HOUSE BILL NO. 529

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H0529aa.............................................by REVENUE AND TAXATION
TAXATION - GEOTHERMAL ENERGY - Amends existing law to provide for a
geothermal energy tax; to provide for the filing of operator's statements
by producers of electricity by means of geothermal energy; to provide for
the computation, allotment and apportionment of tax due from producers of
electricity by means of geothermal energy by the State Tax Commission; to
authorize county treasurers to collect specified taxes from producers of
electricity by means of geothermal energy; to provide for tax liens on
property of producers of electricity by means of geothermal energy; to
provide for the assessment of nonoperating property of producers of
electricity by means of geothermal energy; and to provide an exemption from
taxation for certain operating property of producers of electricity by
means of geothermal energy.

02/13    House intro - 1st rdg - to printing
02/14    Rpt prt - to Rev/Tax
02/22    Rpt out - to Gen Ord
02/26    Rpt out amen - to engros
02/27    Rpt engros - 1st rdg - to 2nd rdg as amen
02/28    2nd rdg - to 3rd rdg as amen
02/29    3rd rdg as amen - PASSED - 67-0-3
      AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Block,
      Bock, Boe, Bolz, Bowers, Brackett, Bradford, Chadderdon, Chavez,
      Chew, Clark, Collins, Crane, Durst, Eskridge, Hagedorn, Hart,
      Harwood, Henbest, Henderson, Jaquet, Killen, King, Kren, Labrador,
      Lake, LeFavour, Loertscher, Luker, Marriott, Mathews, McGeachin,
      Mortimer, Moyle, Nielsen, Nonini, Pasley-Stuart, Patrick, Pence,
      Raybould, Ringo, Roberts, Ruchti, Rusche, Sayler, Schaefer,
      Shepherd(08), Shirley, Shively, Smith(24), Smith(30)(Stanek),
      Snodgrass, Stevenson, Thayn, Thomas, Trail, Vander Woude, Wood(27),
      Wood(35), Mr. Speaker
      NAYS -- None
      Absent and excused -- Black, Shepherd(02), Wills
    Floor Sponsor - Bedke
    Title apvd - to Senate
03/03    Senate intro - 1st rdg - to Loc Gov
03/06    Rpt out - rec d/p - to 2nd rdg
03/07    2nd rdg - to 3rd rdg
03/13    3rd rdg - PASSED - 35-0-0
      AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
      Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
      Goedde, Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst,
      Little, Lodge, Malepeai(Sagness), McGee, McKague, McKenzie, Pearce,
      Richardson, Schroeder, Siddoway, Stegner, Stennett, Werk
      NAYS -- None
      Absent and excused -- None
    Floor Sponsor - McKenzie
    Title apvd - to House
03/13    To enrol
03/14    Rpt enrol - Sp signed
03/17    Pres signed - To Governor
03/20    Governor signed
         Session Law Chapter 227
         Effective: 01/01/08

Bill Text




                                                                       
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008

                                                                       

                              IN THE HOUSE OF REPRESENTATIVES

                                     HOUSE BILL NO. 529

                             BY REVENUE AND TAXATION COMMITTEE

  1                                        AN ACT
  2    RELATING TO TAXATION OF ENERGY SYSTEMS USING GEOTHERMAL ENERGY; AMENDING  SEC-
  3        TION  63-3501,  IDAHO  CODE,  TO  FURTHER  DEFINE  TERMS; AMENDING SECTION
  4        63-3502B, IDAHO CODE, TO PROVIDE FOR THE LEVY OF TAX ON GEOTHERMAL  ENERGY
  5        ELECTRICAL  PRODUCTION;  AMENDING SECTION 63-3503B, IDAHO CODE, TO PROVIDE
  6        FOR FILING OPERATORS' STATEMENTS AND FOR THE ALLOTMENT  AND  APPORTIONMENT
  7        OF  TAX DUE FROM PRODUCERS OF ELECTRICITY BY MEANS OF GEOTHERMAL ENERGY BY
  8        THE STATE TAX COMMISSION; AMENDING SECTION 63-3504, IDAHO CODE, TO PROVIDE
  9        REFERENCE TO A PRODUCER OF ELECTRICITY  BY  MEANS  OF  GEOTHERMAL  ENERGY;
 10        AMENDING  SECTION 63-3505, IDAHO CODE,  TO PROVIDE REFERENCE TO A PRODUCER
 11        OF ELECTRICITY BY MEANS OF GEOTHERMAL ENERGY;  AMENDING  SECTION  63-3506,
 12        IDAHO CODE,  TO PROVIDE REFERENCE TO A PRODUCER OF ELECTRICITY BY MEANS OF
 13        GEOTHERMAL ENERGY; AMENDING SECTION 63-3622QQ, IDAHO CODE, TO PROVIDE THAT
 14        MACHINERY AND EQUIPMENT INCLUDES CERTAIN OPERATING PROPERTY; AMENDING SEC-
 15        TION 63-602JJ, IDAHO CODE, TO PROVIDE A PROPERTY TAX EXEMPTION FOR CERTAIN
 16        OPERATING  PROPERTY  OF  PRODUCERS  OF  ELECTRICITY BY MEANS OF GEOTHERMAL
 17        ENERGY; DECLARING AN EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.

