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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
renewable energy storage equipment; valuation
Purpose
Exempts renewable energy storage equipment from transaction privilege taxes (TPT), use tax and municipal tax. Prescribes a valuation formula for renewable energy storage equipment.
Background
Renewable energy equipment is electric generation facilities, electric transmission, 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 full cash value (FCV) of renewable energy equipment is 20 percent of the depreciated cost of the equipment, which is the taxable original cost less depreciation (A.R.S. § 42-14155).
Exemptions from the retail classification of TPT and affiliated excise tax and use tax include: 1) the gross proceeds of sales or gross income derived from sales of machinery, equipment or transmission lines used directly in producing or transmitting electrical power, excluding distribution; and 2) transformers and control equipment used at transmission substation sites to produce or transmit electrical power (A.R.S. §§ 42-5061 and 42-5159).
The governing body of a city or town or a county board of supervisors (county BOS) may designate a renewable energy incentive district if the proposed district meets the outlined requirements to accommodate the construction and operation of renewable energy equipment and the proposed district is in a location that would not be incompatible with other uses of property in the area. If a renewable energy incentive district is established, a renewable energy incentive plan must be adopted to encourage the construction and operation of renewable energy equipment in the district (A.R.S. §§ 9-499.14 and 11-254.07).
The Joint Legislative Budget Committee (JLBC) estimated on a mirror measure in 2019 and was unable to determine the fiscal impact. In 2019, the bill would have reduced current revenue collections by providing more favorable TPT and property tax treatment for renewable energy storage equipment. The amount of renewable energy storage equipment purchased in Arizona is unknown and trends towards renewable energy sources will likely increase the purchase of electric storage equipment in future years, which could result in significant future foregone revenues losses not in the existing base. JLBC also estimated that lower property tax payments would increase the cost of Basic State Aid to the state General Fund by $42,000 in FY 2021 (JLBC fiscal note).
Provisions
1. Exempts the gross proceeds of sales or gross income derived from sales of machinery and equipment used directly for energy storage for later electrical use from the TPT imposed on the retail classification.
2. Exempts machinery and equipment used directly for energy storage for later electrical use from use tax.
3. Prohibits a city, town or special taxing district from levying a TPT, sales, use or other similar tax on the gross proceeds of sales or gross income derived from sales of machinery and equipment used directly for energy storage for later electrical use.
4. Sets the FCV of renewable energy storage equipment at 20 percent of the depreciated cost of the equipment.
5. Requires ADOR to determine the FCV of taxable renewable energy storage equipment, in addition to that of renewable energy equipment, through December 31, 2040.
6. Requires ADOR to annually determine the valuation of all property, owned or leased, used in the operation of an energy storage, transmission or distribution system, rather than property used in the operation of an electric transmission or distribution system.
7. Includes the consideration of renewable energy storage equipment by a city or town or a county BOS when designating a renewable energy incentive district.
8. Requires, if a city or town or a county BOS establishes a renewable energy incentive district, the city or town or county BOS to adopt a renewable energy incentive plan to encourage the construction and operation of renewable energy storage equipment, in addition to that of renewable energy equipment, in the district.
9. Specifies
that all energy storage equipment, both collocated with renewable energy and
stand-alone energy storage equipment, qualifies for valuation.
10. Renames renewable energy equipment as renewable energy and storage equipment and includes energy storage in renewable energy and storage equipment.
11. Defines electric utility scale as a person, or a person's equipment supplier, who is engaged in furnishing, or producing and furnishing, natural or artificial gas and water to consumers or who is providing ancillary services, electric distribution services, electric generation services, electric transmission services and other services related to providing electricity to retail electric customers.
12. Defines energy storage as commercially available technology for electric utility scale that uses mechanical, chemical or thermal processes to store energy and that is capable of absorbing energy, storing energy for a period of time and dispatching the energy.
13. Defines machinery and equipment used directly as all machinery and equipment used for electric energy storage from the point of receipt from the grid in order to facilitate storage of the electric energy to the point where electric energy is released to the grid.
14. Applies the definition of taxable original cost to renewable energy storage equipment.
15. Contains a technical conditional enactment.
16. Makes technical and conforming changes.
17. Becomes effective on the general effective date.
House Action
WM 1/29/20 DP 8-2-0-0
3rd Read 2/17/20 49-11-0
Prepared by Senate Research
March 9, 2020
MG/gs