43-1164.05 - Credit for renewable energy investment and production for self-consumption by international operations centers; definitions

43-1164.05. Credit for renewable energy investment and production for self-consumption by international operations centers; definitions

A. A credit is allowed against the taxes imposed by this title for investment in new renewable energy facilities that produce energy for self-consumption using renewable energy resources if the power will be used primarily for an international operations center.

B. The taxpayer is eligible for the credit if all of the following apply:

1. The taxpayer, or a third-party entity on behalf of or for the direct benefit of the taxpayer, invests at least $100,000,000 in one or more new renewable energy facilities in this state that produce energy for self-consumption using renewable energy resources. The minimum investment must be completed within a three-year period beginning on the date the initial application is received or by December 31, 2018, whichever is earlier.

2. A portion of the energy produced at each renewable energy facility is used for self-consumption in this state. By the fifth year a renewable energy facility is in operation, at least fifty-one percent of the energy produced must be used for self-consumption in this state. Self-consumption includes the power used by related entities if the related entities are directly or indirectly under the same ownership interests that collectively own more than eighty percent. Power that a renewable energy facility transfers to a utility or power generated by a utility-owned renewable energy facility developed on behalf of or for the direct benefit of the taxpayer qualifies as self-consumption if the utility is the same utility that provides power to the owner's international operations center in this state.

3. The power that is used for self-consumption under paragraph 2 of this subsection is used for an international operations center in this state. A lessor of an international operations center facility that uses power for self-consumption under paragraph 2 of this subsection satisfies the requirements of this paragraph if the lessee is an international operations center and the power is transferred as part of the lease to the lessee.

C. Subject to subsection F of this section, the credit authorized by this section is $5,000,000 per year for five years for each renewable energy facility. The maximum credit allowed per taxpayer per year is $5,000,000. The taxpayer, including all affiliates of the taxpayer, may not cumulate tax credits under this section over different taxable years exceeding, in the aggregate, $25,000,000. The initial credit for each facility is claimed in the year that the facility becomes operational. A credit, other than carryovers allowed under subsection M of this section, may not be claimed for any taxable year beginning after December 31, 2025. An international operations center that is initially certified pursuant to section 41-1520, subsection C after December 31, 2018 may not claim the tax credit authorized by this section.

D. To qualify as a separate renewable energy facility for the purposes of this section, a facility must be located at least one mile from any other renewable energy facility for which the taxpayer is claiming a credit under this section.

E. To be eligible for the credit under this section, the taxpayer must apply to the department for certification of the credit on a form prescribed by the department. The application shall include:

1. The name, address and social security number or federal employer identification number of the applicant.

2. An estimate of the total investment the taxpayer will make, including investments made by a third-party entity on behalf of or for the direct benefit of the taxpayer, over a three-year period beginning on the date the application is received, in new renewable energy facilities in this state that produce energy for self-consumption using renewable energy resources. For investments made by a third party, a statement from the utility that provides power to the international operations center affirming that the investment in new renewable energy facilities is made on behalf of or for the direct benefit of the taxpayer satisfies the requirement of this paragraph.

3. The expected location of each of the taxpayer's facilities that comprise the total investment in paragraph 2 of this subsection and the earliest date that each facility is expected to be operational.

4. A statement that the portion of the power generated by each facility, as required by subsection B, paragraph 2 of this section, shall be for self-consumption and shall be used for international operations center use.

5. Any additional information that the department requires.

F. The department shall review each application under subsection E of this section and preapprove the taxpayer for a specified amount of credit that is authorized. Credits are allowed under this section on a first-come, first-served basis. The department may not authorize tax credits under this section that exceed in the aggregate a total of $10,000,000 for any calendar year. The portion of each year's limit that is reserved for each taxpayer must be based on the year that each credit is expected to be claimed using the dates provided in subsection E, paragraph 3 of this section. If the year a facility is completed is different from the estimated completion date provided in subsection E, paragraph 3 of this section, the taxpayer must amend the application with the new dates. If an application is received that, if authorized, would require the department to exceed the $10,000,000 limit, the department shall grant the applicant only the remaining credit amount that would not exceed the $10,000,000 limit. After the department authorizes $10,000,000 in tax credits, the department shall deny any subsequent applications that are received for that calendar year. The department may not authorize any additional tax credits that exceed the $10,000,000 limit even if the amounts that have been certified to any taxpayer are not claimed or a taxpayer otherwise fails to meet the requirements to claim the additional credit.

G. If a taxpayer fails to start construction within six months after submitting the application under subsection E of this section, the preapproval issued under subsection F of this section is void and all monies reserved from the limits specified in subsection F of this section revert back to the limit for the year for which they were reserved.

H. Each year after initial preapproval, on or before the anniversary date of the application specified in subsection E of this section, the taxpayer must submit to the department:

1. Documentation of the taxpayer's progress toward the investment required by subsection B, paragraph 1 of this section. This documentation is not required after the department receives a report stating that the required investment threshold has been reached.

2. Documentation for each facility that demonstrates that the required portion of the power generated by each renewable energy facility is for self-consumption as required by subsection B, paragraph 2 of this section.

