Senate File 2077 - Introduced SENATE FILE BY RAGAN Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to renewable energy, providing for state bank 2 acquisition of equity interests in renewable energy production 3 facilities, and providing for qualification for specified 4 production tax credits by state banks and by owners or 5 manufacturing facilities generating renewable energy for 6 on=site consumption rather than sale, and providing effective 7 and applicability dates. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 5589SS 82 10 rn/rj/24 PAG LIN 1 1 Section 1. Section 524.802, Code 2007, is amended by 1 2 adding the following new subsection: 1 3 NEW SUBSECTION. 13A. Provide customer financing for 1 4 renewable energy production facilities eligible for production 1 5 tax credits pursuant to chapters 476B and 476C in a manner 1 6 that maximizes the availability of production tax credits to 1 7 the state bank, including structuring such financing as a 1 8 membership investment whereby the state bank as equity 1 9 investor may take a majority financial position, but not a 1 10 management position, in each such facility, subject to the 1 11 following: 1 12 a. Prior to providing financing, a creditworthiness review 1 13 shall be conducted pursuant to the state bank's standard loan 1 14 underwriting criteria. 1 15 b. The state bank shall not participate in the operation 1 16 of the facility, the production of renewable energy, or the 1 17 sale of renewable energy if such sale is contemplated by the 1 18 customer. 1 19 c. If the facility does not perform as projected in the 1 20 equity investment agreement, the state bank may either sell 1 21 its interest in the facility or pursue liquidation. 1 22 d. The state bank shall not share in any appreciation in 1 23 value of its interest in the facility or in any of the 1 24 customer's real or personal assets. 1 25 e. At the end of any applicable holding period, the state 1 26 bank shall sell at book value its ownership interest in the 1 27 facility. 1 28 Sec. 2. Section 476B.1, subsection 4, paragraph c, Code 1 29 2007, is amended to read as follows: 1 30 c. Was originally placed in service on or after July 1, 1 31 2005, but before July 1,20092012. 1 32 Sec. 3. Section 476B.2, Code 2007, is amended to read as 1 33 follows: 1 34 476B.2 GENERAL RULE. 1 35 The owner of a qualified facility shall, for each 2 1 kilowatt=hour of qualified electricity that the owner sells or 2 2 uses for on=site consumption during the ten=year period 2 3 beginning on the date the qualified facility was originally 2 4 placed in service, be allowed a wind energy production tax 2 5 credit to the extent provided in this chapter against the tax 2 6 imposed in chapter 422, divisions II, III, and V, and chapter 2 7 432. 2 8 Sec. 4. Section 476B.3, Code 2007, is amended to read as 2 9 follows: 2 10 476B.3 CREDIT AMOUNT. 2 11 The wind energy production tax credit allowed under this 2 12 chapter equals the product of one cent multiplied by the 2 13 number of kilowatt=hours of qualified electricity sold or used 2 14 for on=site consumption by the owner during the taxable year. 2 15 Sec. 5. Section 476B.5, subsection 1, paragraph e, Code 2 16 2007, is amended to read as follows: 2 17 e.AExcept when electricity is used for on=site 2 18 consumption, a copy of an executed power purchase agreement or 2 19 other agreement to purchase electricity upon completion of the 2 20 project. An executed interconnection agreement or 2 21 transmission service agreement shall be accepted by the board 2 22 under this paragraph if the owner of the facility has agreed 2 23 to sell electricity from the facility directly or indirectly 2 24 to a wholesale power pool market. 2 25 Sec. 6. Section 476B.5, subsection 4, Code 2007, is 2 26 amended to read as follows: 2 27 4. The maximum amount of nameplate generating capacity of 2 28 all qualified facilities the board may find eligible under 2 29 this chapter shall not exceedfourtwo hundred fifty megawatts 2 30 of nameplate generating capacity. 2 31 Sec. 7. Section 476B.6, subsection 2, Code 2007, is 2 32 amended by adding the following new paragraph: 2 33 NEW PARAGRAPH. f. For a facility in which electricity is 2 34 used for on=site consumption, the requirements of paragraphs 2 35 "c" and "d" shall not be applicable. 3 1 Sec. 8. Section 476B.6, subsection 3, Code 2007, is 3 2 amended to read as follows: 3 3 3. The board shall notify the department of the amount of 3 4 kilowatt=hours generatedandor purchased from a qualified 3 5 facility. The department shall calculate the amount of the 3 6 tax credit for which the applicant is eligible and shall issue 3 7 the tax credit certificate for that amount or notify the 3 8 applicant in writing of its refusal to do so. An applicant 3 9 whose application is denied may file an appeal with the 3 10 department within sixty days from the date of the denial 3 11 pursuant to the provisions of chapter 17A. 3 12 Sec. 9. Section 476B.7, unnumbered paragraph 2, Code 2007, 3 13 is amended to read as follows: 3 14 The tax credit shallonly be transferred