Committee Substitute for sb0237cos

SENATE CONSERVATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 237

49th legislature - STATE OF NEW MEXICO - first session, 2009

AN ACT

RELATING TO TAXATION; PROVIDING INCOME TAX CREDITS FOR INTERESTS IN GEOTHERMAL, SOLAR THERMAL AND SOLAR PHOTOVOLTAIC ELECTRIC GENERATING FACILITIES; CLARIFYING APPLICATION OF THE ADVANCED ENERGY TAX CREDITS TO PERSONS WITH LEASEHOLD OR PARTIAL INTERESTS IN CERTAIN ADVANCED ENERGY GENERATING FACILITIES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] ADVANCED ENERGY INCOME TAX CREDIT.--

A. The tax credit that may be claimed pursuant to this section may be referred to as the "advanced energy income tax credit".

B. A taxpayer who holds an interest in a qualified generating facility and who files an individual New Mexico income tax return may claim an advanced energy income tax credit in an amount equal to no more than six percent of the eligible generation plant costs of a qualified generating facility, subject to the limitations imposed in this section.

C. To claim the advanced energy income tax credit, a taxpayer shall submit with the taxpayer's New Mexico income tax return a certificate of eligibility from the department of environment stating that the facility in which the taxpayer holds a proportionate interest in a qualified generating facility and the taxpayer may be eligible for advanced energy tax credits. The taxation and revenue department shall determine the amount of advanced energy income tax credit for which the taxpayer may apply.

D. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the advanced energy income tax credit that would have been allowed on a joint return.

E. A taxpayer who otherwise qualifies and claims an advanced energy income tax credit and who is a member of a partnership or owns interest in an entity that is a qualified generating facility may claim the advanced energy income tax credit only in relation to the taxpayer's interest in the partnership or entity. The total advanced energy income tax credit claimed by all members of the partnership or all of the owners of the entity shall not exceed the proportionate interest allowed by the department for that partnership or entity. The total amount of all advanced energy tax credits claimed shall not exceed the total amount determined by the department to be allowable pursuant to this section, the Corporate Income and Franchise Tax Act and Section 7-9G-2 NMSA 1978.

F. Any balance of the advanced energy income tax credit that the taxpayer is approved to claim may be claimed by the taxpayer as an advanced energy combined reporting tax credit allowed pursuant to Section 7-9G-2 NMSA 1978. If the advanced energy income tax credit exceeds the amount of the taxpayer's tax liabilities pursuant to the Income Tax Act and Section 7-9G-2 NMSA 1978 in the taxable year in which it is claimed, the balance of the unpaid credit may be carried forward for ten years. The advanced energy income tax credit is not refundable.

G. A taxpayer claiming the advanced energy income tax credit pursuant to this section is ineligible for credits pursuant to the Investment Credit Act or any other credit that may be taken pursuant to the Income Tax Act or credits that may be taken against the gross receipts tax, compensating tax or withholding tax for the same expenditures.

H. The aggregate amount of all advanced energy tax credits that may be claimed with respect to a qualified generating facility shall not exceed sixty million dollars ($60,000,000).

I. As used in this section:

(1) "advanced energy tax credit" means the advanced energy income tax credit, the advanced energy corporate income tax credit and the advanced energy combined reporting tax credit;

(2) "eligible generation plant costs" means expenditures for the development and construction of a qualified generating facility, including permitting; site characterization and assessment; engineering; design; carbon dioxide capture, treatment, compression, transportation and sequestration; site and equipment acquisition; and fuel supply development used directly and exclusively in a qualified generating facility;

(3) "entity" means an individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, limited liability partnership, joint venture, syndicate or other association or a gas, water or electric utility owned or operated by a county or municipality;

(4) "geothermal electric generating facility" means a facility with a name-plate capacity of one megawatt or more that uses geothermal energy to generate electricity, including a facility that captures and provides geothermal energy to a preexisting electric generating facility using other fuels in part;

