House of Representatives

HB 2429

solar energy tax incentives

Sponsors: Representative Mason, Representative Boone, Representative Chase, Representative Downing et al.

 

 

HB 2429 requires the Department of Commerce (DOC) to establish a solar energy income tax credit program, increases solar energy tax credits for residential property, establishes solar energy tax credits for commercial and industrial projects, removes the $5,000 tax exemption limitation for retail and prime contracting classifications under the transaction privilege tax (TPT) and prohibits solar energy systems for on-site consumption from being added to property value.

 

History

Current Arizona Solar Energy Income Tax Credit

Arizona's Solar Energy Credit provides an individual taxpayer with a credit for installing a solar device at the taxpayer's Arizona residence. The credit is allowed against the taxpayer's personal income tax in the amount of 25% of the cost of a solar device, with a $1,000 maximum allowable limit, regardless of the number of energy devices installed. The credit should be claimed in the year of installation and if the amount of the credit exceeds a taxpayer’s liability in a certain year, the unused portion of the credit may be carried forward for up to five years.

 

Current TPT Exemptions

Under the retail classification, retailers may deduct the amount received from sales of solar energy devices from their tax base.  This deduction may not exceed $5000.  Additionally, under the prime contracting classification, the gross proceeds of sales or gross income earned from a contract to provide and install a solar energy device may be deducted from the tax base.  This deduction may not exceed $5000 for each contract.

  

Qualifying Solar Energy Devices

Qualifying technologies include: solar domestic water heating systems, solar swimming pool and spa heating systems, solar photovoltaic systems, solar photovoltaic phones and street lighting, passive solar building systems, solar day-lighting systems, wind generators, and wind powered pumps.

 

 

 

 

 

Provisions

Solar Energy Income Tax Credit Projects

·          Requires DOC to establish procedures to identify commercial solar energy projects for solar energy income tax credits.

·          Requires businesses to apply in order to qualify for solar energy tax credits.

·          Outlines the process for DOC to evaluate and initially certify solar energy projects.

·          Requires businesses, upon completion of each initially certified installation, to certify that each installation is operational and provide total amount of solar energy tax credits being claimed.

·          Requires DOC to review the installation expenses and issue a credit certificate to the business and transmit the credit information to DOR.

·          Requires DOC and the Department of Revenue (DOR) to collaborate in adopting rules for certifying and granting solar energy tax credits.

·          Caps the commercial solar energy tax credits in a calendar year at $7 million.

·          Declares applications confidential and not subject to disclosure for a period of 18 months.

Residential Solar Energy Device Income Tax Credit

·          Increases the current residential solar energy device income tax credit to $2,000 from $1,000, beginning January 1, 2006 through December 31, 2012, and limits the total tax credits to $5,000 per residence, rather than $1,000.

·          Allows the tax payer to carry back the tax credits one year back in addition to the five year carry forward.

Commercial and Industrial Solar Energy Device Income Tax Credit

·          Establishes a new solar energy device tax credit beginning January 1, 2006 and extending through December 31, 2012 for the installation of one or more solar energy devices for commercial or industrial purposes in a trade or business located in Arizona. 

·          Allows third party organizations that finance solar energy devices to take the tax credit. 

·          Specifies the amount of the tax credit is equal to 10% of the installed cost of the device.

·          Limits the tax credit taken to $25,000 with respect to the same building in the same year and is limited to $50,000 per company per year.

·          Allows the tax credit to be carried forward for five consecutive years and carried back the preceding year.

·          Requires the person who provides or installs the solar energy device to furnish the taxpayer with an accounting of the cost. 

·          Allows co-owners, partners, corporate partners and shareholders to claim pro-rata share of the tax credit based on ownership interests or percentage of investment in the solar energy system.

·          Prohibits total credits allowed to all owners from exceeding the amount that would have been allowed a sole owner.

TPT Retail and Prime Contracting Classifications

·          Removes the $5,000 tax exemption limitation for retail and prime contracting classifications under the TPT. 

Property Value

·          Prohibits solar energy devices and any other device or system designed for the production of solar energy for on-site consumption from adding to property value.

Other Provisions

·          Adds the solar energy tax credits to the income tax review schedule for 2011.

·          Contains a purpose statement.

·          Repeals a duplicative section of law.

·          Makes technical and conforming changes.

 

Amendments

Ways and Means:

·          Removes the provision that allows the tax payer to carry back the tax credits.

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·          ---------- DOCUMENT FOOTER ---------

·          Forty-seventh Legislature             Analyst Initials _______

·          Second Regular Session                January 19, 2006

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·          ---------- DOCUMENT FOOTER ---------