Senate Study Bill 3226 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM) A BILL FOR An Act relating to the administration of the replacement tax 1 for new cogeneration facilities, and including effective 2 date and retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 6167XC (4) 83 rn/rj
S.F. _____ Section 1. Section 437A.3, subsection 1, Code Supplement 1 2009, is amended by adding the following new unnumbered 2 paragraph: 3 NEW UNNUMBERED PARAGRAPH . For new cogeneration facilities, 4 the assessed value shall be determined as provided in section 5 437A.16A. 6 Sec. 2. Section 437A.3, subsection 4, Code Supplement 2009, 7 is amended to read as follows: 8 4. a. “Cogeneration facility” means a facility with a 9 capacity of two hundred megawatts or less that uses the same 10 energy source for the sequential generation of electrical or 11 mechanical power in combination with steam, heat, or other 12 forms of useful energy and, except for ownership, meets the 13 criteria to be a qualifying cogeneration facility as defined in 14 the federal Public Utility Regulatory Policies Act of 1978, 16 15 U.S.C. § 2601 et seq., and related federal regulations. 16 b. “New cogeneration facility” means any of the following: 17 (1) A cogeneration facility, regardless of capacity, which 18 is first placed into service on or after January 1, 2009, that 19 uses the same energy source for the sequential generation of 20 electrical or mechanical power in combination with steam, heat, 21 or other forms of useful energy and meets the criteria to be 22 a qualifying cogeneration facility as defined in the federal 23 Public Utility Regulatory Policies Act of 1978, 16 U.S.C § 2601 24 et seq., and related federal regulations. 25 (2) A cogeneration facility in service prior to January 1, 26 2009, that became subject to the replacement generation tax 27 under section 437A.6 for the first time on or after January 1, 28 2009. 29 Sec. 3. Section 437A.3, subsection 11, paragraph b, 30 subparagraphs (1) and (2), Code Supplement 2009, are amended 31 to read as follows: 32 (1) An electric power generating plant that is owned 33 by or leased to an electric company, electric cooperative, 34 or municipal utility , or any other taxpayer , and that initially 35 -1- LSB 6167XC (4) 83 rn/rj 1/ 8
S.F. _____ generates electricity subject to replacement generation tax 1 under section 437A.6 on or after January 1, 2003. 2 (2) An electric power generating plant that is owned 3 by or leased to an electric company, electric cooperative, 4 or municipal utility , or any other taxpayer , that initially 5 generated electricity subject to replacement generation tax 6 under section 437A.6 before January 1, 2003, and that is sold, 7 leased, or transferred, in full or in part, on or after January 8 1, 2003. If any portion of an electric power generating plant 9 is sold, the entire plant shall be treated as if it were a new 10 electric power generating plant. 11 Sec. 4. Section 437A.5, subsection 1, paragraph c, 12 unnumbered paragraph 3, Code 2009, is amended to read as 13 follows: 14 If the new electric power generating plant is part of a 15 cogeneration facility or new cogeneration facility , the natural 16 gas delivery rate for that plant shall be the lesser of the 17 natural gas delivery rate established in this paragraph “c” or 18 the rate per therm of natural gas as in effect at the time of 19 the initial natural gas deliveries to the plant for the natural 20 gas competitive service area where the new electric power 21 generating plant is located. 22 Sec. 5. Section 437A.8, subsection 4, paragraph d, Code 23 2009, is amended by adding the following new unnumbered 24 paragraph: 25 NEW UNNUMBERED PARAGRAPH . If a taxpayer has paid an amount 26 of replacement tax, penalty, or interest which was deposited 27 into the property tax relief fund and which was not due, all 28 of the provisions of section 437A.14, subsection 1, paragraph 29 “b” , shall apply with regard to any claim for refund or credit 30 filed by the taxpayer. The director shall have sole discretion 31 as to whether the erroneous payment will be refunded to the 32 taxpayer or credited against any replacement tax due, or to 33 become due, from the taxpayer that would be subject to deposit 34 in the property tax relief fund. 35 -2- LSB 6167XC (4) 83 rn/rj 2/ 8
S.F. _____ Sec. 6. Section 437A.15, subsection 7, paragraph b, Code 1 Supplement 2009, is amended to read as follows: 2 b. The task force shall study the effects of the replacement 3 tax on local taxing authorities, local taxing districts, 4 consumers, and taxpayers through January 1, 2010 2013 . If the 5 task force recommends modifications to the replacement tax that 6 will further the purposes of tax neutrality for local taxing 7 authorities, local taxing districts, taxpayers, and consumers, 8 consistent with the stated purposes of this chapter, the 9 department of management shall transmit those recommendations 10 to the general assembly. 11 Sec. 7. NEW SECTION . 437A.16A New cogeneration facilities. 