(5) "interest in a qualified generating facility" means title to a qualified generating facility; a leasehold interest in a qualified generating facility; an ownership interest in a business or entity that is taxed for federal income tax purposes as a partnership that holds title to or a leasehold interest in a qualified generating facility; or an ownership interest, through one or more intermediate entities that are each taxed for federal income tax purposes as a partnership, in a business that holds title to or a leasehold interest in a qualified generating facility;

(6) "name-plate capacity" means the maximum rated output of the facility measured as alternating current or the equivalent direct current measurement;

(7) "proportionate interest" means a taxpayer's direct and indirect ownership in the leasehold or any other interest in a qualified generating facility, provided that:

(a) the total of all interests of taxpayers claiming advanced energy tax credits for the same qualified generating facility shall not exceed one hundred percent; and

(b) in the case where a leasehold interest in a qualified generating facility is less than one hundred percent of the interests claimed, the taxpayers holding leasehold and nonleasehold interests shall apportion the interests for purposes of applying for an advanced energy tax credit so that all proportionate interests when totaled equal one hundred percent;

(8) "qualified generating facility" means a new solar electric generating facility that begins construction on or after July 1, 2007 and that may include an associated renewable energy storage facility; a new geothermal electric generating facility that begins construction on or after July 1, 2009; or a recycled energy project if that facility or project begins construction no later than December 31, 2015; "qualified generating facility" also includes a new or repowered coal-based electric generating unit and an associated coal gasification facility, if any, that begins construction no later than December 31, 2015 that meets the following specifications:

(a) emits the lesser of: 1) what is achievable with the best available control technology; or 2) thirty-five thousandths pound per million British thermal units of sulfur dioxide, twenty-five thousandths pound per million British thermal units of oxides of nitrogen and one hundredth pound per million British thermal units of total particulates in the flue gas;

(b) removes the greater of: 1) what is achievable with the best available control technology; or 2) ninety percent of the mercury from the input fuel;

(c) captures and sequesters or controls carbon dioxide emissions so that by the later of January 1, 2017 or eighteen months after the commercial operation date of the qualified generating facility, no more than one thousand one hundred pounds per megawatt-hour of carbon dioxide is emitted into the atmosphere; (d) all infrastructure required for sequestration is in place by the later of January 1, 2017 or eighteen months after the commercial operation date of the qualified generating facility;

(e) includes methods and procedures to monitor the disposition of the carbon dioxide captured and sequestered from the facility; and (f) does not exceed seven hundred net megawatts name-plate capacity;

(9) "recycled energy" means energy produced by a generation unit with a name-plate capacity of not more than fifteen megawatts that converts the otherwise lost energy from the exhaust stacks or pipes to electricity without combustion of additional fossil fuel; (10) "sequester" means to store, or chemically convert, carbon dioxide in a manner that prevents its release into the atmosphere and may include the use of geologic formations and enhanced oil, coalbed methane or natural gas recovery techniques; and

(11) "solar electric generating facility" means a solar thermal or solar photovoltaic electric generating facility with a name-plate capacity of one megawatt or more that uses solar energy to generate electricity, including a facility that captures and provides solar energy to a preexisting electric generating facility using other fuels in part."

Section 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] ADVANCED ENERGY CORPORATE INCOME TAX CREDIT.--

A. The tax credit that may be claimed pursuant to this section may be referred to as the "advanced energy corporate income tax credit".

B. A taxpayer that holds an interest in a qualified generating facility and that files a New Mexico corporate income tax return may claim an advanced energy corporate income tax credit in an amount equal to no more than six percent of the eligible generation plant costs of a qualified generating facility, subject to the limitations imposed in this section.

C. To claim the advanced energy corporate income tax credit, a taxpayer shall submit with the taxpayer's New Mexico corporate income tax return a certificate of eligibility from the department of environment stating that the taxpayer holds a proportionate interest in a qualified generating facility and the taxpayer may be eligible for advanced energy tax credits. The taxation and revenue department shall determine the amount of advanced energy corporate income tax credit for which the taxpayer may apply.

