Utah ~ Corporate, Personal Income Taxes: Alternative Energy Development Credit Provisions Revamped

The Alternative Energy Development Act in Title 63M, Chapter 1, Part 28, of the Utah Code is repealed, and a new Alternative Energy Development Tax Credit Act and Alternative Energy Manufacturing Tax Credit Act are enacted, pursuant to which Utah corporate and individual income tax credits are provided.

Alternative Energy Development Tax Credit

For taxable years beginning on or after January 1, 2012, an alternative energy entity that conducts business within the state and enters into a qualifying agreement with the Governor’s Office of Economic Development may claim a nonrefundable tax credit for alternative energy development in an amount certified by the office pursuant to Title 63M, Chapter 4, Part 5, of the Utah Code. “Alternative energy project” is defined to mean a project produced by an alternative energy entity if that project involves (1) a new or expanding operation in the state; and (2) utility-scale alternative energy generation or the extraction of alternative fuels. The tax credit may not exceed the new state revenues generated by an alternative energy project during the taxable year. If the office expects that the time from the commencement of construction until the end of the economic life of the alternative energy project is 20 years or more, the office will grant a tax credit for the lesser of the economic life of the alternative energy project or 20 years, and the tax credit will be equal to 75% of the new state revenues generated by the alternative energy project. If the amount of the tax credit allowed exceeds the alternative energy entity’s tax liability for the taxable year, the excess credit may be carried forward to the next seven taxable years.

Before the office enters into an agreement with an alternative energy entity authorizing the tax credit, the office, in consultation with other state agencies as necessary, must certify:

— that the alternative energy entity plans to produce in the state at least two megawatts of electricity, or 1,000 barrels per day if the alternative energy project is a crude oil equivalent production;

— that the alternative energy project will generate new state revenues;

— the economic life of the alternative energy project produced by the alternative energy entity;

— that the alternative energy entity meets the requirements for the credit; and

— that the alternative energy entity has received a Certificate of Good Standing from the Division of Corporations and Commercial Code.

Alternative Energy Manufacturing Tax Credit

In addition, for taxable years beginning on or after January 1, 2012, an alternative energy entity that conducts business within the state and enters into a qualifying agreement with the office may claim a nonrefundable tax credit for alternative energy manufacturing in an amount certified by the office pursuant to Title 63M, Chapter 1, Part 31, of the Utah Code. “Alternative energy manufacturing project” is defined to mean a project produced by an alternative energy entity if that project involves (1) a new or expanding operation in the state of a new or expanding alternative energy entity; and (2) the manufacturing of machinery or equipment used directly in the production of alternative energy. The office may authorize or commit a tax credit in an amount not to exceed 100% of the new state revenues generated by an alternative energy manufacturing project. The credit may be authorized or committed for a time period not to exceed the lesser of the economic life of the alternative energy manufacturing project or 20 years. The office must consider economic modeling, including the costs and benefits of an alternative energy manufacturing project to the state and local governments, in determining the amount of tax credit to authorize or commit and the time period for which the office will authorize or commit a tax credit. If the amount of the tax credit allowed exceeds the alternative energy entity’s tax liability for the taxable year, the excess credit may be carried forward to the next seven taxable years.

Before the office enters into an agreement with an alternative energy entity authorizing the tax credit, the office must certify:

— that the alternative energy manufacturing project will generate new state revenues;

— the economic life of the alternative energy manufacturing project produced by the alternative energy entity;

— that local incentives have been committed or will be committed to be provided to the alternative energy manufacturing project;

— that the alternative energy entity meets the requirements for the credit; and

— that the alternative energy entity has received a Certificate of Good Standing from the Division of Corporations and Commercial Code.

Repealed Provisions

The repealed Alternative Energy Development Act in Title 63M, Chapter 1, Part 28, of the Utah Code, allowed the office to create an alternative energy development zone in the state and provided a refundable credit for business entities that invested in alternative energy projects in an alternative energy development zone.

S.B. 65, Laws 2012, effective May 8, 2012, and operative as noted

AUTHOR

Wolters Kluwer Tax and Accounting

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