but does
321 not include property subject to the fees in lieu of the ad valorem tax under:
322 (i) Section 59-2-404 ;
323 (ii) Section 59-2-405 ; or
324 (iii) Section 59-2-405.1 .
325 (l) "Utah Geological Survey" means the Utah Geological Survey established in Section
326 63-73-5 .
327 (m) "Wind system" means a system of apparatus and equipment capable of intercepting
328 and converting wind energy into mechanical or electrical energy and transferring these forms of
329 energy by a separate apparatus to the point of use or storage.
330 (2) (a) (i) For taxable years beginning on or after January 1, 2001, but beginning on or
331 before December 31, 2006, a business entity that purchases and completes or participates in the
332 financing of a residential energy system to supply all or part of the energy required for a
333 residential unit owned or used by the business entity and situated in Utah is entitled to a tax
334 credit as provided in this Subsection (2)(a).
335 (ii) (A) A business entity is entitled to a tax credit equal to 25% of the costs of a

336 residential energy system installed with respect to each residential unit it owns or uses,
337 including installation costs, against any tax due under this chapter for the taxable year in which
338 the energy system is completed and placed in service.
339 (B) The total amount of the credit under this Subsection (2)(a) may not exceed $2,000
340 per residential unit.
341 (C) The credit under this Subsection (2)(a) is allowed for any residential energy system
342 completed and placed in service on or after January 1, 2001, but on or before December 31,
343 2006.
344 (iii) If a business entity sells a residential unit to an individual taxpayer prior to making
345 a claim for the tax credit under this Subsection (2)(a), the business entity may:
346 (A) assign its right to this tax credit to the individual taxpayer; and
347 (B) if the business entity assigns its right to the tax credit to an individual taxpayer
348 under Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the
349 individual taxpayer had completed or participated in the costs of the residential energy system
350 under Section 59-10-134 .
351 (b) (i) For taxable years beginning on or after January 1, 2001, but beginning on or
352 before December 31, 2006, a business entity that purchases or participates in the financing of a
353 commercial energy system is entitled to a tax credit as provided in this Subsection (2)(b) if:
354 (A) the commercial energy system supplies all or part of the energy required by
355 commercial units owned or used by the business entity; or
356 (B) the business entity sells all or part of the energy produced by the commercial
357 energy system as a commercial enterprise.
358 (ii) (A) A business entity is entitled to a tax credit equal to 10% of the costs of any
359 commercial energy system installed, including installation costs, against any tax due under this
360 chapter for the taxable year in which the commercial energy system is completed and placed in
361 service.
362 (B) The total amount of the credit under this Subsection (2)(b) may not exceed $50,000
363 per commercial unit.
364 (C) The credit under this Subsection (2)(b) is allowed for any commercial energy
365 system completed and placed in service on or after January 1, 2001, but on or before December
366 31, 2006.

367 (iii) A business entity that leases a commercial energy system installed on a
368 commercial unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can
369 confirm that the lessor irrevocably elects not to claim the credit.
370 (iv) Only the principal recovery portion of the lease payments, which is the cost
371 incurred by a business entity in acquiring a commercial energy system, excluding interest
372 charges and maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
373 (v) A business entity that leases a commercial energy system is eligible to use the tax
374 credit under this Subsection (2)(b) for a period no greater than seven years from the initiation
375 of the lease.
376 (c) (i) A tax credit under this section may be claimed for the taxable year in which the
377 energy system is completed and placed in service.
378 (ii) Additional energy systems or parts of energy systems may be claimed for
379 subsequent years.
380 (iii) If the amount of a tax credit under this section exceeds a business entity's tax
381 liability under this chapter for a taxable year, the amount of the credit exceeding the liability
382 may be carried over for a period which does not exceed the next four taxable years.
383 (3) (a) The tax credits provided for under Subsection (2) are in addition to any tax
384 credits provided under the laws or rules and regulations of the United States.
385 (b) (i) The [Office of Energy and Resource Planning] Utah Geological Survey may
386 [promulgate] set standards for residential and commercial energy systems that cover the safety,
387 reliability, efficiency, leasing, and technical feasibility of the systems to ensure that the systems
388 eligible for the tax credit use the state's renewable and nonrenewable energy resources in an
389 appropriate and economic manner.
390 (ii) A tax credit may not be taken under Subsection (2) until the [Office of Energy and
391 Resource Planning] Utah Geological Survey has certified that the energy system has been
392 completely installed and is a viable system for saving or production of energy from renewable
393 resources.
394 (c) The [Office of Energy and Resource Planning] Utah Geological Survey and the
395 commission are authorized to promulgate rules in accordance with Title 63, Chapter 46a, Utah
396 Administrative Rulemaking Act, which are necessary to implement this section.
397 (d) The Uniform School Fund shall be reimbursed by transfers from the General Fund

