S.B. 224

             1     

RENEWABLE ENERGY TAX CREDIT AMENDMENTS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Ralph Okerlund

             5     
House Sponsor: Michael E. Noel

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies certain tax credits related to renewable energy.
             10      Highlighted Provisions:
             11          This bill:
             12          .    modifies certain tax credits related to renewable energy;
             13          .    enacts a tax credit related to renewable energy; and
             14          .    makes technical and conforming changes.
             15      Money Appropriated in this Bill:
             16          None
             17      Other Special Clauses:
             18          This bill takes effect for a taxable year beginning on or after January 1, 2016.
             19      Utah Code Sections Affected:
             20      AMENDS:
             21           59-7-614 , as last amended by Laws of Utah 2012, Chapter 37
             22     
             23      Be it enacted by the Legislature of the state of Utah:
             24          Section 1. Section 59-7-614 is amended to read:
             25           59-7-614. Renewable energy systems tax credit -- Definitions -- Limitations --
             26      Certification -- Rulemaking authority.
             27          (1) As used in this section:


             28          (a) "Active solar system":
             29          (i) means a system of equipment capable of collecting and converting incident solar
             30      radiation into thermal, mechanical, or electrical energy, and transferring these forms of energy
             31      by a separate apparatus to storage or to the point of use; and
             32          (ii) includes water heating, space heating or cooling, and electrical or mechanical
             33      energy generation.
             34          (b) "Biomass system" means any system of apparatus and equipment for use in
             35      converting material into biomass energy, as defined in Section 59-12-102 , and transporting that
             36      energy by separate apparatus to the point of use or storage.
             37          (c) "Business entity" means any sole proprietorship, estate, trust, partnership,
             38      association, corporation, cooperative, or other entity under which business is conducted or
             39      transacted.
             40          (d) "Commercial energy system" means any active solar, passive solar, geothermal
             41      electricity, direct-use geothermal, geothermal heat-pump system, wind, hydroenergy, or
             42      biomass system used to supply energy to a commercial unit or as a commercial enterprise.
             43          (e) "Commercial enterprise" means a business entity whose purpose is to produce
             44      electrical, mechanical, or thermal energy for sale from a commercial energy system.
             45          (f) (i) "Commercial unit" means any building or structure that a business entity uses to
             46      transact its business.
             47          (ii) Notwithstanding Subsection (1)(f)(i):
             48          (A) in the case of an active solar system used for agricultural water pumping or a wind
             49      system, each individual energy generating device shall be a commercial unit; and
             50          (B) if an energy system is the building or structure that a business entity uses to
             51      transact its business, a commercial unit is the complete energy system itself.
             52          (g) "Direct-use geothermal system" means a system of apparatus and equipment
             53      enabling the direct use of thermal energy, generally between 100 and 300 degrees Fahrenheit,
             54      that is contained in the earth to meet energy needs, including heating a building, an industrial
             55      process, and aquaculture.
             56          (h) "Geothermal electricity" means energy contained in heat that continuously flows
             57      outward from the earth that is used as a sole source of energy to produce electricity.
             58          (i) "Geothermal heat-pump system" means a system of apparatus and equipment