 18    Be It Enacted by the Legislature of the State of Idaho:

 19        SECTION 1.  That Section 63-3501, Idaho Code, be, and the same  is  hereby
 20    amended to read as follows:

 21        63-3501.  DEFINITIONS. For the purposes of this chapter:
 22        (a)  The  term  "cooperative  electrical association" means any nonprofit,
 23    cooperative association organized  and  maintained  by  its  members,  whether
 24    incorporated  or unincorporated, for the purpose of transmitting, distributing
 25    or delivering electric power to its members.
 26        (b)  The term "cooperative natural gas association"  means  any  nonprofit
 27    cooperative  association  organized  and  maintained  by  its members, whether
 28    incorporated or unincorporated, for the purpose of transmitting,  distributing
 29    or delivering natural gas to its members.
 30        (c)  The term "cost of power" means the cost of power purchases and gener-
 31    ation  included  in reports to, and in accordance with applicable requirements
 32    of, the rural electrification  administration,  United  States  department  of
 33    agriculture,  by  cooperative electrical associations which are borrowers from
 34    the rural electrification administration, and for cooperative electrical asso-
 35    ciations which are not borrowers from the  rural  electrification  administra-
 36    tion, such costs which could have been included by such cooperative electrical
 37    associations using equivalent reporting and accounting requirements. The state
 38    tax  commission shall prescribe necessary rules for the purpose of providing a
 39    uniform method of reporting cost of power purchases and generation by coopera-
 40    tive electrical associations, consistent with  the  reporting  and  accounting
 41    requirements of the rural electrification administration.
 42        (d)  The  term  "cost  of  gas" means the cost of natural gas purchased by
 43    cooperative natural gas associations from wholesale or other suppliers of nat-

                                       2

  1    ural gas for delivery to members of the cooperative natural gas association.
  2        (e)  The term "gross electrical earnings" means the gross  receipts  of  a
  3    cooperative electrical association from the distribution, delivery and sale of
  4    electric  power  within the state of Idaho, but shall not include any earnings
  5    or receipts from the distribution, delivery or sale of electric power consumed
  6    in pumping water for irrigation or  drainage  purposes  within  the  state  of
  7    Idaho,  upon  the land of such consumer and for the use and benefit of his own
  8    land, and where such consumer has received  from  the  association  a  refund,
  9    rebate, or credit of three and one-half percent (3 1/2%) of the cost to him of
 10    the electric power so used and consumed.
 11        (f)  The  term  "gross natural gas earnings" means the gross receipts of a
 12    cooperative natural gas association from the distribution, delivery  and  sale
 13    of natural gas within the state of Idaho.
 14        (g)  The  term  "gross wind or geothermal energy earnings" means the gross
 15    receipts of a wind  energy generator or a geothermal energy generator from the
 16    distribution, delivery and sale to a customer for the direct use or resale  of
 17    electrical  energy generated, manufactured or produced by means of wind energy
 18    or geothermal energy within the state of Idaho.
 19        (h)  The term "operating property" means and  includes  all  real  estate,
 20    fixtures  or  personal property owned, controlled, operated or managed by such
 21    electrical or natural gas association, or producer of electricity by means  of
 22    wind energy or geothermal energy, excluding entities that are regulated by the
 23    Idaho public utilities commission as to price, in connection with or to facil-
 24    itate  the  generation,  transmission, distribution, delivery, or measuring of
 25    electric power, natural gas, or electrical energy generated,  manufactured  or
 26    produced by means of wind energy or geothermal energy, excluding entities that
 27    are  regulated  by  the Idaho public utilities commission as to price, and all
 28    conduits, ducts, or other devices, materials, apparatus or property  for  con-
 29    taining,  holding  or carrying conductors used for the transmission, distribu-
 30    tion and delivery of electric power, natural gas, or electrical energy  gener-
 31    ated,  manufactured  or produced by means of wind energy or geothermal energy,
 32    excluding entities that are regulated by the Idaho public utilities commission
 33    as to price, including construction tools, materials and supplies.
 34        (i)  The term "nonoperating property" means all other  property,  real  or
 35    personal, owned, controlled or managed by such electrical or natural gas asso-
 36    ciation.
 37        (j)  The  term  "taxing  unit" shall include any of the following that had
 38    property taxes levied in the prior year: the separate taxing districts of  the
 39    county as well as the county itself and any such taxing district's fund having
 40    a different geographical boundary than such taxing district itself.
 41        (k)  The  term  "tax levy" means the total tax levies fixed by each taxing
 42    district, as defined herein, in the prior calendar year.
 43        (l)  The term "WPPSS 4 and 5 costs" means, for  a  cooperative  electrical
 44    association  which  is  a participant under the Washington public power supply
 45    system nuclear projects numbers 4 and 5 participants'  agreement,  dated  July
 46    14,  1976,  all of its costs in connection with Washington public power supply
 47    system nuclear projects numbers 4 and 5.
 48        (m)  The term "weighted wire mileage  factor"  means  a  figure  which  is
 49    arrived  at  by  multiplying the tax levy of each taxing unit by the number of
 50    wire miles of transmission and distribution lines of such cooperative electri-
 51    cal association situated in such taxing unit.
 52        (n)  The term "gas line mileage factor" means a figure which is arrived at
 53    by multiplying the tax levy of each taxing unit by the number of miles of nat-
 54    ural gas transmission and distribution lines of such cooperative  natural  gas
 55    association situated in such taxing unit.

                                       3

  1        SECTION  2.  That Section 63-3502B, Idaho Code, be, and the same is hereby
  2    amended to read as follows:

  3        63-3502B.  LEVY OF TAX ON WIND ENERGY OR GEOTHERMAL ENERGY ELECTRICAL PRO-
  4    DUCTION. There shall be levied against every producer of electricity by  means
  5    of  wind energy  or geothermal energy a wind energy tax or a geothermal energy
  6    tax equal to three percent (3%) of such producer's gross wind energy  earnings
  7    or  geothermal  energy earnings. This wind energy tax or geothermal energy tax
  8    shall be in lieu of all other taxes on the operating property, as  defined  in
  9    section  63-3501(h),  Idaho Code, of such wind energy producer or of such geo-
 10    thermal energy producer.