398 for any credits taken under this section.
399 Section 7. Section 59-10-127 is amended to read:
400 59-10-127. Definitions -- Tax credit -- Cleaner burning fuels.
401 (1) As used in this section:
402 (a) "Board" means the Air Quality Board created in Title 19, Chapter 2, Air
403 Conservation Act.
404 (b) "Certified by the board" means that:
405 (i) a motor vehicle on which conversion equipment has been installed meets the
406 following criteria:
407 (A) before the installation of conversion equipment, the vehicle does not exceed the
408 emission cut points for a transient test driving cycle, as specified in 40 C.F.R. Part 51,
409 Appendix E to Subpart S, or an equivalent test for the make, model, and year of the vehicle;
410 (B) the motor vehicle's emissions of regulated pollutants, when operating on fuels
411 listed in Subsection (2)(b), is less than the emissions were before the installation of conversion
412 equipment; and
413 (C) a reduction in emissions under Subsection (1)(b)(i)(B) is demonstrated by:
414 (I) certification of the conversion equipment by the federal Environmental Protection
415 Agency or by a state whose certification standards are recognized by the board;
416 (II) testing the motor vehicle, before and after installation of the conversion equipment,
417 in accordance with 40 C.F.R. Part 86, Control Emissions from New and In-use Highway
418 Vehicles and Engines, using all fuels the motor vehicle is capable of using; or
419 (III) any other test or standard recognized by board rule; or
420 (ii) special mobile equipment on which conversion equipment has been installed meets
421 the following criteria:
422 (A) the special mobile equipment's emissions of regulated pollutants, when operating
423 on fuels listed in Subsection (2)(c), is less than the emissions were before the installation of
424 conversion equipment; and
425 (B) a reduction in emissions under Subsection (1)(b)(ii)(A) is demonstrated by:
426 (I) certification of the conversion equipment by the federal Environmental Protection
427 Agency or by a state whose certification standards are recognized by the board; or
428 (II) any other test or standard recognized by the board.

429 (c) "Clean fuel grant" means a grant the taxpayer receives under Title [63] 19, Chapter
430 [34] 1, Part [2] 4, Clean Fuels Conversion Program Act, for reimbursement of a portion of the
431 incremental cost of the OEM vehicle or the cost of conversion equipment.
432 (d) "Conversion equipment" means equipment referred to in Subsection (2)(b) or
433 (2)(c).
434 (e) "Incremental cost" has the same meaning as in Section [ 63-34-202 ] 19-1-402 .
435 (f) "OEM vehicle" has the same meaning as in Section [ 63-34-202 ] 19-1-402 .
436 (g) "Special mobile equipment":
437 (i) means any mobile equipment or vehicle not designed or used primarily for the
438 transportation of persons or property; and
439 (ii) includes construction or maintenance equipment.
440 (2) For taxable years beginning on or after January 1, 2001, but beginning on or before
441 December 31, 2005, a taxpayer may claim a tax credit against tax otherwise due under this
442 chapter in an amount equal to:
443 (a) 50% of the incremental cost of an OEM vehicle registered in Utah minus the
444 amount of any clean fuel grant received, up to a maximum tax credit of $3,000 per vehicle, if
445 the vehicle:
446 (i) is fueled by propane, natural gas, or electricity;
447 (ii) is fueled by other fuel the board determines annually on or before July 1 to be at
448 least as effective in reducing air pollution as fuels under Subsection (2)(a)(i); or
449 (iii) meets the clean-fuel vehicle standards in the federal Clean Air Act Amendments of
450 1990, 42 U.S.C. Sec. 7521 et seq.;
451 (b) 50% of the cost of equipment for conversion, if certified by the board, of a motor
452 vehicle registered in Utah minus the amount of any clean fuel conversion grant received, up to
453 a maximum tax credit of $2,500 per vehicle, if the motor vehicle:
454 (i) is to be fueled by propane, natural gas, or electricity;
455 (ii) is to be fueled by other fuel the board determines annually on or before July 1 to be
456 at least as effective in reducing air pollution as fuels under Subsection (2)(b)(i); or
457 (iii) will meet the federal clean fuel vehicle standards in the federal Clean Air Act
458 Amendments of 1990, 42 U.S.C. Sec. 7521 et seq.; and
459 (c) 50% of the cost of equipment for conversion, if certified by the board, of a special