12 1. a. Except as otherwise provided by this chapter, the 13 property of a new cogeneration facility subject to replacement 14 tax that is primarily and directly used in the production, 15 generation, transmission, or delivery of electricity shall be 16 exempt from taxation by means of applying a credit, as computed 17 in this section, representing the value of this exempt property 18 against the assessed value of the entire new cogeneration 19 facility as determined by the local assessor under the 20 provisions of chapters 427, 427A, 427B, 428, 441, and any other 21 applicable abatement and exemption provisions under this Code. 22 b. Following the March 31 due date for the replacement 23 tax return as required by section 437A.8, the director shall 24 annually determine the assessed value of the new cogeneration 25 facility exempt property by dividing the prior year’s 26 replacement tax liability attributable to that facility by 27 the current fiscal year’s consolidated taxing district rate 28 for the taxing district where the facility is located, then 29 multiplying the quotient by one thousand. The director shall 30 certify this value to the local assessor on or before April 10 31 of the current calendar year. The assessor shall apply this 32 certified value as a credit against the total assessed value of 33 the facility. The allowable credit shall not exceed the total 34 value of the new cogeneration facility as determined by the 35 -3- LSB 6167XC (4) 83 rn/rj 3/ 8
S.F. _____ local assessor for the assessment year and any excess credits 1 shall not be applied to any other assessment year. 2 c. A credit shall not be applied to a new cogeneration 3 facility for the first year the facility becomes subject to the 4 replacement tax if it first became subject to the replacement 5 tax after January 1 of that year. For the first year in which 6 the new cogeneration facility is subject to the replacement 7 tax as of January 1 of that year, the taxpayer shall estimate 8 the total replacement taxes due for that year and report that 9 estimate to the director by March 31, and the director shall 10 base the determination of assessed value from that estimate. 11 If the estimate varies by more than five percent from the 12 actual replacement tax liability for the year in which the 13 facility was first subject to the replacement tax as of January 14 1, the director shall adjust the next year’s assessed value 15 calculation by increasing or decreasing the current replacement 16 tax calculation to reflect the difference between the estimate 17 and the actual replacement tax owed for the year in which the 18 facility was first subject to replacement tax as of January 1. 19 2. The director shall classify each new cogeneration 20 facility as a separate taxpayer for reporting purposes and 21 shall allocate the entire replacement tax attributable to the 22 new cogeneration facility to the local taxing district or 23 districts where that facility is located. The assessed value 24 of the exempt property of the new cogeneration facility shall 25 be the basis for determining the statewide property tax imposed 26 by section 437A.18. 27 3. Any cogeneration facility placed in service prior to 28 January 1, 2009, that did not qualify as a self-generator under 29 subsection 437A.3, subsection 27, as of January 1, 2009, shall 30 be subject exclusively to the replacement tax. 31 Sec. 8. Section 437A.18, Code 2009, is amended to read as 32 follows: 33 437A.18 Tax imposition. 34 An annual statewide property tax of three cents per one 35 -4- LSB 6167XC (4) 83 rn/rj 4/ 8
S.F. _____ thousand dollars of assessed value is imposed upon all property 1 described in section sections 437A.16 and 437A.16A on the 2 assessment date of January 1. 3 Sec. 9. Section 437A.19, subsection 1, paragraph a, Code 4 Supplement 2009, is amended by adding the following new 5 subparagraph: 6 NEW SUBPARAGRAPH . (8) Any gas or transmission property 7 at acquisition cost of more than one million dollars that was 8 transferred or disposed of in the preceding calendar year by 9 local taxing district. 10 Sec. 10. Section 437A.19, subsection 2, paragraph e, Code 11 Supplement 2009, is amended to read as follows: 12 e. In addition to reporting the assessed values as described 13 in this subsection, the director, on or before October 31 of 14 each assessment year, shall also report to the department 15 of management and to the auditor of each county the taxable 16 value of taxpayer property as of January 1 of such assessment 17 year for each local taxing district. For purposes of this 18 chapter, “taxable value” means the value for all property 19 subject to the replacement tax annually determined by the 20 director, by dividing the estimated annual replacement tax 21 liability for that property by the prior current fiscal year’s 22 consolidated taxing district rate for the taxing district 23 where that property is located, then multiplying the quotient 24 by one thousand. A taxpayer who paid more than five hundred 25 thousand dollars in replacement tax in the previous tax year 26 or who believes their the taxpayer’s replacement tax liability 27 will vary more than ten percent from the previous tax year 28 shall report to the director by October 1 of the current 29 calendar year, on forms prescribed by the director, the 30 estimated replacement tax liability that will be attributable 31 to all of the taxpayer’s property subject to replacement 32 tax for the current tax year. The department shall utilize 33 the estimated replacement tax liability as reported by the 34 taxpayer or the taxpayer’s prior year’s replacement tax 35 -5- LSB 6167XC (4) 83 rn/rj 5/ 8