 11        SECTION 3.  That Section 63-3503B, Idaho Code, be, and the same is  hereby
 12    amended to read as follows:

 13        63-3503B.  FILING  OPERATORS' STATEMENTS -- ALLOTMENT AND APPORTIONMENT OF
 14    TAX DUE FROM PRODUCERS OF ELECTRICITY BY MEANS OF WIND  ENERGY  OR  GEOTHERMAL
 15    ENERGY BY STATE TAX COMMISSION. Every producer of electricity by means of wind
 16    energy  or  by  means  of  geothermal energy in this state shall file with the
 17    state tax commission of the state of Idaho an operator's statement in the man-
 18    ner as provided for in section 63-404, Idaho Code, and shall include thereon a
 19    statement of the prior calendar year's gross wind  energy  earnings  or  gross
 20    geothermal  energy  earnings. Upon examining and verifying said statement, the
 21    state tax commission shall compute the amount of the wind energy  tax  or  the
 22    geothermal  energy  tax  based  on the gross wind energy earnings or the gross
 23    geothermal energy earnings and shall allot to each county in which the operat-
 24    ing property of such producer is situate either: that proportion of the  total
 25    wind  energy tax or that proportion of the total geothermal energy tax of such
 26    producer shown to be due as the same proportion that the total  original  cost
 27    of  operating property situate in such county bears to the total original cost
 28    of operating property of such producer for the wind energy project or of  such
 29    producer  for  the  geothermal  energy project. The state tax commission shall
 30    then, for each county, apportion the wind energy tax or geothermal energy  tax
 31    so allotted to such county among the several taxing units thereof within which
 32    any  operating  property  of such producer is situate, by apportioning to each
 33    such taxing unit that proportion of the wind energy tax or  geothermal  energy
 34    tax  so allotted to such county. For such apportionment, the state tax commis-
 35    sion shall calculate the weighted original cost which shall be the product  of
 36    the  original  cost  of  such operating property within such taxing unit times
 37    such taxing unit's property tax levy for  the  prior  year  and  the  weighted
 38    apportionment  rate  which shall be the ratio of the wind energy tax or of the
 39    geothermal energy tax as the case may be, allotted  to  such  county,  to  the
 40    aggregate  weighted  original  cost for all such taxing units within which the
 41    operating property is located and then shall calculate  the  apportionment  of
 42    the  wind  energy tax or geothermal energy tax for each such taxing unit to be
 43    equal to the product of the weighted original cost times the  weighted  appor-
 44    tionment  rate. The state tax commission shall, on or before the second Monday
 45    in August, notify the state superintendent of public instruction,  the  county
 46    auditor,  and the county treasurer of such allotment and apportionment and the
 47    amounts thereof. On or before the third Monday in August, the  county  auditor
 48    shall  notify the appropriate taxing units of the amount of wind energy tax or
 49    the amount of the geothermal energy tax being apportioned.

 50        SECTION 4.  That Section 63-3504, Idaho Code, be, and the same  is  hereby
 51    amended to read as follows:

                                       4

  1        63-3504.  COLLECTION  BY  COUNTY TREASURER -- PENALTY AND INTEREST IMPOSED
  2    WHEN DELINQUENT. Upon receipt of the notification of the allotment and  appor-
  3    tionment  of  such  taxes by the state tax commission by the county treasurer,
  4    said county treasurer shall, not later than June 15 of each year, notify  each
  5    cooperative  electrical  association, natural gas cooperative, and producer of
  6    electricity by means of wind energy or by means of geothermal energy,  of  the
  7    amount  of  taxes owed, and the apportionment thereof to the county and to the
  8    several taxing districts in the county and such tax shall be due  and  payable
  9    not  later  than  July  1, following and, upon the payment thereof, the county
 10    treasurer shall pay over to each taxing district its apportionment  as  herein
 11    determined.  Any  such  taxes  not  paid by July 1, as aforesaid, shall become
 12    delinquent and a penalty of  five  percent  (5%)  thereof  shall  be  imposed,
 13    together  with  interest at the rate of one percent (1%) per month from July 1
 14    until paid.

 15        SECTION 5.  That Section 63-3505, Idaho Code, be, and the same  is  hereby
 16    amended to read as follows:

 17        63-3505.  TAXES  A LIEN ON PROPERTY OF ASSOCIATION OR PRODUCER UNTIL PAID.
 18    All taxes due and payable under this chapter shall be a lien on all  property,
 19    real  and personal, of the electrical, or natural gas association, or the pro-
 20    ducer of electricity by means of wind energy or by means of geothermal energy,
 21    owing the same, as of June 15 of each year and shall be discharged only by the
 22    payment thereof. In any action to enforce payment of any delinquent taxes  due
 23    under  this chapter, the county prosecuting such action shall be entitled to a
 24    judgment for the reasonable costs of prosecuting such action, as well  as  for
 25    the delinquent taxes, penalty and interest.

 26        SECTION  6.  That  Section 63-3506, Idaho Code, be, and the same is hereby
 27    amended to read as follows:

 28        63-3506.  ASSESSMENT   OF   NONOPERATING   PROPERTY   BY   ASSESSOR.   The
 29    nonoperating property of any cooperative electrical or  natural  gas  associa-
 30    tion,  or  producer of electricity by means of wind energy or by means of geo-
 31    thermal energy, shall be assessed by the county assessor of the county wherein
 32    such property is situate, and taxes levied against the same shall be  a  lien,
 33    and  shall  be  due  and payable, in the same manner as are any other taxes on
 34    property.