460 mobile equipment engine minus the amount of any clean fuel conversion grant received, up to a
461 maximum tax credit of $1,000 per special mobile equipment engine, if the special mobile
462 equipment is to be fueled by:
463 (i) propane, natural gas, or electricity; or
464 (ii) other fuel the board determines annually on or before July 1 to be:
465 (A) at least as effective in reducing air pollution as the fuels under Subsection (2)(c)(i);
466 or
467 (B) substantially more effective in reducing air pollution than the fuel for which the
468 engine was originally designed.
469 (3) An individual shall provide proof of the purchase of an item for which a tax credit
470 is allowed under this section by:
471 (a) providing proof to the board in the form the board requires by rule;
472 (b) receiving a written statement from the board acknowledging receipt of the proof;
473 and
474 (c) retaining the written statement described in Subsection (3)(b).
475 (4) Except as provided by Subsection (5), the tax credit under this section is allowed
476 only:
477 (a) against any Utah tax owed in the taxable year by the taxpayer;
478 (b) in the taxable year in which the item is purchased for which the tax credit is
479 claimed; and
480 (c) once per vehicle.
481 (5) If the amount of a tax credit claimed by a taxpayer under this section exceeds the
482 taxpayer's tax liability under this chapter for a taxable year, the amount of the tax credit
483 exceeding the tax liability may be carried forward for a period that does not exceed the next
484 five taxable years.
485 Section 8. Section 59-10-134 is amended to read:
486 59-10-134. Renewable energy systems tax credit -- Definitions -- Individual tax
487 credit -- Limitations -- Business tax credit -- Limitations -- State tax credit in addition to
488 allowable federal credits -- Certification -- Rulemaking authority -- Reimbursement of
489 Uniform School Fund.
490 (1) As used in this part:

491 (a) "Active solar system":
492 (i) means a system of equipment capable of collecting and converting incident solar
493 radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
494 by a separate apparatus to storage or to the point of use; and
495 (ii) includes water heating, space heating or cooling, and electrical or mechanical
496 energy generation.
497 (b) "Biomass system" means any system of apparatus and equipment capable of
498 converting organic plant, wood, or waste products into electrical and thermal energy and
499 transferring these forms of energy by a separate apparatus to the point of use or storage.
500 (c) "Business entity" means any sole proprietorship, estate, trust, partnership,
501 association, corporation, cooperative, or other entity under which business is conducted or
502 transacted.
503 (d) "Commercial energy system" means any active solar, passive solar, wind,
504 hydroenergy, or biomass system used to supply energy to a commercial unit or as a commercial
505 enterprise.
506 (e) "Commercial enterprise" means a business entity whose purpose is to produce
507 electrical, mechanical, or thermal energy for sale from a commercial energy system.
508 (f) (i) "Commercial unit" means any building or structure which a business entity uses
509 to transact its business, except as provided in Subsection (1)(f)(ii); and
510 (ii) (A) in the case of an active solar system used for agricultural water pumping or a
511 wind system, each individual energy generating device shall be a commercial unit; and
512 (B) if an energy system is the building or structure which a business entity uses to
513 transact its business, a commercial unit is the complete energy system itself.
514 (g) "Hydroenergy system" means a system of apparatus and equipment capable of
515 intercepting and converting kinetic water energy into electrical or mechanical energy and
516 transferring this form of energy by separate apparatus to the point of use or storage.
517 (h) "Individual taxpayer" means any person who is a taxpayer as defined in Section
518 59-10-103 and an individual as defined in Section 59-10-103 .
519 [(i) "Office of Energy and Resource Planning" means the Office of Energy and
520 Resource Planning, Department of Natural Resources.]
521 [(j)] (i) "Passive solar system":