S.F. _____ amounts to estimate the current tax year’s taxable value for 1 that property. Furthermore, a taxpayer who has a new major 2 addition of operating property which is put into service for 3 the first time in the current calendar year shall report to 4 the director by October 1 of the current calendar year, or at 5 the time the major addition is put into service, whichever 6 time is later, on forms prescribed by the director, the cost 7 of the major addition and, if not previously reported, shall 8 report the estimated replacement taxes which that asset will 9 generate in the current calendar year. For the purposes of 10 computing the taxable value of property in a taxing district, 11 the taxing district’s share of the estimated replacement tax 12 liability shall be the taxing district’s percentage share of 13 the “assessed value allocated by property tax equivalent” 14 multiplied by the total estimated replacement tax. “Assessed 15 value allocated by property tax equivalent” shall be determined 16 by dividing the taxpayer’s current year assessed valuation in a 17 taxing district by one thousand, and then multiplying by the 18 prior year’s consolidated tax rate. 19 Sec. 11. EFFECTIVE DATE AND RETROACTIVE APPLICABILITY. 20 This Act, being deemed of immediate importance, takes effect 21 upon enactment and applies retroactively to January 1, 2010, 22 for tax years beginning on or after that date. 23 EXPLANATION 24 This bill modifies provisions relating to the imposition of 25 a replacement tax on electricity and natural gas providers. 26 Code chapter 437A imposes a replacement tax on electric 27 companies, natural gas companies, electric cooperatives, and 28 municipal utilities in lieu of property taxes which would 29 otherwise be payable, which operates to remove tax costs 30 as a factor in a competitive environment by imposing like 31 generation, transmission, and delivery taxes on similarly 32 situated competitors who generate, transmit, or deliver 33 electricity or natural gas in the same competitive service 34 area. 35 -6- LSB 6167XC (4) 83 rn/rj 6/ 8
S.F. _____ The Code chapter currently defines a cogeneration facility 1 to mean a facility with a capacity of 200 megawatts or less 2 that uses the same energy source for the sequential generation 3 of electrical or mechanical power in combination with 4 steam, heat, or other forms of useful energy and, except for 5 ownership, meets specified federal criteria. The bill adds a 6 definition of new cogeneration facility which conforms to this 7 existing definition, but without limitation as to generation 8 capacity, and is applicable to a facility which is first placed 9 into service on or after January 1, 2009, or to a facility in 10 service prior to January 1, 2009, which first became subject to 11 the replacement generation tax on or after January 1, 2009. 12 The bill provides a means for allocating the assessed value 13 of a new cogeneration facility between property of the facility 14 that is subject to local assessment and the property of the 15 facility that is subject to the replacement tax, and to exempt 16 from property tax the value of the property subject to the 17 replacement tax by applying a credit representing the value of 18 such exempt property against the total value of the facility. 19 The bill modifies provisions relating to determination of the 20 natural gas delivery rate applicable to new electric power 21 generating plants to include a new cogeneration facility, and 22 amends Code section 437A.18 to apply the statewide property tax 23 to property of a new cogeneration facility. 24 Additionally, the bill adds to the definition of an electric 25 power generating plant that such a plant may be owned by or 26 leased to “any other taxpayer”, in addition to an electric 27 company, electric cooperative, or municipal utility. The 28 bill provides a mechanism for refunding or crediting excess 29 replacement taxes, penalties, and interest paid into the 30 property tax relief fund established in Code section 426B.1 31 by a new electric power generating plant, applying existing 32 provisions regarding claims for refunds and credits contained 33 in Code section 437A.14 and stating that the director of 34 revenue shall have sole discretion regarding whether a refund 35 -7- LSB 6167XC (4) 83 rn/rj 7/ 8
S.F. _____ will be paid versus a credit granted. 1 The bill extends the time period during which the utility 2 replacement tax task force is in existence for an additional 3 three years, with the committee continuing to study the effects 4 of the replacement tax on local taxing authorities, local 5 taxing districts, consumers, and taxpayers through January 1, 6 2013. The bill requires taxpayers to report to the director 7 any gas or transmission property that had been acquired at a 8 cost of more than $1 million and disposed of in the preceding 9 calendar year. The bill also provides, with reference to 10 determining and reporting the taxable value of property subject 11 to the replacement tax, that calculations will utilize the 12 current fiscal year’s consolidated taxing district rate for the 13 taxing district where the property is located, rather than the 14 prior fiscal year’s rate under current law. 15 The bill takes effect upon enactment and applies 16 retroactively to tax years beginning on or after January 1, 17 2010. 18 -8- LSB 6167XC (4) 83 rn/rj 8/ 8