Analysis

Synopsis:

 House Bill 262 (HB 262) creates the energy storage system income tax credit. It requires the Taxation and Revenue Department to provide an annual report and the Energy, Minerals and Natural Resources Department to contribute to that annual report.
2/23/21
The House Energy and Natural Resources Committee introduced a committee substitute for HB 262 (CS/HB 262 HENRC).  It creates the energy storage system income tax credit and requires the Energy, Minerals and Natural Resources Department to establish an energy system tax credit installation website. HB 262CS HENRC requires reports.


Analysis:

 House Bill 262 (HB 262) creates the energy storage system income tax credit in the Income Tax Act. It allows a taxpayer who purchases and installs an energy storage system on the taxpayer’s residential property to apply for and receive a credit against the taxpayer’s tax liability. The claim for the credit, known as the energy storage system income tax credit, is limited to taxable years prior to 2024 and for one system only.

HB 262 establishes certain installation and certification criteria including use with a new or existing photovoltaic system; minimum of two hours of storage; meets certain permitting requirements; ability to be used as a shared resource with a utility; and certified by the Energy, Minerals and Natural Resources Department (EMNRD). It allows the credit for installation in an agricultural enterprise, a business or a residence even though subsection A limits it to the taxpayer’s residential property.

HB 262 limits the credit to forty percent of the total cost to purchase and install the system, up to a maximum credit of five thousand dollars ($5,000). It does not apply to costs associated with equipment or installation costs for energy generation. It allows a taxpayer to claim the credit in the following tax year if the annual aggregate amount for this credit has been met at the time of the claim and allows the taxpayer to carry forward the balance of the credit for a maximum of five years, if the credit exceeds the taxpayer’s tax liability in the year claimed. HB 262 allows married couples filing separately to claim half of the credit they would have claimed on a joint return. It provides for allocation of the tax credit based on the proportion of the taxpayer’s ownership interest in a business entity that is taxed for federal purposes as a partnership or a limited liability company and if all other requirements for the credit are met. 

HB 262 requires the Taxation and Revenue Department (TRD) to create an application for the credit that includes certification of the system by the Energy, Minerals and Natural Resources Department. It directs both departments to process completed applications in the order received and for the TRD to notify the EMNRD when the annual aggregate amount has been reached. Both departments have obligations to notify taxpayer applicants if and when the annual aggregate amount has been reached. The TRD must notify taxpayer-applicants that they may apply in the following year. The amount of the maximum annual aggregate for this credit is one million dollars ($1,000,000) per Fiscal Year. The TRD will develop the application forms; the EMNRD will promulgate rules concerning the certification of these energy storage systems for the purpose of this tax credit; notice to taxpayers when the annual aggregate amount is reached; and supply the TRD with the information it will need in its annual report. HB 262 specifies the data required in the annual report and requires the TRD to present the report to the Revenue Stabilization and Tax Policy Committee (RSTPC) and the Legislative Finance Committee (LFC) with an analysis of the cost of the tax credit.

HB 262 defines energy storage system as a battery used to store electrical energy for use or to displace energy at a later time.


It directs that the provisions of this act will apply to taxable years beginning on or after January 1, 2022.

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