522 (i) means a direct thermal system which utilizes the structure of a building and its
523 operable components to provide for collection, storage, and distribution of heating or cooling
524 during the appropriate times of the year by utilizing the climate resources available at the site;
525 and
526 (ii) includes those portions and components of a building that are expressly designed
527 and required for the collection, storage, and distribution of solar energy.
528 [(k)] (j) "Residential energy system" means any active solar, passive solar, wind, or
529 hydroenergy system used to supply energy to or for any residential unit.
530 [(l)] (k) "Residential unit" means any house, condominium, apartment, or similar
531 dwelling unit which serves as a dwelling for a person, group of persons, or a family but does
532 not include property subject to the fees in lieu of the ad valorem tax under:
533 (i) Section 59-2-404 ;
534 (ii) Section 59-2-405 ; or
535 (iii) Section 59-2-405.1 .
536 (l) "Utah Geological Survey" means the Utah Geological Survey established in Section
537 63-73-5 .
538 (m) "Wind system" means a system of apparatus and equipment capable of intercepting
539 and converting wind energy into mechanical or electrical energy and transferring these forms of
540 energy by a separate apparatus to the point of use or storage.
541 (2) For taxable years beginning on or after January 1, 2001, but beginning on or before
542 December 31, 2006, any individual taxpayer may claim a tax credit as provided in this section
543 if:
544 (a) the individual taxpayer purchases and completes or participates in the financing of a
545 residential energy system to supply all or part of the energy for the individual taxpayer's
546 residential unit in the state; or
547 (b) (i) a business entity sells a residential unit to an individual taxpayer prior to making
548 a claim for a tax credit under Subsection (6) or Section 59-7-614 ; and
549 (ii) the business entity assigns its right to the tax credit to the individual taxpayer as
550 provided in Subsection (6)(c) or Subsection 59-7-614 (2)(a)(iii).
551 (3) (a) An individual taxpayer meeting the requirements of Subsection (2) is entitled to
552 a tax credit equal to 25% of the costs of the energy system, including installation costs, against

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

584 (ii) The total amount of the credit under this Subsection (6) may not exceed $2,000 per
585 residential unit.
586 (iii) The credit under this Subsection (6) is allowed for any residential energy system
587 completed and placed in service on or after January 1, 2001, but on or before December 31,
588 2006.
589 (c) If a business entity sells a residential unit to an individual taxpayer prior to making
590 a claim for the tax credit under this Subsection (6), the business entity may:
591 (i) assign its right to this tax credit to the individual taxpayer; and
592 (ii) if the business entity assigns its right to the tax credit to an individual taxpayer
593 under Subsection (6)(c)(i), the individual taxpayer may claim the tax credit as if the individual
594 taxpayer had completed or participated in the costs of the residential energy system under this
595 section.
596 (7) (a) A business entity that purchases or participates in the financing of a commercial
597 energy system is entitled to a tax credit as provided in this Subsection (7) if:
598 (i) the commercial energy system supplies all or part of the energy required by
599 commercial units owned or used by the business entity; or
600 (ii) the business entity sells all or part of the energy produced by the commercial
601 energy system as a commercial enterprise.
602 (b) (i) A business entity is entitled to a tax credit equal to 10% of the costs of any
603 commercial energy system installed, including installation costs, against any tax due under this
604 chapter for the taxable year in which the commercial energy system is completed and placed in
605 service.
606 (ii) The total amount of the credit under this Subsection (7) may not exceed $50,000
607 per commercial unit.
608 (iii) The credit under this Subsection (7) is allowed for any commercial energy system
609 completed and placed in service on or after January 1, 2001, but on or before December 31,
610 2006.
611 (c) A business entity that leases a commercial energy system installed on a commercial
612 unit is eligible for the tax credit under this Subsection (7) if the lessee can confirm that the
613 lessor irrevocably elects not to claim the credit.
614 (d) Only the principal recovery portion of the lease payments, which is the cost

