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Arizona Solar Center Blog

Commentary from Arizona Solar Center Board Members and invited contributors.

While blog entries are initiated by the Solar Center, we welcome dialogue around the posted topics. Your expertise and perspective are highly valued -- so if you haven't logged in and contributed, please do so!

Arizona Elections

While the State Legislature addresses issues related to Energy policy, the Arizona Corporation Commission is directly involved with the oversight of electricity generation and renewable energy standards.

2010 Election Year Cycle

 

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Federal Residential Renewable Energy Tax Credit

(Information provided by DSIRE - Last reviewed 02/19/2009)
Incentive Type:   Personal Tax Credit
State:   Federal
Eligible Renewable/Other Technologies:   Solar Water Heat, Photovoltaics, Wind, Fuel Cells, Geothermal Heat Pumps, Other Solar Electric Technologies
Applicable Sectors:   Residential
Amount:   30%
Maximum Incentive:   Solar-electric systems placed in service before 2009: $2,000
Solar-electric systems placed in service after 2008: no maximum
Solar water heaters placed in service before 2009: $2,000
Solar water heaters placed in service after 2008: no maximum
Wind turbines placed in service in 2008: $4,000
Wind turbines placed in service after 2008: no maximum
Geothermal heat pumps placed in service in 2008: $2,000
Geothermal heat pumps placed in service after 2008: no maximum
Fuel cells: $500 per 0.5 kW
Carryover Provisions:   Excess credit may be carried forward to succeeding tax year
Eligible System Size:   Fuel cells: 0.5 kW minimum
Equipment/Installation Requirements:   Solar water heating property must be certified by SRCC or by comparable entity endorsed by the state in which the system is installed. At least half the energy used to heat the dwelling's water must be from solar. Geothermal heat pumps must meet federal Energy Star requirements. Fuel cells must have electricity-only generation efficiency greater than 30%.
Authority 1:   26 USC § 25D
Date Enacted:   8/8/2005 (subsequently amended)
Date Effective:   1/1/2006
Expiration Date:   12/31/2016
Authority 2:   IRS Form 5695 & Instructions: Residential Energy Credits



Summary:
Note: The American Recovery and Reinvestment Act of 2009 does not allow taxpayers eligible for the residential renewable energy tax credit to receive a U.S. Treasury Department grant instead of taking this credit.

Established by the federal Energy Policy Act of 2005, the federal tax credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells. The Energy Improvement and Extension Act of 2008 (H.R. 1424) extended the tax credit to small wind-energy systems and geothermal heat pumps, effective January 1, 2008. Other key revisions included an eight-year extension of the credit to December 31, 2016, the ability to take the credit against the alternative minimum tax, and the removal of the $2,000 credit limit for solar-electric systems beginning in 2009. The credit was further enhanced in February 2009 by The American Recovery and Reinvestment Act of 2009 (H.R. 1: Div. B, Sec. 1122, p. 46), which removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the "placed in service" date is the date of occupancy by the homeowner. Expenditures include labor costs for onsite preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit can be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.


Solar-electric property
  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service before January 1, 2009.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • The home served by the system does not have to be the taxpayer's principal residence.
  • Note that the Solar Energy Industries Association (SEIA) has published a five-page document that provides answers to frequently asked questions regarding the federal tax credits for solar energy.

Solar water-heating property
  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service before January 1, 2009.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
  • At least half the energy used to heat the dwelling's water must be from solar in order for the solar water-heating property expenditures to be eligible.
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
  • The home served by the system does not have to be the taxpayer's principal residence.
  • Note that the Solar Energy Industries Association (SEIA) has published a five-page document that provides answers to frequently asked questions regarding the federal tax credits for solar energy.

Fuel cell property
  • The maximum credit is $500 per half kilowatt (kW).
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
  • In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per half kilowatt. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs he or she paid.
  • The home served by the system must be the taxpayer's principal residence.

Small wind-energy property
  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $500 per half kilowatt, not to exceed $4,000, for systems placed in service in 2008.
  • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
  • The home served by the system does not have to be the taxpayer's principal residence.

Geothermal heat pumps
  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service in 2008.
  • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
  • The geothermal heat pump must meet federal Energy Star program requirements in effect at the time the installation is completed.
  • The home served by the system does not have to be the taxpayer's principal residence.