             59      enabling the use of thermal properties contained in the earth at temperatures well below 100
             60      degrees Fahrenheit to help meet heating and cooling needs of a structure.
             61          (j) "Hydroenergy system" means a system of apparatus and equipment capable of
             62      intercepting and converting kinetic water energy into electrical or mechanical energy and
             63      transferring this form of energy by separate apparatus to the point of use or storage.
             64          (k) "Individual taxpayer" means any person who is a taxpayer as defined in Section
             65      59-10-103 and an individual as defined in Section 59-10-103 .
             66          (l) "Office" means the Office of Energy Development created in Section 63M-4-401 .
             67          (m) "Passive solar system":
             68          (i) means a direct thermal system that utilizes the structure of a building and its
             69      operable components to provide for collection, storage, and distribution of heating or cooling
             70      during the appropriate times of the year by utilizing the climate resources available at the site;
             71      and
             72          (ii) includes those portions and components of a building that are expressly designed
             73      and required for the collection, storage, and distribution of solar energy.
             74          (n) "Residential energy system" means any active solar, passive solar, biomass,
             75      direct-use geothermal, geothermal heat-pump system, wind, or hydroenergy system used to
             76      supply energy to or for any residential unit.
             77          (o) "Residential unit" means any house, condominium, apartment, or similar dwelling
             78      unit that serves as a dwelling for a person, group of persons, or a family but does not include
             79      property subject to a fee under:
             80          (i) Section 59-2-404 ;
             81          (ii) Section 59-2-405 ;
             82          (iii) Section 59-2-405.1 ;
             83          (iv) Section 59-2-405.2 ; or
             84          (v) Section 59-2-405.3 .
             85          (p) "Wind system" means a system of apparatus and equipment capable of intercepting
             86      and converting wind energy into mechanical or electrical energy and transferring these forms of
             87      energy by a separate apparatus to the point of use, sale, or storage.
             88          (2) (a) (i) [For taxable years beginning on or after January 1, 2007, a] A business entity
             89      that purchases and completes or participates in the financing of a residential energy system to


             90      supply all or part of the energy required for a residential unit owned or used by the business
             91      entity and [situated in Utah is entitled to] located in the state may claim a nonrefundable tax
             92      credit as provided in this Subsection (2)(a).
             93          (ii) (A) [A business entity is entitled to a] The tax credit is equal to 25% of the
             94      reasonable costs of each residential energy system installed with respect to each residential unit
             95      [it] the business entity owns or uses, including installation costs, against any tax due under this
             96      chapter for the taxable year in which the energy system is completed and placed in service.
             97          (B) The total amount of each tax credit under this Subsection (2)(a) may not exceed
             98      $2,000 per residential unit.
             99          (C) The tax credit under this Subsection (2)(a) is allowed for any residential energy
             100      system completed and placed in service on or after January 1, 2007.
             101          (iii) If a business entity sells a residential unit to an individual taxpayer before making
             102      a claim for the tax credit under this Subsection (2)(a), the business entity may:
             103          (A) assign its right to this tax credit to the individual taxpayer; and
             104          (B) if the business entity assigns its right to the tax credit to an individual taxpayer
             105      under Subsection (2)(a)(iii)(A), the individual taxpayer may claim the tax credit as if the
             106      individual taxpayer had completed or participated in the costs of the residential energy system
             107      under Section 59-10-1014 .
             108          (b) (i) [For taxable years beginning on or after January 1, 2007, a] A business entity
             109      that purchases or participates in the financing of a commercial energy system situated in Utah
             110      [is entitled to] may claim a refundable tax credit as provided in this Subsection (2)(b) if the
             111      commercial energy system does not use wind, geothermal electricity, solar, or biomass
             112      equipment capable of producing a total of 660 or more kilowatts of electricity, and:
             113          (A) the commercial energy system supplies all or part of the energy required by
             114      commercial units owned or used by the business entity; or
             115          (B) the business entity sells all or part of the energy produced by the commercial
             116      energy system as a commercial enterprise.
             117          (ii) (A) A business entity is entitled to a tax credit of up to 10% of the reasonable costs
             118      of any commercial energy system installed, including installation costs, against any tax due
             119      under this chapter for the taxable year in which the commercial energy system is completed and
             120      placed in service.