615 incurred by a business entity in acquiring a commercial energy system, excluding interest
616 charges and maintenance expenses, is eligible for the tax credit under this Subsection (7).
617 (e) A business entity that leases a commercial energy system is eligible to use the tax
618 credit under this Subsection (7) for a period no greater than seven years from the initiation of
619 the lease.
620 (8) (a) A tax credit under this section may be claimed for the taxable year in which the
621 energy system is completed and placed in service.
622 (b) Additional energy systems or parts of energy systems may be claimed for
623 subsequent years.
624 (c) If the amount of a tax credit under this section exceeds a business entity's tax
625 liability under this chapter for a taxable year, the amount of the credit exceeding the liability
626 may be carried over for a period which does not exceed the next four taxable years.
627 (9) The tax credits provided for under this section are in addition to any tax credits
628 provided under the laws or rules and regulations of the United States.
629 (10) (a) The [Office of Energy and Resource Planning] Utah Geological Survey may
630 [promulgate] set standards for residential and commercial energy systems that cover the safety,
631 reliability, efficiency, leasing, and technical feasibility of the systems to ensure that the systems
632 eligible for the tax credit use the state's renewable and nonrenewable energy resources in an
633 appropriate and economic manner.
634 (b) A tax credit may not be taken under this section until the [Office of Energy and
635 Resource Planning] Utah Geological Survey has certified that the energy system has been
636 completely installed and is a viable system for saving or production of energy from renewable
637 resources.
638 (11) The [Office of Energy and Resource Planning] Utah Geological Survey and the
639 commission are authorized to promulgate rules in accordance with Title 63, Chapter 46a, Utah
640 Administrative Rulemaking Act, which are necessary to implement this section.
641 (12) The Uniform School Fund shall be reimbursed by transfers from the General Fund
642 for any credits taken under this section.
643 Section 9. Section 63-65-2 is amended to read:
644 63-65-2. Definitions.
645 As used in this chapter:

646 (1) "Agency bonds" means any bond, note, contract, or other evidence of indebtedness
647 representing loans or grants made by an authorizing agency.
648 (2) "Authorized official" means the state treasurer or other person authorized by a bond
649 document to perform the required action.
650 (3) "Authorizing agency" means the board, person, or unit with legal responsibility for
651 administering and managing revolving loan funds.
652 (4) "Bond document" means:
653 (a) a resolution of the commission; or
654 (b) an indenture or other similar document authorized by the commission that
655 authorizes and secures outstanding revenue bonds from time to time.
656 (5) "Commission" means the State Bonding Commission created in Section
657 63B-1-201 .
658 (6) "Revenue bonds" means any special fund revenue bonds issued under this chapter.
659 (7) "Revolving Loan Funds" means:
660 (a) the Water Resources Conservation and Development Fund, created in Section
661 73-10-24 ;
662 (b) the Water Resources Construction Fund, created in Section 73-10-8 ;
663 (c) the Water Resources Cities Water Loan Fund, created in Section 73-10-22 ;
664 (d) the Clean Fuel Conversion Funds, created in Title [63] 19, Chapter [34] 1, Part [2]
665 4, Clean Fuels Conversion Program Act;
666 (e) the Water Development Security Fund and its subaccounts created in Section
667 73-10c-5 ;
668 (f) the Agriculture Resource Development Fund, created in Section 4-18-6 ;
669 (g) the Utah Rural Rehabilitation Fund, created in Section 4-19-4 ;
670 (h) the Permanent Community Impact Fund, created in Section 9-4-303 ;
671 (i) the Petroleum Storage Tank Loan Fund, created in Section 19-6-405.3 ; and
672 (j) the Transportation Infrastructure Loan Fund, created in Section 72-2-202 .
673 Section 10. Section 63-73-6 is amended to read:
674 63-73-6. Powers and duties of survey.
675 (1) The survey shall:
676 (a) assist and advise state and local governmental agencies and state educational