D. A taxpayer that otherwise qualifies and claims an advanced energy corporate income tax credit and that is a member of a partnership or owns interest in an entity that is a qualified generating facility may claim the advanced energy corporate income tax credit only in relation to the taxpayer's interest in the partnership or entity. The total advanced energy corporate income tax credit claimed by all members of the partnership or all of the owners of the entity shall not exceed the proportionate interest allowed by the department for that partnership or entity. The total amount of all advanced energy tax credits claimed shall not exceed the total amount determined by the department to be allowable pursuant to this section, the Income Tax Act and Section 7-9G-2 NMSA 1978.

E. Any balance of the advanced energy corporate income tax credit that the taxpayer is approved to claim may be claimed by the taxpayer as an advanced energy combined reporting tax credit allowed pursuant to Section 7-9G-2 NMSA 1978. If the advanced energy corporate income tax credit exceeds the amount of the taxpayer's tax liabilities pursuant to the Corporate Income and Franchise Tax Act and Section 7-9G-2 NMSA 1978 in the taxable year in which it is claimed, the balance of the unpaid credit may be carried forward for ten years. The advanced energy corporate income tax credit is not refundable.

F. A taxpayer claiming the advanced energy corporate income tax credit pursuant to this section is ineligible for credits pursuant to the Investment Credit Act or any other credit that may be taken pursuant to the Corporate Income and Franchise Tax Act or credits that may be taken against the gross receipts tax, compensating tax or withholding tax for the same expenditures.

G. The aggregate amount of all advanced energy tax credits that may be claimed with respect to a qualified generating facility shall not exceed sixty million dollars ($60,000,000).

H. As used in this section:

(1) "advanced energy tax credit" means the advanced energy income tax credit, the advanced energy corporate income tax credit and the advanced energy combined reporting tax credit;

(6) "name-plate capacity" means the maximum rated output of the facility measured as alternating current or the equivalent direct current measurement;

(7) "proportionate interest" means a taxpayer's direct and indirect ownership in a leasehold or any other interest in a qualified generating facility, provided that:

(a) the total of all interests of taxpayers claiming advanced energy tax credits for the same qualified generating facility shall not exceed one hundred percent; and

(b) removes the greater of: 1) what is achievable with the best available control technology; or 2) ninety percent of the mercury from the input fuel;

Section 3. Section 7-9G-2 NMSA 1978 (being Laws 2007, Chapter 229, Section 1) is amended to read:

"7-9G-2. ADVANCED ENERGY COMBINED REPORTING TAX CREDIT--GROSS RECEIPTS TAX--COMPENSATING TAX--WITHHOLDING TAX.--

A. Except as otherwise provided in this section, a taxpayer that holds an interest in a qualified generating facility located in New Mexico may claim a credit to be computed pursuant to the provisions of this section. The credit provided by this section may be referred to as the "advanced energy combined reporting tax credit".

B. As used in this section:

(1) "advanced energy tax credit" means the advanced energy income tax credit, the advanced energy corporate income tax credit and the advanced energy combined reporting tax credit;

[(1)] (2) "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

[(2)] (3) "eligible generation plant costs" means expenditures for the development and construction of a qualified generating facility, including permitting; site characterization and assessment; engineering; design; carbon dioxide capture, treatment, compression, transportation and sequestration; site and equipment acquisition; and fuel supply development used directly and exclusively in a qualified generating facility;

(4) "entity" means an individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, limited liability company, limited liability partnership, joint venture, syndicate or other association or a gas, water or electric utility owned or operated by a county or municipality;

(5) "geothermal electric generating facility" means a facility with a name-plate capacity of one megawatt or more that uses geothermal energy to generate electricity, including a facility that captures and provides geothermal energy to a preexisting electric generating facility using other fuels in part;

(6) "gross receipts tax due to the state" means the taxpayer's taxable gross receipts for the reporting period multiplied by an amount equal to the difference between the gross receipts tax rate specified in Section 7-9-4 NMSA 1978 for the period and:

(a) if the taxpayer's business location is described in Subsection A of Section 7-1-6.4 NMSA 1978, one and two hundred twenty-five thousandths percent; and