oncebe freely 3 15 transferable. The transferee may use the amount of the tax 3 16 credit transferred against the taxes imposed under chapter 3 17 422, divisions II, III, and V, and chapter 432 for any tax 3 18 year the original transferor could have claimed the tax 3 19 credit. Any consideration received for the transfer of the 3 20 tax credit shall not be included as income under chapter 422, 3 21 divisions II, III, and V. Any consideration paid for the 3 22 transfer of the tax credit shall not be deducted from income 3 23 under chapter 422, divisions II, III, and V. 3 24 Sec. 10. Section 476C.1, subsection 6, paragraph b, Code 3 25 2007, is amended by adding the following new subparagraphs: 3 26 NEW SUBPARAGRAPH. (8) A state bank as defined in section 3 27 524.103. 3 28 NEW SUBPARAGRAPH. (9) A manufacturing facility located in 3 29 this state producing renewable energy solely for its own use. 3 30 Sec. 11. Section 476C.1, subsection 6, paragraph d, Code 3 31 2007, is amended to read as follows: 3 32 d. Was initially placed into service on or after July 1, 3 33 2005, and before January 1,20122014. 3 34 Sec. 12. Section 476C.2, subsection 1, Code 2007, is 3 35 amended to read as follows: 4 1 1. A producer or purchaser of renewable energy may receive 4 2 renewable energy tax credits under this chapter in an amount 4 3 equal toone and one=halftwo cents per kilowatt=hour of 4 4 electricity, or four dollars and fifty cents per million 4 5 British thermal units of heat for a commercial purpose, or 4 6 four dollars and fifty cents per million British thermal units 4 7 of methane gas or other biogas used to generate electricity, 4 8 or one dollar and forty=four cents per one thousand standard 4 9 cubic feet of hydrogen fuel generated byandor purchased from 4 10 an eligible renewable energy facility. 4 11 Sec. 13. Section 476C.3, subsection 1, paragraph e, Code 4 12 2007, is amended to read as follows: 4 13 e.AExcept when renewable energy is used solely for 4 14 on=site consumption, a copy of the power purchase agreement or 4 15 other agreement to purchase electricity, hydrogen fuel, 4 16 methane or other biogas, or heat for a commercial purpose 4 17 which shall designate either the producer or purchaser of 4 18 renewable energy as eligible to apply for the renewable energy 4 19 tax credit. 4 20 Sec. 14. Section 476C.3, subsections 4 and 6, Code 2007, 4 21 are amended to read as follows: 4 22 4. The maximum amount of nameplate generating capacity of 4 23 all wind energy conversion facilities the board may find 4 24 eligible under this chapter shall not exceedone hundred 4 25 eightythree hundred sixty megawatts of nameplate generating 4 26 capacity. The maximum amount of energy production capacity 4 27 equivalent of all other facilities the board may find eligible 4 28 under this chapter shall not exceed a combined output of 4 29 twenty megawatts of nameplate generating capacity and one 4 30 hundred sixty=seven billion British thermal units of heat for 4 31 a commercial purpose. Of the maximum amount of energy 4 32 production capacity equivalent of all other facilities found 4 33 eligible under this chapter, fifty=five billion British 4 34 thermal units of heat for a commercial purpose shall be 4 35 reserved for an eligible facility that is a refuse conversion 5 1 facility for processed, engineered fuel from a multicounty 5 2 solid waste management planning area. The maximum amount of 5 3 energy production capacity the board may find eligible for a 5 4 single refuse conversion facility is fifty=five billion 5 5 British thermal units of heat for a commercial purpose. 5 6 6. An owner meeting the requirements of section 476C.1, 5 7 subsection 6, paragraph "b", shall not be an owner of more 5 8 than two eligible renewable energy facilities. A person that 5 9 has an equity interest equal to or greater than fifty=one 5 10 percent in an eligible renewable energy facility shall not 5 11 have an equity interest greater than ten percent in any other 5 12 eligible renewable energy facility. This subsection shall not 5 13 be applicable to a state bank structuring the financing for 5 14 such facilities as membership investments with the state bank 5 15 as an equity investor pursuant to section 524.802, subsection 5 16 13A, or to a manufacturing facility producing renewable energy 5 17 solely for its own use. 5 18 Sec. 15. Section 476C.4, subsection 1, Code 2007, is 5 19 amended by adding the following new paragraph: 5 20 NEW PARAGRAPH. f. For a facility in which renewable 5 21 energy is used for on=site consumption, the requirements of 5 22 paragraphs "c" and "d" shall not be applicable. 