Significantly, The American Recovery and Reinvestment Act of 2009 repealed a previous limitation on the use of the credit for eligible projects also supported by "subsidized energy financing." For projects placed in service after December 31, 2008, this limitation no longer applies.  


History
The federal Energy Policy Act of 2005 established a 30% tax credit (up to $2,000) for the purchase and installation of residential solar electric and solar water heating property and a 30% tax credit (up to $500 per 0.5 kilowatt) for fuel cells. Initially scheduled to expire at the end of 2007, the tax credits were extended through December 31, 2008, by the Tax Relief and Health Care Act of 2006.  

In October 2008, the Energy Improvement and Extension Act of 2008 extended the tax credits once again (until December 31, 2016), and a new tax credit for small wind-energy systems and geothermal heat pump systems was created. In February 2009, The American Recovery and Reinvestment Act of 2009 removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

 


Contact:
Public Information - IRS
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web Site: http://www.irs.gov
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Initiatives & Programs

Arizona Initiatives

Governor's Solar Energy Advisory Task Force
www.azenergy.gov/Policy/GSETF.aspx

Arizona Energy Consortium
(November 2011 Report: Arizona's Solar Strategic Plan)

Environment Arizona
(March 2010 Report Summary: Building a Solar Future - Repowering America's Homes, Businesses and Industry with Solar Energy)

 

National Initiatives

Information about current and past initiatives and programs at a national level may be found on the Solar Initiatives page of the US Department of Energy EERE Information Center website.

 

Past Initiatives in Arizona

Arizona Solar Initiative (1999-2001)

The Mission of the Arizona Solar Initiative was to encourage individual, local, and statewide action that capitalized on the national Million Solar Roof Initiative and the region's explosive growth. This Initiative sought to enable Arizona to become a national leader in solar energy utilization, manufacturing, and exports.

Goal 1: Establish an Arizona Solar Initiative sub-committee of the Arizona Solar Energy Advisory Council. The sub-committee will be comprised of invited parties and a representative from the Energy Office.

Goal 2: Install 100,000 new thermal and photovoltaic systems in Arizona by 2010.

Goal 3: Establish technical capabilities to utilize solar in government and non-government application.

Goal 4: Educate consumers about the benefits of using passive and active solar systems.

Goal 5: Coordinate industry and government efforts to overcome institutional barriers.

Goal 6: Develop and support solar manufacturing capacity in the state.

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Legislation (Federal & State)

Incentive Programs across the U.S. (Prepared by DSIRE)

Comprehensive inventory of incentive programs prepared by Database of State Incentives for Renewable Energy (DSIRE Main Page)


State Bills Overview

  • Arizona House Bill summaries and updates
  • Arizona Department of Commerce Energy Office Monthly Updates
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State Legislative Tracker

Updated: April 26, 2014:
The Arizona Legislature adjourned on Thursday, April 24 at 1:42 am -- bringing an end to the 51st legislature – second session. Of the bills the Az Solar Center was tracking – SB 1484 was signed into law by the Governor earlier this month. Two other bills, SB 1301 and HB 2403, passed the legislature and have been transmitted to the Governor for her signature.



  • HB 2403: Strike All Amendment to H.B. 2403, relating to valuation; tax; renewable energy equipment is on the calendar for the Senate Committee of the Whole for April 21, 2014

    Purpose:
    Specifies procedure relating to the full cash value and depreciation of renewable energy equipment.

    Background:
    The Department of Revenue (DOR) determines valuation of centrally assessed property. Centrally assessed property in Arizona includes mines, railroads, private car companies, electric, gas, and water utilities, pipelines, airlines and telecommunications providers that are located in more than one county.

    Current statute defines renewable energy equipment as electric generation facilities, electric transmission, electric distribution, gas distribution or combination gas and electric transmission and distribution and transmission and distribution cooperative property that is used or useful for the generation, storage, transmission or distribution of electric power, energy or fuel derived from solar, wind or other nonpetroleum renewable sources not intended for self-consumption.

    The centrally assessed value of renewable energy equipment is statutorily set at twenty percent of the depreciated cost of the equipment. Depreciation is an annual allowance for the wear and tear, deterioration or obsolescence of property. The value of a depreciated property is arrived at by subtracting the acquisition cost of that property from the appropriate depreciation for that property as prescribed by DOR. The depreciated value may not be lower than fair market rate for the property.