(b) if the taxpayer's business location is not described in Subsection A of Section 7-1-6.4 NMSA 1978, by the gross receipts tax rate specified in Section 7-9-4 NMSA 1978 for the period;

(7) "interest in a qualified generating facility" means title to a qualified generating facility; a leasehold interest in a qualified generating facility; an ownership interest in a business or entity that is taxed for federal income tax purposes as a partnership that holds title to or a leasehold interest in a qualified generating facility; or an ownership interest, through one or more intermediate entities that are each taxed for federal income tax purposes as a partnership, in a business that holds title to or a leasehold interest in a qualified generating facility;

(8) "name-plate capacity" means the maximum rated output of the facility measured as alternating current or the equivalent direct current measurement;

(9) "proportionate interest" means a taxpayer's direct and indirect ownership in the leasehold or any other interest in a qualified generating facility, provided that:

(a) the total of all interests of taxpayers claiming advanced energy combined reporting tax credits for the same qualified generating facility shall not exceed one hundred percent; and

(b) in the case where a leasehold interest in a qualified generating facility is less than one hundred percent of the interests claimed, the taxpayers holding leasehold and nonleasehold interests shall apportion the interests for purposes of applying for an advanced energy combined reporting tax credit so that all proportionate interests when totaled equal one hundred percent;

[(3)] (10) "qualified generating facility" means a new solar [thermal] electric generating facility that begins construction on or after July 1, 2007 and that may include an associated renewable energy storage facility; a new geothermal electric generating facility that begins construction on or after July 1, 2009; or a recycled energy [projects that] project if that facility or project begins construction no later than December 31, 2015 [or]. "Qualified generating facility" also includes a new or re-powered coal-based electric generating unit and an associated coal gasification facility, if any, that begins construction no later than December 31, 2015 that meets the following specifications:

(b) removes the greater of: 1) what is achievable with the best available control technology; or 2) ninety percent of the mercury from the input fuel;

[(4)] (11) "recycled energy" means energy produced by a generation unit with a name-plate capacity of not more than fifteen megawatts that converts the otherwise lost energy from the exhaust stacks or pipes to electricity without combustion of additional fossil fuel; [and

(5)] (12) "sequester" means to store, or chemically convert, carbon dioxide in a manner that prevents its release into the atmosphere and may include the use of geologic formations and enhanced oil, coalbed methane or natural gas recovery techniques; and

(13) "solar electric generating facility" means a solar thermal or solar photovoltaic electric generating facility with a name-plate capacity of one megawatt or more that uses solar energy to generate electricity, including a facility that captures and provides solar energy to a preexisting electric generating facility using other fuels in part.

C. Subject to the limit imposed in Subsection H of this section, the advanced energy combined reporting tax credit with respect to a qualified generating facility shall equal no more than six percent of the eligible generation plant costs of [a] the qualified generating facility. Taxpayers eligible to claim an advanced energy combined reporting tax credit holding proportionate interests in the qualified generating facility shall designate an individual to report annually to the department. That designated individual shall report the eligible generation plant costs incurred during the calendar year and the proportionate interest of those costs attributed to each eligible interest holder. The taxpayers shall submit a copy of the proportionate interests attributed to each interest holder to the department, and any change to the apportioned proportionate interests shall be submitted to the department. The designated person and the department may identify a mutually acceptable reporting schedule.

D. A taxpayer may apply for the advanced energy combined reporting tax credit by submitting to the taxation and revenue department a certificate issued by the department of environment pursuant to Subsection I of this section, documentation showing the taxpayer's proportionate interest [in the qualified generating facility] identified in the certificate, documentation of all eligible generation plant costs incurred by the taxpayer prior to the date of the application by the taxpayer for the advanced energy combined reporting tax credit and any other information the taxation and revenue department requests to determine the amount of tax credit due to the taxpayer.