             121          (B) Notwithstanding Subsection (2)(b)(ii)(A), the total amount of the tax credit under
             122      this Subsection (2)(b) may not exceed $50,000 per commercial unit.
             123          (C) The tax credit under this Subsection (2)(b) is allowed for any commercial energy
             124      system completed and placed in service on or after January 1, 2007.
             125          (iii) A business entity that leases a commercial energy system installed on a
             126      commercial unit is eligible for the tax credit under this Subsection (2)(b) if the lessee can
             127      confirm that the lessor irrevocably elects not to claim the tax credit.
             128          (iv) Only the principal recovery portion of the lease payments, which is the cost
             129      incurred by a business entity in acquiring a commercial energy system, excluding interest
             130      charges and maintenance expenses, is eligible for the tax credit under this Subsection (2)(b).
             131          (v) A business entity that leases a commercial energy system is eligible to use the tax
             132      credit under this Subsection (2)(b) for a period no greater than seven years from the initiation
             133      of the lease.
             134          (vi) A tax credit allowed by this Subsection (2)(b) may not be carried forward or
             135      carried back.
             136          (c) (i) [For taxable years beginning on or after January 1, 2007, a] A business entity
             137      that owns a commercial energy system [situated in Utah] located in the state using wind,
             138      geothermal electricity, or biomass equipment capable of producing a total of 660 or more
             139      kilowatts of electricity [is entitled to] may claim a refundable tax credit as provided in this
             140      Subsection (2)(c) if:
             141          (A) the commercial energy system supplies all or part of the energy required by
             142      commercial units owned or used by the business entity; or
             143          (B) the business entity sells all or part of the energy produced by the commercial
             144      energy system as a commercial enterprise.
             145          (ii) (A) A business entity [is entitled to] may claim a tax credit under this section equal
             146      to the product of:
             147          (I) 0.35 cents; and
             148          (II) the kilowatt hours of electricity produced and either used or sold during the taxable
             149      year.
             150          (B) (I) The tax credit calculated under Subsection (2)(c)(ii)(A) may be claimed for
             151      production occurring during a period of 48 months beginning with the month in which the


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


             183          (e) The tax credit under this Subsection (3) is allowed for a commerical energy system
             184      completed and placed in service on or after January 1, 2016.
             185          (f) A business entity that leases a commerical energy system installed on a commercial
             186      unit may claim a tax credit under this Subsection (3) if the business entity that is the lessee can
             187      confirm that the lessor irrevocably elects not to claim the tax credit.
             188          [(3)] (4) (a) Except as provided in Subsection [(3)] (4)(b), the tax credits provided for
             189      under Subsection (2) or (3) are in addition to any tax credits provided under the laws or rules
             190      and regulations of the United States.
             191          (b) A purchaser of one or more solar units that claims a tax credit under Section
             192      59-7-614.3 for the purchase of the one or more solar units may not claim a tax credit under this
             193      section for that purchase.
             194          (c) (i) The office may set standards for residential and commercial energy systems
             195      claiming a tax credit under Subsections (2)(a) and (b) that cover the safety, reliability,
             196      efficiency, leasing, and technical feasibility of the systems to ensure that the systems eligible
             197      for the tax credit use the state's renewable and nonrenewable energy resources in an appropriate
             198      and economic manner.
             199          (ii) The office may set standards for residential and commercial energy systems that
             200      establish the reasonable costs of an energy system, as used in Subsections (2)(a)(ii)(A) and
             201      (2)(b)(ii)(A), as an amount per unit of energy production.
             202          (iii) A tax credit may not be taken under Subsection (2) or (3) until the office has
             203      certified that the energy system has been completely installed and is a viable system for saving
             204      or production of energy from renewable resources.
             205          (d) The office and the commission may make rules in accordance with Title 63G,
             206      Chapter 3, Utah Administrative Rulemaking Act, that are necessary to implement this section.
             207          [(4)] (5) (a) On or before October 1, 2012, and every five years thereafter, the Revenue
             208      and Taxation Interim Committee shall review each tax credit provided by this section and
             209      report its recommendations to the Legislative Management Committee concerning whether the
             210      tax credit should be continued, modified, or repealed.
             211          (b) The Revenue and Taxation Interim Committee's report under Subsection [(4)]
             212      (5)(a) shall include information concerning the cost of the tax credit, the purpose and
             213      effectiveness of the tax credit, and the state's benefit from the tax credit.


             214          Section 2. Effective date.
             215          This bill takes effect for a taxable year beginning on or after January 1, 2016.




Legislative Review Note
    as of 2-20-14 10:31 AM


Office of Legislative Research and General Counsel


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