BILL REQ. #:  S-0424.2 

Read first time 01/22/09.   Referred to Committee on Environment, Water & Energy.

     AN ACT Relating to providing incentives for solar electric power; amending RCW 82.16.110, 82.16.120, and 82.16.130; adding a new section to chapter 84.36 RCW; adding a new section to chapter 82.04 RCW; creating a new section; making an appropriation; providing an effective date; providing an expiration date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds that solar electric generating technologies have advanced significantly in the past decade, and that solar power is becoming more cost-competitive with other traditional and renewable generation. The legislature further finds that there is a public interest in promoting greater industrial and commercial applications for solar electric generation. To this end the state should support pilot projects that employ industrial and commercial structures for solar arrays in order to promote more efficient and cost-effective solar power production. The legislature further finds that such distributed solar generation will have additional benefits in reducing transmission losses from grid-based service, as well as contributing toward reducing greenhouse gas emissions from the state's electrical service sector.
     Therefore it is the purpose of this act to increase incentives payments to businesses installing solar power for use on-site, to prevent increases in property tax valuation from solar power installation, and to provide additional incentives for solar power installation.

NEW SECTION.  Sec. 2   A new section is added to chapter 84.36 RCW to read as follows:
     (1) Property equipped with solar energy systems for the purpose of heating, cooling, or generating electrical energy is exempt from ad valorem taxation in an amount that equals any positive amount obtained by subtracting the real market value of the property, as if it were not equipped with such systems, from the real market value of the property so equipped.
     (2) This section applies to tax years beginning prior to July 1, 2020.
     (3) This section does not apply to property used by a light and power business for the generation of electricity.

Sec. 3   RCW 82.16.110 and 2005 c 300 s 2 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Customer-generated electricity" means the alternating current electricity that is generated from a renewable energy system located on an individual's, businesses', or local government's real property that is also provided electricity generated by a light and power business. A system located on a leasehold interest does not qualify under this definition. "Customer-generated electricity" does not include electricity generated by a light and power business with greater than one thousand megawatt hours of annual sales or a gas distribution business.
     (2) "Economic development kilowatt-hour" means the actual kilowatt-hour measurement of customer-generated electricity multiplied by the appropriate economic development factor.
     (3) "Photovoltaic cell" means a device that converts light directly into electricity without moving parts.
     (4) "Renewable energy system" means a solar energy system, an anaerobic digester as defined in RCW 82.08.900, or a wind generator used for producing electricity.
     (5) "Solar energy system" means any device or combination of devices or elements that rely upon direct sunlight as an energy source for use in the generation of electricity.
     (6) "Solar inverter" means the device used to convert direct current to alternating current in a photovoltaic cell system.
     (7) "Solar module" means the smallest nondivisible self-contained physical structure housing interconnected photovoltaic cells and providing a single direct current electrical output.
     (((8) "Standards for interconnection to the electric distribution system" means technical, engineering, operational, safety, and procedural requirements for interconnection to the electric distribution system of a light and power business.))