3. If applicable, certification from the Arizona commerce authority pursuant to section 41-1520.

I. The taxpayer must submit a request for final certification to the department within thirty days after each of the renewable energy facilities for which an authorization was given under subsection F of this section becomes operational. Within thirty days after receiving a completed request under this subsection, the department shall review the request and either issue a final certification of the credit to the taxpayer or issue a denial of the credit if it is determined that the requirements of this section have not been met. Every final certification issued under this subsection must include a facility code issued by the department that is unique to each facility. To show that the facility has been certified, the taxpayer shall include with the tax return the facility code for each facility for which a credit is claimed. If the taxpayer is the owner or operator of an international operations center, the taxpayer must submit the request for final certification for each of the renewable energy facilities for which capital investment will be claimed towards the required investment threshold and must submit additional evidence to the department within sixty days after the end of the fifth year of operation of each facility that the requirements of subsection B, paragraph 2 of this section have been met.

J. If the taxpayer fails to make the required investment in renewable energy facilities within the time period required by subsection B, paragraph 1 of this section or if the certification of an international operations center has been revoked under section 41-1520 due to a failure to make a $1,250,000,000 investment in the center within ten years after certification or if the taxpayer fails to receive final certification of the credit under subsection I of this section, the taxpayer is not eligible and must cease claiming any further credits under this section and shall reimburse the amount of all credits previously received under this section. The reimbursement must be made on the taxpayer's income tax return for the taxable year in which it is first known that the required investment would not be made within the required time or the taxable year in which the certification was revoked. The department may give special consideration or allow a temporary exemption from reimbursement if there is extraordinary hardship due to factors beyond the taxpayer's control. If the reimbursement is due to revocation of the certification of an international operations center due to a failure to invest $1,250,000,000 in the center within ten years after certification, the credits shall be reimbursed in inverse proportion to the total capital investment made in the international operations center divided by $1,250,000,000. The department may require reimbursement before the tenth anniversary of certification of an international operations center if the facility has been closed or relocated or the taxpayer has otherwise demonstrated that the $1,250,000,000 investment will not be timely made. For taxpayers using investments made by third-party entities on behalf of or for the direct benefit of the taxpayer, the investment threshold is $1,500,000,000. A third-party entity may not include the owner or operator of the international operations center or, solely for the purposes of this subsection, the owner's or operator's affiliated entities.

K. If a particular facility ceases to meet the requirements of this section or if the facility is sold, the taxpayer may not claim any future credits related to that facility.

L. Co-owners of a business, including corporate partners in a partnership and corporate members of a limited liability company treated as a partnership, may each claim the pro rata share of the credit allowed under this section based on ownership interest. Only co-owners that are corporations may claim a share of the credit allowed under this section. The total of the credits allowed all the owners of the business may not exceed the amount that would have been allowed for a sole owner of the business.

M. If the allowable tax credit for a taxpayer exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the amount of the claim not used to offset taxes under this title may be carried forward for not more than five consecutive taxable years as a credit against subsequent years' income tax liability.

N. A taxpayer may not claim a credit under this section and section 43-1164.03 regarding the same facilities.

O. The department shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate the purposes of this section.

P. For the purposes of this section:

1. "Biomass" means organic material that is available on a renewable or recurring basis, including:

(a) Forest-related materials, including mill residues, logging residues, forest thinnings, slash, brush, low-commercial value materials or undesirable species, salt cedar and other phreatophyte or woody vegetation removed from river basins or watersheds and woody material harvested for the purpose of forest fire fuel reduction or forest health and watershed improvement.

(b) Agricultural-related materials, including orchard trees, vineyard, grain or crop residues, including straws and stover, aquatic plants and agricultural processed coproducts and waste products, including fats, oils, greases, whey and lactose.

(d) Solid woody waste materials, including landscape or right-of-way tree trimmings, rangeland maintenance residues, waste pallets, crates and manufacturing, construction and demolition wood wastes but excluding pressure-treated, chemically treated or painted wood wastes and wood contaminated with plastic.

(e) Crops and trees planted for the purpose of being used to produce energy.

(f) Landfill gas, wastewater treatment gas and biosolids, including organic waste by-products generated during the wastewater treatment process.

2. "International operations center" means a facility that is certified by the Arizona commerce authority pursuant to section 41-1520.

3. "Renewable energy facility" means a facility in which the taxpayer, or a third-party entity on behalf of and for the benefit of the taxpayer, invested at least $30,000,000, that has at least twenty megawatts generating capacity or a minimum typical annual generation of forty thousand megawatt hours, that is located on land in this state owned or leased by the taxpayer or a third-party entity on behalf of and for the benefit of the taxpayer and that produces electricity using a renewable energy resource.

4. "Renewable energy resource" means a resource that generates electricity through the use of only the following energy sources:

(a) Solar light.

(b) Solar heat.

(d) Biomass, including fuel cells supplied directly or indirectly with biomass generated fuels.

(e) Battery storage that is independent from or coupled with other sources.