E. A taxpayer having applied for and been granted approval [for a] to claim an advanced energy combined reporting tax credit by the department pursuant to this section may claim an amount of available credit against the taxpayer's gross receipts tax, compensating tax or withholding tax due to the state. Any balance of the advanced energy combined reporting tax credit that the taxpayer is approved to claim after applying that tax credit against the taxpayer's gross receipts tax, compensating tax or withholding tax liabilities may be claimed by the taxpayer against the taxpayer's tax liability pursuant to the Income Tax Act by claiming an advanced energy income tax credit or pursuant to the Corporate Income and Franchise Tax Act by claiming an advanced energy corporate income tax credit. The advanced energy combined reporting tax credit is not refundable. The total amount of tax credit claimed pursuant to this section, when combined with the tax credits claimed pursuant to the Income Tax Act and the Corporate Income and Franchise Tax Act, shall not exceed the amount approved by the department for the taxpayer's interest in the qualified generating facility.

F. A taxpayer that is liable for the payment of gross receipts or compensating tax with respect to the ownership, development, construction, maintenance or operation of a new coal-based electric generating facility that does not meet the criteria for a qualified generating facility and that begins construction after January 1, 2007 shall not claim an advanced energy tax combined reporting credit pursuant to this section or a gross receipts tax credit, a compensating tax credit or a withholding tax credit pursuant to any other state law.

G. If the amount of the tax credit claimed exceeds the taxpayer's liability, the excess may be carried forward for up to [five] ten years.

H. The aggregate amount of tax credit that may be claimed with respect to each qualified generating facility shall not exceed sixty million dollars ($60,000,000).

I. An entity that holds [title to] an interest in a qualified generating facility may request a certificate of eligibility from the department of environment to enable the requester to apply for the advanced energy combined reporting tax credit. The department of environment:

(1) shall determine if the facility is a qualified generating facility;

(2) shall require that the requester provide the department of environment with the information necessary to assess whether the requester's facility meets the criteria to be a qualified generating facility;

(3) shall issue a certificate to the requester stating that the facility is or is not a qualified generating facility within one hundred eighty days after receiving all information necessary to make a determination;

(4) shall:

(a) issue rules governing the procedure for administering the provisions of this subsection and Subsection J of this section;

(b) issue a schedule of fees in which no fee exceeds one hundred fifty thousand dollars ($150,000); and

(c) deposit fees collected pursuant to this paragraph in the state air quality permit fund created pursuant to Section 74-2-15 NMSA 1978; and

(5) shall report annually to the appropriate interim legislative committee information that will allow the legislative committee to analyze the effectiveness of the advanced energy tax [credit] credits, including the identity of qualified generating facilities, the energy production means used, the amount of emissions identified in this section reduced and removed by those qualified generating facilities and whether any requests for certificates of eligibility could not be approved due to program limits.

J. If the department of environment issues a certificate of eligibility to a taxpayer stating that the taxpayer [is] holds an interest in a qualified generating facility and the taxpayer does not sequester or control carbon dioxide emissions to the extent required by this section by the later of January 1, 2017 or eighteen months after the commercial operation date of the qualified generating facility, the taxpayer's certification as a qualified generating facility shall be revoked by the department of environment and the taxpayer shall [refund] repay to the state tax credits granted pursuant to this section; provided that if the taxpayer demonstrates to the department of environment that the taxpayer made every effort to sequester or control carbon dioxide emissions to the extent feasible and the facility's inability to meet the sequestration requirements of a qualified generating facility was beyond the facility's control, in which case the department of environment shall determine, after a public hearing, the amount of the tax credit that should be [refunded] repaid to the state. The department of environment, in its determination, shall consider the environmental performance of the facility and the extent to which the inability to meet the sequestration requirements of a qualified generating facility was in the control of the taxpayer. The [refund] repayment as determined by the department of environment shall be paid within one hundred eighty days following a final order by the department of environment.

K. Expenditures for which a taxpayer claims [a] an advanced energy combined reporting tax credit pursuant to this section are ineligible for credits pursuant to the provisions of the Investment Credit Act or any other credit against personal income tax, corporate income tax, compensating tax, gross receipts tax or withholding tax.

L. A taxpayer shall apply for approval for a credit within one year following the end of the calendar year in which the eligible generation plant costs are incurred."

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