Sec. 4   RCW 82.16.120 and 2007 c 111 s 101 are each amended to read as follows:
     (1) Any individual, business, or local governmental entity, not in the light and power business or in the gas distribution business, may apply to the light and power business serving the situs of the system, each fiscal year beginning on July 1, 2005, for an investment cost recovery incentive for each kilowatt-hour from a customer-generated electricity renewable energy system ((installed on its property that is not interconnected to the electric distribution system)). No incentive may be paid for kilowatt-hours generated before July 1, 2005, or after June 30, ((2014)) 2025.
     (2) ((When light and power businesses serving eighty percent of the total customer load in the state adopt uniform standards for interconnection to the electric distribution system, any individual, business, or local governmental entity, not in the light and power business or in the gas distribution business, may apply to the light and power business serving the situs of the system, each fiscal year, for an investment cost recovery incentive for each kilowatt-hour from a customer-generated electricity renewable energy system installed on its property that is not interconnected to the electric distribution system and from a customer-generated electricity renewable energy system installed on its property that is interconnected to the electric distribution system. Uniform standards for interconnection to the electric distribution system means those standards established by light and power businesses that have ninety percent of total requirements the same. No incentive may be paid for kilowatt-hours generated before July 1, 2005, or after June 30, 2014.
     (3)))(a) Before submitting for the first time the application for the incentive allowed under subsection (4) of this section, the applicant shall submit to the department of revenue and to the climate and rural energy development center at the Washington State University, established under RCW 28B.30.642, a certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system;
     (ii) The applicant's tax registration number;
     (iii) That the electricity produced by the applicant meets the definition of "customer-generated electricity" and that the renewable energy system produces electricity with:
     (A) Any solar inverters and solar modules manufactured in Washington state;
     (B) A wind generator powered by blades manufactured in Washington state;
     (C) A solar inverter manufactured in Washington state;
     (D) A solar module manufactured in Washington state; or
     (E) Solar or wind equipment manufactured outside of Washington state;
     (iv) That the electricity can be transformed or transmitted for entry into or operation in parallel with electricity transmission and distribution systems;
     (v) The date that the renewable energy system received its final electrical permit from the applicable local jurisdiction.
     (b) Within thirty days of receipt of the certification the department of revenue shall notify the applicant by mail, or electronically as provided in RCW 82.32.135, whether the renewable energy system qualifies for an incentive under this section. The department may consult with the climate and rural energy development center to determine eligibility for the incentive. System certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(m).
     (((4))) (3)(a) By August 1st of each year application for the incentive shall be made to the light and power business serving the situs of the system by certification in a form and manner prescribed by the department that includes, but is not limited to, the following information:
     (i) The name and address of the applicant and location of the renewable energy system;
     (ii) The applicant's tax registration number;
     (iii) The date of the notification from the department of revenue stating that the renewable energy system is eligible for the incentives under this section;
     (iv) A statement of the amount of kilowatt-hours generated by the renewable energy system in the prior fiscal year.
     (b) Within sixty days of receipt of the incentive certification the light and power business serving the situs of the system shall notify the applicant in writing whether the incentive payment will be authorized or denied. The business may consult with the climate and rural energy development center to determine eligibility for the incentive payment. Incentive certifications and the information contained therein are subject to disclosure under RCW 82.32.330(3)(m).
     (c)(i) Persons receiving incentive payments shall keep and preserve, for a period of five years, suitable records as may be necessary to determine the amount of incentive applied for and received. Such records shall be open for examination at any time upon notice by the light and power business that made the payment or by the department. If upon examination of any records or from other information obtained by the business or department it appears that an incentive has been paid in an amount that exceeds the correct amount of incentive payable, the business may assess against the person for the amount found to have been paid in excess of the correct amount of incentive payable and shall add thereto interest on the amount. Interest shall be assessed in the manner that the department assesses interest upon delinquent tax under RCW 82.32.050.
     (ii) If it appears that the amount of incentive paid is less than the correct amount of incentive payable the business may authorize additional payment.
     (((5))) (4) The investment cost recovery incentive may be paid fifteen cents per economic development kilowatt-hour unless requests exceed the amount authorized for credit to the participating light and power business. For the purposes of this section, the rate paid for the investment cost recovery incentive may be multiplied by the following factors:
     (a) For customer-generated electricity produced using solar modules manufactured in Washington state, two and four-tenths;
     (b) For customer-generated electricity produced using a solar or a wind generator equipped with an inverter manufactured in Washington state, one and two-tenths;
     (c) For customer-generated electricity produced using an anaerobic digester, or by other solar equipment or using a wind generator equipped with blades manufactured in Washington state, one; and
     (d) For all other customer-generated electricity produced by wind, eight-tenths.