 35        SECTION 7.  That Section 63-3622QQ, Idaho Code, be, and the same is hereby
 36    amended to read as follows:

 37        63-3622QQ.  EQUIPMENT USED IN ALTERNATIVE METHOD OF  GENERATION  OF  ELEC-
 38    TRICITY. (1) Purchasers of machinery and equipment used directly in generating
 39    electricity  using  fuel  cells, low impact hydro, wind, geothermal resources,
 40    biomass, cogeneration, sun or landfill gas as the principal  source  of  power
 41    may qualify for a rebate of sales or use taxes paid on such purchases but only
 42    if  the  purchaser  develops with such machinery, equipment, and tangible per-
 43    sonal property a facility capable of generating not less than twenty-five (25)
 44    kilowatts of electricity.
 45        (2)  For purposes of this section:
 46        (a)  "Landfill gas" means biomass fuel of the type qualified  for  federal
 47        tax  credits  under  26  U.S.C.  section  29  collected  from  a landfill.
 48        "Landfill" means a landfill as defined in section 39-7403, Idaho Code;
 49        (b)  "Machinery and equipment" means  industrial  fixtures,  devices,  and

                                       5

  1        support  facilities  that  are integral and necessary to the generation of
  2        electricity  using  fuel    cells,  low  impact  hydro,  wind,  geothermal
  3        resources, biomass, cogeneration, sun, or landfill gas  as  the  principal
  4        source of power;
  5        (c)  "Machinery and equipment" does not include:
  6             (i)   Hand-powered tools;
  7             (ii)  Property with a useful life of less than one (1) year;
  8             (iii) Repair  parts  required  to  restore machinery and equipment to
  9             normal working order;
 10             (iv)  Replacement parts that do not  increase  productivity,  improve
 11             efficiency, or extend the useful life of machinery and equipment;
 12             (v)   Buildings; or
 13             (vi)  Building  fixtures  that  are not integral and necessary to the
 14             generation of electricity that are permanently affixed to and  become
 15             a physical part of a building;.
 16        Machinery  and  equipment  includes all operating property as described in
 17        section 63-3501(h), Idaho Code.
 18        (d)  Machinery and equipment is "used directly" in generating  electricity
 19        with fuel cells or by low impact hydro, wind energy, geothermal resources,
 20        biomass,  cogeneration,  solar energy or landfill gas power if it provides
 21        any part of the process that captures the energy of the  fuel  cells,  low
 22        impact  hydro,  wind, geothermal resources, biomass, cogeneration, sun, or
 23        landfill gas, converts that energy to electricity, and stores,  transforms
 24        or transmits that electricity for entry into or operation in parallel with
 25        electric transmission and distribution systems;
 26        (e)  "Fuel  cell"  means  an electrochemical reaction that generates elec-
 27        tricity by combining atoms of hydrogen and oxygen in  the  presence  of  a
 28        catalyst;
 29        (f)  "Low  impact  hydro"  means an electric generating facility utilizing
 30        water for the generation of electricity,  housed  in  existing  canals  or
 31        existing  reservoirs  and   having a power production capacity twenty-five
 32        (25) kilowatts or greater.
 33        (3)  To qualify for the rebate, the taxpayer and his contractors must  pay
 34    sales  and  use tax on their purchases of property.  Once  a public utility, a
 35    cooperative, a municipality or the public utilities commission  certifies  the
 36    project  will generate at least twenty-five (25) kilowatts of electricity, the
 37    taxpayer may file a refund request with the state tax commission.  The  refund
 38    request  shall  state  that  the taxpayer will construct or has constructed  a
 39    project that will generate sufficient kilowatts of electricity at the  project
 40    site  to  be  eligible  for  the  rebate  and that the taxpayer is entitled to
 41    receive a rebate of all sales and use taxes paid that qualifies for the rebate
 42    created by this section.
 43        (4)  Upon filing of a written refund claim by the taxpayer entitled to the
 44    rebate, and subject to such reasonable documentation and verification  as  the
 45    state  tax  commission  may require, the rebate shall be paid by the state tax
 46    commission as a refund allowable under section 63-3626, Idaho  Code.  A  claim
 47    for  rebate  under this section must be filed on or before the last day of the
 48    third calendar year following the year in which the taxes sought to be rebated
 49    were paid or the right to the rebate is lost.
 50        (5)  Any rebate paid shall be subject to recapture by the state  tax  com-
 51    mission.  In  the event the property is not used, stored or otherwise consumed
 52    in the process of generating electricity for a period of  sixty  (60)  months,
 53    the  state tax commission may recapture the tax paid in the same proportion as
 54    an amount of credit required to be recaptured under  section  63-3029B,  Idaho
 55    Code.

                                       6

  1        (6)  Any  recapture amount due under this section shall be a deficiency in
  2    tax for the period in which the disqualification first occurs for purposes  of
  3    section  63-3629,  Idaho Code, and may be enforced and collected in the manner
  4    provided by the Idaho sales tax act, provided however, that  in  lieu  of  the
  5    provisions of section 63-3633, Idaho Code, the period of time within which the
  6    commission  may issue a notice under section 63-3629, Idaho Code, in regard to
  7    an amount subject to recapture shall be the later of five (5) years after  the
  8    end  of the taxable year, for income tax purposes, in which the project period
  9    ends.