    The fiscal impact to the state General fund associated with this legislation is unknown.

    Provisions

    1. Stipulates depreciated cost for renewable energy equipment must be calculated by subtracting the depreciated value from the taxable original cost.

    2. Defines the following:
         a) depreciation means a straight line depreciation of value, as defined by DOR, over the useful life of equipment, and prohibits depreciation exceeding 90 percent of the adjusted original costs;
         b) original cost means the actual cost, without trending, of the acquisition or construction of property. Acquisition or construction includes additions, retirements, adjustments and transfers of property; and
         c) taxable original cost means the original cost of the renewable energy equipment minus the value of applicable investment and production tax credits or cash grants.

    3. Makes technical and conforming changes.

    4. Becomes effective on the general effective date.



  • SB 1484: tax credit, manufacturers; renewable energy

    Senators Worsley, Pierce: McComish (with permission of Committee on Rules)

    Status (Updated 4/18/14): Signed into law by Governor Jan Brewer 4/11/2014.
     
    Description: Creates individual and corporate tax credits for investment in new renewable energy facilities that produce energy primarily for manufacturing. The amount of the credit is capped at $2 million per facility per calendar year, with the aggregate amount of credit capped at $20 million per calendar year. To be eligible for the credit, the taxpayer must invest at least $300 million in new renewable energy facilities in Arizona that produce energy for self-consumption using renewable energy resources; at least 90 percent of the energy produced at each renewable energy facility is used for self-consumption in Arizona; and the power is used primarily for manufacturing.

    www.azleg.gov/legtext/51leg/2r/bills/sb1484p.pdf


  • SB 1227: limits energy efficiency regulations

    Sponsored by Sen. Crandell.


    Status (Updated 3/29/14): Had its third reading in the Senate on March 4, 2014. No further action has occurred since 3/4/14.

    Description: Prohibits municipalities and counties from certain actions relating to energy efficiency, energy conservation or green construction regulations in new construction.

    Amendment: The Crandell Floor Amendment exempts any, or part of any, ordinance that solely regulates outdoor lighting from the mandated energy efficiency or conservation prohibition.

    Provisions:

    1. Prohibits cities, towns and counties from the following actions related to energy efficiency, energy conservation or green construction in new construction:
            a) adopting any mandatory building codes, ordinances, stipulations or other legal requirements; and
            b) denying licenses or building permits, or imposing any fines, penalties or other requirements for non-compliance.

    2. Exempts any building code, ordinance, stipulation or other legal requirement related to energy efficiency, energy conservation or green construction in new construction that was adopted and effective prior to this act's effective date or any ordinance that solely regulates outdoor lighting.

    3. Defines building code.

    4. Becomes effective on the general effective date.

    http://www.azleg.gov//FormatDocument.asp?inDoc=/legtext/51leg/2r/bills/sb1227s.htm&Session_ID=112


  • HB 2553: political subdivisions; energy incentives; prohibition

    Sponsored by Rep. Allen

    Status (Updated 3/29/14): Had its second reading in the House on February 6, 2014. No further action has occurred since 2/6/14.

    Description: Prohibits the state and any county, city, school district or other political subdivision from claiming or accepting any incentive or subsidy from an incentive program offered by a public utility. Restricts any third-party vendor or contractor from accepting any incentive on behalf of the government entity.

    www.azleg.gov/legtext/51leg/2r/bills/hb2553p.pdf


  • HB 2358: tax; valuation; renewal energy equipment

    Sponsored by Rep. Fann

    Status (Updated 3/29/14): Last action occurred on 2/10/14 in the House Energy, Environment and Natural Resources Committee. No further action has occurred since 2/10/14

    Description: Outlines the method for determining the full cash value of renewable energy equipment and the full cash value of land on which the equipment is located.

    www.azleg.gov/legtext/51leg/2r/bills/hb2358p.pdf 


  • HB 2182: electric utilities; renewable energy standards

    Sponsored by Rep. Seel
     
    Status (Updated 3/29/14): Had its second reading in the House on January 23, 2014. No further action has occurred since 1/23/14.