     (((6))) (5) No individual, household, business, or local governmental entity is eligible for incentives provided under subsection (4) of this section for more than two thousand dollars per year.
     (((7))) (6) The investment cost recovery incentive may be paid fifty-four cents per kilowatt-hour generated by a commercial or industrial customer consuming at least one-half of the electricity generated in its commercial or industrial activities at the site of the generation. No incentive provided under this subsection may exceed twenty thousand dollars per utility revenue meter per year. A person claiming an incentive payment under this subsection is not eligible for the incentive provided under subsection (5) of this section for the same calendar year.
     (7) If requests for the investment cost recovery incentive exceed the amount of funds available for credit to the participating light and power business, the incentive payments shall be reduced proportionately.
     (8) The climate and rural energy development center at Washington State University energy program may establish guidelines and standards for technologies that are identified as Washington manufactured and therefore most beneficial to the state's environment.
     (9) The environmental attributes of the renewable energy system belong to the applicant, and do not transfer to the state or the light and power business upon receipt of the investment cost recovery incentive.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Subject to the limits and provisions of this section, a credit is allowed against the tax imposed by this chapter for a taxpayer that either:
     (a) Installs one or more solar energy systems during the taxable year for commercial or industrial purposes in the taxpayer's trade or business facility located in this state; or
     (b) Receives certification from the department recognizing its financing of the installation, in a facility located in this state, of one or more solar energy systems during the taxable year by a third-party organization that is exempt from taxation imposed under this chapter.
     (2) The amount of the credit is equal to ten percent of the installed cost of the solar energy system. The person who provides or installs the solar energy system must furnish the taxpayer with an accounting of the installed cost.
     (3) The taxpayer may not cumulate total tax credits under this section exceeding twenty-five thousand dollars with respect to the same building in the same year or fifty thousand dollars in total credits in any year.
     (4) If the allowable credit exceeds the taxes otherwise due under this chapter or if there are no taxes due under this chapter, the amount of the claim not used to offset taxes under this chapter may be carried forward for not more than five consecutive taxable years as a credit against subsequent years' tax liability.
     (5) Co-owners of a business, including corporate partners in a partnership, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest or financial investment in the system. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.
     (6) The department must establish a procedure for identifying projects that qualify for the credit allowed under this section.
     (a) To qualify for the credit, a taxpayer must apply in a form prescribed by the department, including:
     (i) The projected date that the installation of the solar energy system will begin and the projected finish date;
     (ii) The location where the solar energy system will be installed;
     (iii) The type of solar energy system, its total cost, excluding financing costs, and the estimated annual performance level; and
     (iv) The projected amount of the credit against the tax imposed by this chapter.
     (b) The department must:
     (i) Review and evaluate each submitted application;
     (ii) Determine within thirty days after receiving the application whether it meets applicable criteria; and
     (iii) Provide initial certification of a project to the applicant.
     (c) Upon the completion of each certified installation, the taxpayer must certify that the installed solar energy system is operational and provide the total amount of credits to be claimed. The department must review the installation expenses and issue a credit certificate to the business.
     (7) If at any time the department finds that a person is not eligible for a credit under this section, the amount of taxes for which the credit has been claimed are immediately due. The department must assess interest, but not penalties, on the taxes for which the person is not eligible. The interest is assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, is retroactive to the date the credit was taken, and accrues until the taxes for which the credit has been used are repaid.
     (8) As used in this section, "solar energy system" has the same meaning specified in RCW 82.16.110.
     (9) This section expires June 30, 2017.

Sec. 6   RCW 82.16.130 and 2005 c 300 s 4 are each amended to read as follows:
     (1) A light and power business shall be allowed a credit against taxes due under this chapter in an amount equal to investment cost recovery incentive payments made in any fiscal year under RCW 82.16.120. The credit shall be taken in a form and manner as required by the department. The credit under this section for the fiscal year shall not exceed twenty-five one-hundredths of one percent of the businesses' taxable power sales due under RCW 82.16.020(1)(b) or twenty-five thousand dollars, whichever is greater. The credit may not exceed the tax that would otherwise be due under this chapter. Refunds shall not be granted in the place of credits. Expenditures not used to earn a credit in one fiscal year may not be used to earn a credit in subsequent years.
     (2) For any business that has claimed credit for amounts that exceed the correct amount of the incentive payable under RCW 82.16.120, the amount of tax against which credit was claimed for the excess payments shall be immediately due and payable. The department shall assess interest but not penalties on the taxes against which the credit was claimed. Interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and shall accrue until the taxes against which the credit was claimed are repaid.
     (3) The right to earn tax credits under this section expires June 30, ((2015)) 2025. Credits may not be claimed after June 30, ((2016)) 2026.

NEW SECTION.  Sec. 7   Section 5 of this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2009.