 10        SECTION 8.  That Section 63-602JJ, Idaho Code, be, and the same is  hereby
 11    amended to read as follows:

 12        63-602JJ.  PROPERTY  EXEMPT FROM TAXATION -- CERTAIN OPERATING PROPERTY OF
 13    PRODUCER OF ELECTRICITY BY MEANS OF WIND ENERGY  OR  BY  MEANS  OF  GEOTHERMAL
 14    ENERGY. The following property is exempt from taxation: (i) operating property
 15    of  producers  of electricity by means of wind energy exclusively used to pro-
 16    duce electricity by means of wind energy on which the tax on gross wind energy
 17    earnings will be paid; and (ii) operating property of producers of electricity
 18    by means of geothermal energy exclusively used to produce electricity by means
 19    of geothermal energy on which the tax on gross geothermal energy earnings will
 20    be paid.

 21        SECTION 9.  An emergency existing  therefor,  which  emergency  is  hereby
 22    declared to exist, this act shall be in full force and effect on and after its
 23    passage and approval, and retroactively to January 1, 2008.

Amendment




                                                                       
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008

                                                                       

                                                     Moved by    Raybould

                                                     Seconded by     Lake


                              IN THE HOUSE OF REPRESENTATIVES
                              HOUSE AMENDMENT TO H.B. NO. 529


  1                               AMENDMENTS TO SECTION 7
  2        On page 5 of the printed bill, delete  line  4,  and  insert:  "source  of
  3    power.  "Machinery and equipment" includes all operating property as described
  4    in section 63-3501(h), Idaho  Code;";  in  line  5,  delete  ""Machinery"  and
  5    insert:  "Notwithstanding  subsection (2)(b) of this section, "mMachinery"; in
  6    line 15, delete ";." and insert: ";"; and delete lines 16 and 17.

Engrossed Bill (Original Bill with Amendment(s) Incorporated)




                                                                       
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008

                                                                       

                              IN THE HOUSE OF REPRESENTATIVES

                               HOUSE BILL NO. 529, As Amended

                             BY REVENUE AND TAXATION COMMITTEE

  1                                        AN ACT
  2    RELATING TO TAXATION OF ENERGY SYSTEMS USING GEOTHERMAL ENERGY; AMENDING  SEC-
  3        TION  63-3501,  IDAHO  CODE,  TO  FURTHER  DEFINE  TERMS; AMENDING SECTION
  4        63-3502B, IDAHO CODE, TO PROVIDE FOR THE LEVY OF TAX ON GEOTHERMAL  ENERGY
  5        ELECTRICAL  PRODUCTION;  AMENDING SECTION 63-3503B, IDAHO CODE, TO PROVIDE
  6        FOR FILING OPERATORS' STATEMENTS AND FOR THE ALLOTMENT  AND  APPORTIONMENT
  7        OF  TAX DUE FROM PRODUCERS OF ELECTRICITY BY MEANS OF GEOTHERMAL ENERGY BY
  8        THE STATE TAX COMMISSION; AMENDING SECTION 63-3504, IDAHO CODE, TO PROVIDE
  9        REFERENCE TO A PRODUCER OF ELECTRICITY  BY  MEANS  OF  GEOTHERMAL  ENERGY;
 10        AMENDING  SECTION 63-3505, IDAHO CODE,  TO PROVIDE REFERENCE TO A PRODUCER
 11        OF ELECTRICITY BY MEANS OF GEOTHERMAL ENERGY;  AMENDING  SECTION  63-3506,
 12        IDAHO CODE,  TO PROVIDE REFERENCE TO A PRODUCER OF ELECTRICITY BY MEANS OF
 13        GEOTHERMAL ENERGY; AMENDING SECTION 63-3622QQ, IDAHO CODE, TO PROVIDE THAT
 14        MACHINERY AND EQUIPMENT INCLUDES CERTAIN OPERATING PROPERTY; AMENDING SEC-
 15        TION 63-602JJ, IDAHO CODE, TO PROVIDE A PROPERTY TAX EXEMPTION FOR CERTAIN
 16        OPERATING  PROPERTY  OF  PRODUCERS  OF  ELECTRICITY BY MEANS OF GEOTHERMAL
 17        ENERGY; DECLARING AN EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.

 18    Be It Enacted by the Legislature of the State of Idaho:

 19        SECTION 1.  That Section 63-3501, Idaho Code, be, and the same  is  hereby
 20    amended to read as follows:

 21        63-3501.  DEFINITIONS. For the purposes of this chapter:
 22        (a)  The  term  "cooperative  electrical association" means any nonprofit,
 23    cooperative association organized  and  maintained  by  its  members,  whether
 24    incorporated  or unincorporated, for the purpose of transmitting, distributing
 25    or delivering electric power to its members.
 26        (b)  The term "cooperative natural gas association"  means  any  nonprofit
 27    cooperative  association  organized  and  maintained  by  its members, whether
 28    incorporated or unincorporated, for the purpose of transmitting,  distributing
 29    or delivering natural gas to its members.
 30        (c)  The term "cost of power" means the cost of power purchases and gener-
 31    ation  included  in reports to, and in accordance with applicable requirements
 32    of, the rural electrification  administration,  United  States  department  of
 33    agriculture,  by  cooperative electrical associations which are borrowers from
 34    the rural electrification administration, and for cooperative electrical asso-
 35    ciations which are not borrowers from the  rural  electrification  administra-
 36    tion, such costs which could have been included by such cooperative electrical
 37    associations using equivalent reporting and accounting requirements. The state
 38    tax  commission shall prescribe necessary rules for the purpose of providing a
 39    uniform method of reporting cost of power purchases and generation by coopera-
 40    tive electrical associations, consistent with  the  reporting  and  accounting
 41    requirements of the rural electrification administration.
 42        (d)  The  term  "cost  of  gas" means the cost of natural gas purchased by
 43    cooperative natural gas associations from wholesale or other suppliers of nat-