    Description: Gives the legislature exclusive authority to determine renewable energy policy for Arizona, including targets, mandates, tax credits, incentives and other direct means to determine or encourage the production, distribution and use of renewable energy sources. Does not include setting utility rates. Establishes a renewable energy standards for public and private power entities in this state.

    www.azleg.gov/legtext/51leg/2r/bills/hb2182p.pdf



  • SB 1030: Solar School Grant Program

    Sponsored by Sen. Farley
     
    Status (Updated 3/29/14): Never heard in committee. No action has occurred on this bill since it was assigned to Committees on January 13, 2014.

    Description:
    Transfer funds from the Arizona Commerce Authority to the Department of Education to provide grants to school districts for solar education programs in schools that use solar technology. The solar education programs may include solar open houses and other demonstration projects. School districts may apply to the Department of Education for grants from the fund.

    www.azleg.gov/legtext/51leg/2r/bills/sb1030p.pdf


 

  • SB 1402: renewable energy; definition

    Primary Sponsor Sen. Melvin

    Status (Updated 3/29/14): Passed the Senate on Feb. 27, 2014 (17-13) and transmitted to the House. House first read on March 4, 2014 and assigned to Energy, Environment and Natural Resources and the Rules committees on March 4, 2014. Had its second read in the House on March 5, 2014. No further action since 3/5/14.

    Description: Defines energy sources that are considered renewable energy. Defines renewable energy as including: a) solar; b) wind; c) hydroelectric; d) pumped storage; e) flywheel storage; f) hydrogen; g) geothermal; h) biomass and biomass baseload; and i) nuclear energy fueled by recycled uranium fuel rods that include 80 percent or more recycled nuclear fuel or natural thorium reactor resources under development.

    www.azleg.gov/legtext/51leg/2r/bills/sb1402s.pdf


  • SB 1073: green technology and manufacturing incentives

    Introduced by Senators Ableser, Bradley, Farley, Gallardo, Hobbs, Tovar; Representatives Mendez, Sherwood: Senators Meza, Pancrazi

    Status (Updated 3/29/14): First and Second Read in the Senate on Jan 15 and 16, 2014 and assigned to committees for action on 1/15/2014. Never heard in committee.

    Description: Provides definition and criteria for the owner of a green manufacturing business to qualify for an income tax credit and property reclassification

    www.azleg.gov/legtext/51leg/2r/bills/sb1073p.pdf


  • HB 2595: tax; renewable energy; on-site consumption

    Introduced by Representative Allen

    Status (Updated 3/29/14): Held in Committee on February 17, 2014. No further action since 2/17/14.

    Description: Specifies that, for the purposes of property valuation, a solar energy device owned by a homeowner, for their own use, adds no value to the property on which it is installed.

    www.azleg.gov/legtext/51leg/2r/bills/hb2595p.pdf


  • SB 1467: Solar energy devices; on-site electricity

    Sponsor: Sen. McComish

    Status: Stalled in committee

    Description: Would clarify state law by stating that leased or third-party owned grid‑tied photovoltaic systems are considered to have no value and to add no value to the real property on which such device or system is installed.

    http://www.azleg.gov//FormatDocument.asp?inDoc=/legtext/51leg/2r/bills/sb1467p.htm&Session_ID=112

 



  • HB 2304: prime contracting deduction; waste facility

    Introduced by Representative Pratt

    Status (Updated 3/29/14): Never heard in Committee. No action since Second Read on January 23, 2014.

    Description: Would exempt mixed waste processing facilities from prime contracting transaction privilege tax, if that mixed waste processing facility is located on a municipal landfill and that it is constructed for the purpose of recycling waste or producing renewable energy.

    www.azleg.gov/legtext/51leg/2r/bills/hb2304p.pdf


We encourage interested parties to interact with elected officials at the legislature:
An additional source for information on legislative and policy developments in the energy sector is:

 

AZ.gov logo

Arizona Governor's Energy Office Newsletter

This newsletter is published by the Arizona Governor's Office of Energy Policy and is provided free of charge to the public. It contains verbatim excerpts from international and domestic energy and environment-related publications reviewed by the Education and Community Outreach personnel.

 


If you would like to review summaries of past legislation, please see our archives:

Legislative Summary Archive

State Bills - 2012
State Bills - 2011
State Bills - 2010
State Bills - 2009
State Bills - 2008
State Bills - 2007
State Bills - 2006
State Bills - 2005
State Bills - 2004

 

 

 

 

 

 

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