677 institutions on geologic, paleontologic, and mineralogic subjects;
678 (b) collect and distribute reliable information regarding the mineral industry and
679 mineral resources, topography, paleontology, and geology of the state;
680 (c) survey the geology of the state, including mineral occurrences and the ores of
681 metals, energy resources, industrial minerals and rocks, mineral-bearing waters, and surface
682 and ground water resources, with special reference to their economic contents, values, uses,
683 kind, and availability in order to facilitate their economic use;
684 (d) investigate the kind, amount, and availability of mineral substances contained in
685 lands owned and controlled by the state, to contribute to the most effective and beneficial
686 administration of these lands for the state;
687 (e) determine and investigate areas of geologic and topographic hazards that could
688 affect the safety of, or cause economic loss to, the citizens of the state;
689 (f) assist local and state government agencies in their planning, zoning, and building
690 regulation functions by publishing maps, delineating appropriately wide special earthquake risk
691 areas, and, at the request of state agencies or other governmental agencies, review the siting of
692 critical facilities;
693 (g) cooperate with state agencies, political subdivisions of the state,
694 quasi-governmental agencies, federal agencies, schools of higher education, and others in fields
695 of mutual concern, which may include field investigations and preparation, publication, and
696 distribution of reports and maps;
697 (h) collect and preserve data pertaining to mineral resource exploration and
698 development programs and construction activities, such as claim maps, location of drill holes,
699 location of surface and underground workings, geologic plans and sections, drill logs, and
700 assay and sample maps, including the maintenance of a sample library of cores and cuttings;
701 (i) study and analyze other scientific, economic, or aesthetic problems as, in the
702 judgment of the board, should be undertaken by the survey to serve the needs of the state and to
703 support the development of natural resources and utilization of lands within the state;
704 (j) prepare, publish, distribute, and sell maps, reports, and bulletins, embodying the
705 work accomplished by the survey, directly or in collaboration with others, and collect and
706 prepare exhibits of the geological and mineral resources of this state and interpret their
707 significance;

708 (k) collect, maintain, and preserve data and information in order to accomplish the
709 purposes of this section and act as a repository for information concerning the geology of this
710 state;
711 (l) stimulate research, study, and activities in the field of paleontology;
712 (m) mark, protect, and preserve critical paleontological sites;
713 (n) collect, preserve, and administer critical paleontological specimens until they are
714 placed in a repository or curation facility;
715 (o) administer critical paleontological site excavation records; [and]
716 (p) edit and publish critical paleontological records and reports[.]; and
717 (q) by following the procedures and requirements of Title 63, Chapter 38e, Federal
718 Funds Procedures, seek federal grants, loans, or participation in federal programs, and, in
719 accordance with applicable federal program guidelines, administer federally funded state
720 programs regarding:
721 (i) renewable energy;
722 (ii) energy efficiency; and
723 (iii) energy conservation.
724 (2) (a) The survey may maintain as confidential, and not as a public record,
725 information provided to the survey by any source.
726 (b) The board shall adopt rules in order to determine whether to accept such
727 information and to maintain the confidentiality of the accepted information.
728 (c) The survey shall maintain information received from any source at the level of
729 confidentiality assigned to it by the source.
730 (3) Upon approval of the board, the survey shall undertake other activities consistent
731 with Subsection (1).
732 (4) (a) Subject to the authority granted to the department, the survey may enter into
733 cooperative agreements with the entities specified in Subsection (1)(g), if approved by the
734 board, and may accept or commit allocated or budgeted funds in connection with those
735 agreements.
736 (b) The survey may undertake joint projects with private entities if:
737 (i) the action is approved by the board;
738 (ii) the projects are not inconsistent with the state's objectives; and