                                       2

  1    ural gas for delivery to members of the cooperative natural gas association.
  2        (e)  The term "gross electrical earnings" means the gross  receipts  of  a
  3    cooperative electrical association from the distribution, delivery and sale of
  4    electric  power  within the state of Idaho, but shall not include any earnings
  5    or receipts from the distribution, delivery or sale of electric power consumed
  6    in pumping water for irrigation or  drainage  purposes  within  the  state  of
  7    Idaho,  upon  the land of such consumer and for the use and benefit of his own
  8    land, and where such consumer has received  from  the  association  a  refund,
  9    rebate, or credit of three and one-half percent (3 1/2%) of the cost to him of
 10    the electric power so used and consumed.
 11        (f)  The  term  "gross natural gas earnings" means the gross receipts of a
 12    cooperative natural gas association from the distribution, delivery  and  sale
 13    of natural gas within the state of Idaho.
 14        (g)  The  term  "gross wind or geothermal energy earnings" means the gross
 15    receipts of a wind  energy generator or a geothermal energy generator from the
 16    distribution, delivery and sale to a customer for the direct use or resale  of
 17    electrical  energy generated, manufactured or produced by means of wind energy
 18    or geothermal energy within the state of Idaho.
 19        (h)  The term "operating property" means and  includes  all  real  estate,
 20    fixtures  or  personal property owned, controlled, operated or managed by such
 21    electrical or natural gas association, or producer of electricity by means  of
 22    wind energy or geothermal energy, excluding entities that are regulated by the
 23    Idaho public utilities commission as to price, in connection with or to facil-
 24    itate  the  generation,  transmission, distribution, delivery, or measuring of
 25    electric power, natural gas, or electrical energy generated,  manufactured  or
 26    produced by means of wind energy or geothermal energy, excluding entities that
 27    are  regulated  by  the Idaho public utilities commission as to price, and all
 28    conduits, ducts, or other devices, materials, apparatus or property  for  con-
 29    taining,  holding  or carrying conductors used for the transmission, distribu-
 30    tion and delivery of electric power, natural gas, or electrical energy  gener-
 31    ated,  manufactured  or produced by means of wind energy or geothermal energy,
 32    excluding entities that are regulated by the Idaho public utilities commission
 33    as to price, including construction tools, materials and supplies.
 34        (i)  The term "nonoperating property" means all other  property,  real  or
 35    personal, owned, controlled or managed by such electrical or natural gas asso-
 36    ciation.
 37        (j)  The  term  "taxing  unit" shall include any of the following that had
 38    property taxes levied in the prior year: the separate taxing districts of  the
 39    county as well as the county itself and any such taxing district's fund having
 40    a different geographical boundary than such taxing district itself.
 41        (k)  The  term  "tax levy" means the total tax levies fixed by each taxing
 42    district, as defined herein, in the prior calendar year.
 43        (l)  The term "WPPSS 4 and 5 costs" means, for  a  cooperative  electrical
 44    association  which  is  a participant under the Washington public power supply
 45    system nuclear projects numbers 4 and 5 participants'  agreement,  dated  July
 46    14,  1976,  all of its costs in connection with Washington public power supply
 47    system nuclear projects numbers 4 and 5.
 48        (m)  The term "weighted wire mileage  factor"  means  a  figure  which  is
 49    arrived  at  by  multiplying the tax levy of each taxing unit by the number of
 50    wire miles of transmission and distribution lines of such cooperative electri-
 51    cal association situated in such taxing unit.
 52        (n)  The term "gas line mileage factor" means a figure which is arrived at
 53    by multiplying the tax levy of each taxing unit by the number of miles of nat-
 54    ural gas transmission and distribution lines of such cooperative  natural  gas
 55    association situated in such taxing unit.

                                       3

  1        SECTION  2.  That Section 63-3502B, Idaho Code, be, and the same is hereby
  2    amended to read as follows:

  3        63-3502B.  LEVY OF TAX ON WIND ENERGY OR GEOTHERMAL ENERGY ELECTRICAL PRO-
  4    DUCTION. There shall be levied against every producer of electricity by  means
  5    of  wind energy  or geothermal energy a wind energy tax or a geothermal energy
  6    tax equal to three percent (3%) of such producer's gross wind energy  earnings
  7    or  geothermal  energy earnings. This wind energy tax or geothermal energy tax
  8    shall be in lieu of all other taxes on the operating property, as  defined  in
  9    section  63-3501(h),  Idaho Code, of such wind energy producer or of such geo-
 10    thermal energy producer.