5 23 Sec. 16. Section 476C.4, subsection 2, Code 2007, is 5 24 amended to read as follows: 5 25 2. The board shall notify the department of the amount of 5 26 kilowatt=hours, British thermal units of heat for a commercial 5 27 purpose, British thermal units of methane gas or other biogas 5 28 used to generate electricity, or standard cubic feet of 5 29 hydrogen fuel generatedandor purchased from an eligible 5 30 renewable energy facility. The department shall calculate the 5 31 amount of the tax credit for which the applicant is eligible 5 32 and shall issue the tax credit certificate for that amount or 5 33 notify the applicant in writing of its refusal to do so. An 5 34 applicant whose application is denied may file an appeal with 5 35 the department within sixty days from the date of the denial 6 1 pursuant to the provisions of chapter 17A. 6 2 Sec. 17. Section 476C.6, subsection 1, unnumbered 6 3 paragraph 1, Code 2007, is amended to read as follows: 6 4 Renewable energy tax credit certificates issued under this 6 5 chapter may be transferred to any person. A tax credit 6 6 certificate shallonly be transferred oncebe freely 6 7 transferable.However, for purposes of this transfer 6 8 provision, aA decision between a producer and purchaser of 6 9 renewable energy regarding who claims the tax credit issued 6 10 pursuant to this chapter shall not be considered a transfer 6 11 and must be set forth in the application for the tax credit 6 12 pursuant to section 476C.4. Within thirty days of transfer, 6 13 the transferee must submit the transferred tax credit 6 14 certificate to the department along with a statement 6 15 containing the transferee's name, tax identification number, 6 16 and address, and the denomination that each new certificate is 6 17 to carry and any other information required by the department. 6 18 Within thirty days of receiving the transferred tax credit 6 19 certificate and the transferee's statement, the department 6 20 shall issue one or more replacement tax credit certificates to 6 21 the transferee. Each replacement tax credit certificate must 6 22 contain the information required under section 476C.4, 6 23 subsection 3, and must have the same effective taxable year 6 24 and the same expiration date that appeared in the transferred 6 25 tax credit certificate. Tax credit certificate amounts of 6 26 less than the minimum amount established by rule shall not be 6 27 transferable. A tax credit shall not be claimed by a 6 28 transferee under this chapter until a replacement tax credit 6 29 certificate identifying the transferee as the proper holder 6 30 has been issued. The replacement tax credit certificate may 6 31 reflect a different type of tax than the type of tax noted on 6 32 the original tax credit certificate. 6 33 Sec. 18. EFFECTIVE AND APPLICABILITY DATES. This Act, 6 34 being deemed of immediate importance, takes effect upon 6 35 enactment and is retroactively applicable to taxable years 7 1 beginning on or after January 1, 2008, for tax credits issued 7 2 pursuant to this Act. 7 3 EXPLANATION 7 4 This bill provides for acquisition of equity interests in 7 5 renewable energy production facilities by state banks 7 6 financing such facilities for customers, and relates to 7 7 qualification for specified renewable energy tax credits. 7 8 The bill specifies procedures and requirements applicable 7 9 to a state bank structuring the financing of renewable energy 7 10 production facilities as a membership investment with the 7 11 state bank as an equity investor acquiring ownership in the 7 12 facility. 7 13 The bill modifies provisions applicable to qualification 7 14 for the wind energy production tax credit pursuant to Code 7 15 chapter 476B consistent with state bank ownership, and 7 16 provides that projects can qualify for the tax credit whether 7 17 the electricity is sold, as is currently the case, or utilized 7 18 for on=site consumption. The time period during which 7 19 projects placed in service may qualify for tax credits is 7 20 extended from July 1, 2009, to July 1, 2012, and the maximum 7 21 amount of nameplate generating capacity eligible for a credit 7 22 is changed from 450 megawatts to 250 megawatts. 7 23 The bill also modifies provisions applicable to 7 24 qualification for the renewable energy tax credit pursuant to 7 25 Code chapter 476C consistent with state bank ownership, and 7 26 ownership by a manufacturing facility located in this state 7 27 producing renewable energy solely for its own use. The time 7 28 period during which projects placed in service may qualify for 7 29 tax credits is extended from January 1, 2012, to January 1, 7 30 2014. The amount of renewable energy tax credit is adjusted 7 31 in the bill from 1.5 cents per kilowatt=hour of electricity to 7 32 2 cents per kilowatt=hour, and the maximum amount of nameplate 7 33 generating capacity of all wind energy conversion facilities 7 34 eligible is changed from 180 to 360 megawatts of capacity. 7 35 The bill also exempts state banks and manufacturing facilities 8 1 using energy for on=site consumption from restrictions 8 2 regarding the number of facilities which may be owned, and a 8 3 current restriction on transferability of credit certificates 8 4 on a one=time basis is changed to an unlimited number of 8 5 transfers. 8 6 The bill takes effect upon enactment and applies 8 7 retroactively to taxable years beginning on or after January 8 8 1, 2008, with respect to tax credits issued pursuant to the 8 9 bill. 8 10 LSB 5589SS 82 8 11 rn/rj/24