Alternative Energy Manufacturing Tax Credit

The Alternative Energy Manufacturing Tax Credit is a nonrefundable tax credit for up to 100% of new state tax revenues (including state, corporate, sales, and withholding taxes) over the life of a manufacturing project, or 20 years, whichever is less. The actual amount and duration of an incentive is determined by the Governor's Office of Economic Development (GOED) on a case-by-case basis.

Eligible projects include the manufacture of equipment that will utilize hydro, solar, biomass, geothermal, and wind energy to produce electricity. It also includes the manufacture of equipment that will help develop the following non-renewable energy sources: coal-to-liquids, nuclear fuel, oil-impregnated diatomaceous earth, oil sands, oil shale, petroleum coke, and waste heat from an industrial facility  or a power station in which an electric generator is driven by a steam turbine. To qualify for an incentive, the project must generate new state revenue and new incremental jobs, and it also receive incentives from the local government.

To receive a tax credit, manufacturers must first apply to the GOED for a tax credit certificate and provide the documents specified in Utah Code 63N-2-704. If the GOED approves the application and issues a tax credit certificate, it will issue a duplicate copy to the State Tax Commission. To maintain eligibility for the tax credit, project owners must:

• Annually file a report with the GOED showing the new state revenues generated by the alternative energy manufacturing project during the taxable year for which they are seeking to receive a tax credit;
• Submit to an audit for verification of a tax credit;
• Provide the GOED with any information required by the GOED to certify the economic life of the alternative energy project, which may include a power purchase agreement, a lease, or a permit; and
• Retain records supporting a claim for a tax credit for at least four years.

On or before October 1, 2017 and every five years after October 1, 2017, the Revenue and Taxation Interim Committee will study the tax credit and make recommendations to the Legislative Management Committee concerning whether the credit should be continued, modified, or repealed.

Background

H.B. 430, signed in March 2009, created a system for the Governor's Office of Economic Development (GOED), in collaboration with local governments, to provide incentives to renewable energy producers and manufacturers who locate their projects in Utah. Originally titled the Renewable Energy Development Incentive (REDI), the name was changed by S.B. 242 of 2010 to the Alternative Energy Development Incentive (AEDI). In addition to the name change, S.B. 242 expanded eligibility under the program to other forms of "alternative energy" including petroleum coke, shale oil, nuclear fuel, tar sands, and oil-impregnated diatomaceous earth. S.B. 65 of 2012 made several more changes to this credit. The bill removed a requirement that the project must be developed in a state-appointed "alternative energy zone" and designed a separate incentive for the development of alternative energy projects.