 11        SECTION 3.  That Section 63-3503B, Idaho Code, be, and the same is  hereby
 12    amended to read as follows:

 13        63-3503B.  FILING  OPERATORS' STATEMENTS -- ALLOTMENT AND APPORTIONMENT OF
 14    TAX DUE FROM PRODUCERS OF ELECTRICITY BY MEANS OF WIND  ENERGY  OR  GEOTHERMAL
 15    ENERGY BY STATE TAX COMMISSION. Every producer of electricity by means of wind
 16    energy  or  by  means  of  geothermal energy in this state shall file with the
 17    state tax commission of the state of Idaho an operator's statement in the man-
 18    ner as provided for in section 63-404, Idaho Code, and shall include thereon a
 19    statement of the prior calendar year's gross wind  energy  earnings  or  gross
 20    geothermal  energy  earnings. Upon examining and verifying said statement, the
 21    state tax commission shall compute the amount of the wind energy  tax  or  the
 22    geothermal  energy  tax  based  on the gross wind energy earnings or the gross
 23    geothermal energy earnings and shall allot to each county in which the operat-
 24    ing property of such producer is situate either: that proportion of the  total
 25    wind  energy tax or that proportion of the total geothermal energy tax of such
 26    producer shown to be due as the same proportion that the total  original  cost
 27    of  operating property situate in such county bears to the total original cost
 28    of operating property of such producer for the wind energy project or of  such
 29    producer  for  the  geothermal  energy project. The state tax commission shall
 30    then, for each county, apportion the wind energy tax or geothermal energy  tax
 31    so allotted to such county among the several taxing units thereof within which
 32    any  operating  property  of such producer is situate, by apportioning to each
 33    such taxing unit that proportion of the wind energy tax or  geothermal  energy
 34    tax  so allotted to such county. For such apportionment, the state tax commis-
 35    sion shall calculate the weighted original cost which shall be the product  of
 36    the  original  cost  of  such operating property within such taxing unit times
 37    such taxing unit's property tax levy for  the  prior  year  and  the  weighted
 38    apportionment  rate  which shall be the ratio of the wind energy tax or of the
 39    geothermal energy tax as the case may be, allotted  to  such  county,  to  the
 40    aggregate  weighted  original  cost for all such taxing units within which the
 41    operating property is located and then shall calculate  the  apportionment  of
 42    the  wind  energy tax or geothermal energy tax for each such taxing unit to be
 43    equal to the product of the weighted original cost times the  weighted  appor-
 44    tionment  rate. The state tax commission shall, on or before the second Monday
 45    in August, notify the state superintendent of public instruction,  the  county
 46    auditor,  and the county treasurer of such allotment and apportionment and the
 47    amounts thereof. On or before the third Monday in August, the  county  auditor
 48    shall  notify the appropriate taxing units of the amount of wind energy tax or
 49    the amount of the geothermal energy tax being apportioned.

 50        SECTION 4.  That Section 63-3504, Idaho Code, be, and the same  is  hereby
 51    amended to read as follows:

                                       4

  1        63-3504.  COLLECTION  BY  COUNTY TREASURER -- PENALTY AND INTEREST IMPOSED
  2    WHEN DELINQUENT. Upon receipt of the notification of the allotment and  appor-
  3    tionment  of  such  taxes by the state tax commission by the county treasurer,
  4    said county treasurer shall, not later than June 15 of each year, notify  each
  5    cooperative  electrical  association, natural gas cooperative, and producer of
  6    electricity by means of wind energy or by means of geothermal energy,  of  the
  7    amount  of  taxes owed, and the apportionment thereof to the county and to the
  8    several taxing districts in the county and such tax shall be due  and  payable
  9    not  later  than  July  1, following and, upon the payment thereof, the county
 10    treasurer shall pay over to each taxing district its apportionment  as  herein
 11    determined.  Any  such  taxes  not  paid by July 1, as aforesaid, shall become
 12    delinquent and a penalty of  five  percent  (5%)  thereof  shall  be  imposed,
 13    together  with  interest at the rate of one percent (1%) per month from July 1
 14    until paid.

 15        SECTION 5.  That Section 63-3505, Idaho Code, be, and the same  is  hereby
 16    amended to read as follows:

 17        63-3505.  TAXES  A LIEN ON PROPERTY OF ASSOCIATION OR PRODUCER UNTIL PAID.
 18    All taxes due and payable under this chapter shall be a lien on all  property,
 19    real  and personal, of the electrical, or natural gas association, or the pro-
 20    ducer of electricity by means of wind energy or by means of geothermal energy,
 21    owing the same, as of June 15 of each year and shall be discharged only by the
 22    payment thereof. In any action to enforce payment of any delinquent taxes  due
 23    under  this chapter, the county prosecuting such action shall be entitled to a
 24    judgment for the reasonable costs of prosecuting such action, as well  as  for
 25    the delinquent taxes, penalty and interest.

 26        SECTION  6.  That  Section 63-3506, Idaho Code, be, and the same is hereby
 27    amended to read as follows:

 28        63-3506.  ASSESSMENT   OF   NONOPERATING   PROPERTY   BY   ASSESSOR.   The
 29    nonoperating property of any cooperative electrical or  natural  gas  associa-
 30    tion,  or  producer of electricity by means of wind energy or by means of geo-
 31    thermal energy, shall be assessed by the county assessor of the county wherein
 32    such property is situate, and taxes levied against the same shall be  a  lien,
 33    and  shall  be  due  and payable, in the same manner as are any other taxes on
 34    property.

 35        SECTION 7.  That Section 63-3622QQ, Idaho Code, be, and the same is hereby
 36    amended to read as follows:

 37        63-3622QQ.  EQUIPMENT USED IN ALTERNATIVE METHOD OF  GENERATION  OF  ELEC-
 38    TRICITY. (1) Purchasers of machinery and equipment used directly in generating
 39    electricity  using  fuel  cells, low impact hydro, wind, geothermal resources,
 40    biomass, cogeneration, sun or landfill gas as the principal  source  of  power
 41    may qualify for a rebate of sales or use taxes paid on such purchases but only
 42    if  the  purchaser  develops with such machinery, equipment, and tangible per-
 43    sonal property a facility capable of generating not less than twenty-five (25)
 44    kilowatts of electricity.
 45        (2)  For purposes of this section:
 46        (a)  "Landfill gas" means biomass fuel of the type qualified  for  federal
 47        tax  credits  under  26  U.S.C.  section  29  collected  from  a landfill.
 48        "Landfill" means a landfill as defined in section 39-7403, Idaho Code;
 49        (b)  "Machinery and equipment" means  industrial  fixtures,  devices,  and