739 (iii) the results of the projects are available to the public.
740 Section 11. Section 63A-3-205 is amended to read:
741 63A-3-205. Revolving loan funds -- Standards and procedures -- Annual report.
742 (1) As used in this section, "revolving loan fund" means:
743 (a) the Water Resources Conservation and Development Fund, created in Section
744 73-10-24 ;
745 (b) the Water Resources Construction Fund, created in Section 73-10-8 ;
746 (c) the Water Resources Cities Water Loan Fund, created in Section 73-10-22 ;
747 (d) the Clean Fuel Conversion Funds, created in Title [63] 19, Chapter [34] 1, Part [2]
748 4, Clean Fuels Conversion Program;
749 (e) the Water Development Security Account and its subaccounts created in Section
750 73-10c-5 ;
751 (f) the Agriculture Resource Development Fund, created in Section 4-18-6 ;
752 (g) the Utah Rural Rehabilitation Fund, created in Section 4-19-4 ;
753 (h) the Permanent Community Impact Fund, created in Section 9-4-303 ;
754 (i) the Petroleum Storage Tank Loan Fund, created in Section 19-6-405.3 ;
755 (j) the Uintah Basin Revitalization Fund, created in Section 9-10-102 ; and
756 (k) the Navajo Revitalization Fund, created in Section 9-11-104 .
757 (2) The division shall for each revolving loan fund:
758 (a) make rules establishing standards and procedures governing:
759 (i) payment schedules and due dates;
760 (ii) interest rate effective dates;
761 (iii) loan documentation requirements; and
762 (iv) interest rate calculation requirements;
763 (b) make an annual report to the Legislature containing:
764 (i) the total dollars loaned by that fund during the last fiscal year;
765 (ii) a listing of each loan currently more than 90 days delinquent, in default, or that was
766 restructured during the last fiscal year;
767 (iii) a description of each project that received money from that revolving loan fund;
768 (iv) the amount of each loan made to that project;
769 (v) the specific purpose for which the proceeds of the loan were to be used, if any;

770 (vi) any restrictions on the use of the loan proceeds;
771 (vii) the present value of each loan at the end of the fiscal year calculated using the
772 interest rate paid by the state on the bonds providing the revenue on which the loan is based or,
773 if that is unknown, on the average interest rate paid by the state on general obligation bonds
774 issued during the most recent fiscal year in which bonds were sold; and
775 (viii) the financial position of each revolving loan fund, including the fund's cash
776 investments, cash forecasts, and equity position.
777 Section 12. Repealer.
778 This bill repeals:
779 Section 63-34-101, Utah Energy Office created -- Utah Energy Office duties.
780 Section 13. Intent language regarding application of rules relating to the Clean
781 Fuels Conversion Program.
782 It is the intent of the Legislature that administrative rules in effect at the time this bill
783 passes, which are issued under Section 63-34-204 by the Department of Natural Resources
784 relating to the Clean Fuels Conversion Program, are not modified by this bill and remain in
785 effect, except that the agency administering the administrative rules shall be the Department of
786 Environmental Quality pursuant to Section 19-1-404 . The Department of Environmental
787 Quality shall coordinate with the Division of Administrative Rules and correct references
788 within the rules, within three months of the bill's effective date.
789 Section 14. Intent language regarding application of rules relating to the
790 Renewable Energy Tax Credit.
791 It is the intent of the Legislature that administrative rules in effect at the time this bill
792 passes, which are issued by the Utah Energy Office in the Department of Natural Resources
793 relating to Renewable Energy Tax Credits, are not modified by this bill and remain in effect,
794 except that the agency administering the administrative rules shall be the Utah Geological
795 Survey pursuant to Section 63-73-4 . The Utah Geological Survey shall coordinate with the
796 Division of Administrative Rules and correct references within the rules, within three months
797 of the bill's effective date.
798 Section 15. Effective date.
799 This bill takes effect May 15, 2005.
800 Section 16. Coordinating S.B. 199 with H.B. 34.

801 If this S.B. 199 and H.B. 34, Emergency Related Amendments, both pass, it is the
802 intent of the Legislature that the Office of Legislative Research and General Counsel in
803 preparing the Utah Code database for publication shall delete Subsection 53-2-110 (2)(b) and
804 renumber remaining subsections.