                                       5

  1        support  facilities  that  are integral and necessary to the generation of
  2        electricity  using  fuel  cells,  low  impact  hydro,   wind,   geothermal
  3        resources,  biomass,  cogeneration,  sun, or landfill gas as the principal
  4        source of power. "Machinery and equipment" includes all operating property
  5        as described in section 63-3501(h), Idaho Code;
  6        (c)  Notwithstanding subsection (2)(b) of this  section,  "mMachinery  and
  7        equipment" does not include:
  8             (i)   Hand-powered tools;
  9             (ii)  Property with a useful life of less than one (1) year;
 10             (iii) Repair  parts  required  to  restore machinery and equipment to
 11             normal working order;
 12             (iv)  Replacement parts that do not  increase  productivity,  improve
 13             efficiency, or extend the useful life of machinery and equipment;
 14             (v)   Buildings; or
 15             (vi)  Building  fixtures  that  are not integral and necessary to the
 16             generation of electricity that are permanently affixed to and  become
 17             a physical part of a building;
 18        (d)  Machinery  and equipment is "used directly" in generating electricity
 19        with fuel cells or by low impact hydro, wind energy, geothermal resources,
 20        biomass, cogeneration, solar energy or landfill gas power if  it  provides
 21        any  part  of  the process that captures the energy of the fuel cells, low
 22        impact hydro, wind, geothermal resources, biomass, cogeneration,  sun,  or
 23        landfill  gas, converts that energy to electricity, and stores, transforms
 24        or transmits that electricity for entry into or operation in parallel with
 25        electric transmission and distribution systems;
 26        (e)  "Fuel cell" means an electrochemical reaction  that  generates  elec-
 27        tricity  by  combining  atoms  of hydrogen and oxygen in the presence of a
 28        catalyst;
 29        (f)  "Low impact hydro" means an electric  generating  facility  utilizing
 30        water  for  the  generation  of  electricity, housed in existing canals or
 31        existing reservoirs and  having a power  production  capacity  twenty-five
 32        (25) kilowatts or greater.
 33        (3)  To  qualify for the rebate, the taxpayer and his contractors must pay
 34    sales and use tax on their purchases of property.  Once  a public  utility,  a
 35    cooperative,  a  municipality or the public utilities commission certifies the
 36    project will generate at least twenty-five (25) kilowatts of electricity,  the
 37    taxpayer  may  file a refund request with the state tax commission. The refund
 38    request shall state that the taxpayer will construct  or  has  constructed   a
 39    project  that will generate sufficient kilowatts of electricity at the project
 40    site to be eligible for the rebate  and  that  the  taxpayer  is  entitled  to
 41    receive a rebate of all sales and use taxes paid that qualifies for the rebate
 42    created by this section.
 43        (4)  Upon filing of a written refund claim by the taxpayer entitled to the
 44    rebate,  and  subject to such reasonable documentation and verification as the
 45    state tax commission may require, the rebate shall be paid by  the  state  tax
 46    commission  as  a  refund allowable under section 63-3626, Idaho Code. A claim
 47    for rebate under this section must be filed on or before the last day  of  the
 48    third calendar year following the year in which the taxes sought to be rebated
 49    were paid or the right to the rebate is lost.
 50        (5)  Any  rebate  paid shall be subject to recapture by the state tax com-
 51    mission. In the event the property is not used, stored or  otherwise  consumed
 52    in  the  process  of generating electricity for a period of sixty (60) months,
 53    the state tax commission may recapture the tax paid in the same proportion  as
 54    an  amount  of  credit required to be recaptured under section 63-3029B, Idaho
 55    Code.

                                       6

  1        (6)  Any recapture amount due under this section shall be a deficiency  in
  2    tax  for the period in which the disqualification first occurs for purposes of
  3    section 63-3629, Idaho Code, and may be enforced and collected in  the  manner
  4    provided  by  the  Idaho  sales tax act, provided however, that in lieu of the
  5    provisions of section 63-3633, Idaho Code, the period of time within which the
  6    commission may issue a notice under section 63-3629, Idaho Code, in regard  to
  7    an  amount subject to recapture shall be the later of five (5) years after the
  8    end of the taxable year, for income tax purposes, in which the project  period
  9    ends.

 10        SECTION  8.  That Section 63-602JJ, Idaho Code, be, and the same is hereby
 11    amended to read as follows:

 12        63-602JJ.  PROPERTY EXEMPT FROM TAXATION -- CERTAIN OPERATING PROPERTY  OF
 13    PRODUCER  OF  ELECTRICITY  BY  MEANS  OF WIND ENERGY OR BY MEANS OF GEOTHERMAL
 14    ENERGY. The following property is exempt from taxation: (i) operating property
 15    of producers of electricity by means of wind energy exclusively used  to  pro-
 16    duce electricity by means of wind energy on which the tax on gross wind energy
 17    earnings will be paid; and (ii) operating property of producers of electricity
 18    by means of geothermal energy exclusively used to produce electricity by means
 19    of geothermal energy on which the tax on gross geothermal energy earnings will
 20    be paid.

 21        SECTION  9.  An  emergency  existing  therefor,  which emergency is hereby
 22    declared to exist, this act shall be in full force and effect on and after its
 23    passage and approval, and retroactively to January 1, 2008.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE

                             RS 17722

     The purpose of this proposed legislation is to include
producers of geothermal energy under the identical tax provisions
of Idaho Code as producers of wind energy.  It clarifies that the
"Operating Property" as defined in Idaho Code Section 63-3501(h)
is included in the definition of "Machinery and Equipment" as
defined in Idaho Code Section 63-3622QQ(b).



                           FISCAL NOTE

     There no impact to the General Fund.






Contact
Name: Stephen E. West, CENTRA Consulting, Inc. 
Phone: 208.338.9400
Kerry Hawkley, US Geothermal Inc.
208.434.1027


STATEMENT OF PURPOSE/FISCAL NOTE                         H 529