H 3154 General Bill, By H.H. Keyserling, R.S. Corning, Elliott, Haskins, 
M.F. Jaskwhich, K.G. Kempe, I.K. Rudnick and C.Y. Waites
 A Bill to provide a state income tax credit for qualified renewable energy
 source expenditures, including qualified active solar energy systems, and to
 provide for related matters, including a criminal penalty.

   12/27/90  House  Prefiled
   12/27/90  House  Referred to Committee on Ways and Means
   01/08/91  House  Introduced and read first time HJ-83
   01/08/91  House  Referred to Committee on Ways and Means HJ-83

A BILL

TO PROVIDE A STATE INCOME TAX CREDIT FOR QUALIFIED RENEWABLE ENERGY SOURCE EXPENDITURES, INCLUDING QUALIFIED ACTIVE SOLAR ENERGY SYSTEMS, AND TO PROVIDE FOR RELATED MATTERS, INCLUDING A CRIMINAL PENALTY.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Subject to the conditions prescribed in this act, a taxpayer as defined in Section 2 is allowed a state income tax credit equal to twenty-five percent of the purchase price up to a maximum credit of one thousand dollars of all qualified renewable energy source expenditures as these expenditures are defined in Section 2, except for qualified active solar energy systems. Active solar energy systems are allowed a state income tax credit equal to fifty dollars per million British thermal units of estimated annual energy produced, but not exceeding the maximum tax credit of twenty-five percent up to one thousand dollars of the purchase price.

SECTION 2. For purposes of this act:

( 1) "Taxpayer" means an individual, fiduciary, or corporation subject to the Income Tax Act of 1926 (Chapter 7, Title 12 of the 1976 Code).

( 2) "Qualified renewable energy source expenditure" means an expenditure made on or after January 1, 1992, by the taxpayer for renewable energy source property installed in connection with a residential or nonresidential building:

(a) which is located in the State;

(b) which is used by the taxpayer, or his tenants in a landlord/tenant relationship, for residential, commercial, or industrial purposes.

"Qualified renewable energy source expenditure" includes, but is not limited to, expenditures for labor costs properly allocable to the on-site preparation, assembly, or original installation of renewable energy source property but does not include any expenditure allocable to a swimming pool used as an energy storage medium or to another energy storage medium which has a primary function other than energy storage.

( 3) "Renewable energy source property" means property:

(a) which, when installed in connection with a building, transmits or uses as an energy source in the building:

( i) solar energy (active and passive systems), biomass conversion, the potential energy of falling or flowing water (water wheel) to produce mechanical or electrical energy, or any other form of renewable energy specified in regulations promulgated by the Tax Commission, after consultation with the Joint Legislative Committee on Energy, for the purpose of heating, cooling, or providing hot water for use within these buildings:

(ii) energy from the burning of wood in stoves or furnaces other than fireplaces;

(b) which is installed by or at the instance of the taxpayer;

(c) which can reasonably be expected to be effective or remain in operation for at least five years;

(d) which meets the performance and quality standards, if any, which:

( i) have been prescribed by federal or state law or regulations;

(ii) are in effect at the time of the acquisition of the property.

( 4) "Active solar energy system" means a mechanical system which collects solar radiation in the form of thermal energy and uses a heat transfer fluid to transport the thermal energy to meet load requirements or to thermal storage where the thermal storage and collectors are separated in order that losses from the collector, while it is not operating, do not contribute to loss from storage. Components of the system include collectors; storage containers and contents, except the building envelope; pipe; fittings; ductwork insulation; pumps; blowers; valves; and controls. ( 5) "Annual usable energy output" means the annual amount of energy provided by the renewable energy system which can be utilized to offset energy requirements normally met by purchased energy resources. It must be measured in millions of British thermal units and must take into account climatic conditions, system performance characteristics, system load, and load usage patterns.

( 6) "British thermal unit" (BTU) means the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.

( 7) "Commission" means the South Carolina Tax Commission.

( 8) "Dual purpose passive solar energy system" means a passive solar energy system whose collectors or storage components serve a purpose other than the collection and storage of solar thermal energy. These purposes include the heating of living space through greenhousing, as well as the treatment of flooring, roofing, and windows. Components of the system include collectors; storage containers and contents, except the building envelope; pipe; fittings; ductwork insulation; pumps; blowers; valves; and controls.

( 9) "Innovative solar energy system" means a solar energy system for which no nationally recognized certification program or testing method exists.

(10) "Installation date" means the date on which the renewable energy system is put into operation or is capable of operating.

(11) "Load" means the energy requirements of a building, device, or process.

(12) "Passive solar energy system" means a solar energy system whose collectors and storage units are integrated into the building structure so that losses from the collector, while it is not operating, contribute to loss from storage.

(13) "Photovoltaic" means a solar energy system that converts radiant solar energy directly into electrical energy. Components include collectors, batteries, wiring, and controls.

(14) "Single purpose passive solar energy system" means a passive solar energy system whose components are used for the sole purpose of collecting, storing, and distributing solar energy. Examples of single purpose passive solar energy systems include solar attics, Trombe walls, water walls, and building integrated phase-change systems except when used in conjunction with a dual purpose passive solar energy system.

(15) "Solar energy system" means the equipment which directly converts and then transfers or stores solar energy into usable forms of thermal or electrical energy. These systems may include space heating or cooling, crop drying, electricity generation, or hot water heating.

(16) "Systems addition" means equipment attached to an existing renewable energy system which increases the annual usable energy output of the system.

(17) "System designer" means a person who offers for sale a renewable energy system as a complete package, the components of which may be produced by different manufacturers.

(18) "System replacement" means the total removal and replacement of the collectors in a solar energy system; or replacement of the blade assembly, generator, or alternator in a wind energy system.

SECTION 3. (A) A person offering to sell a renewable energy resource system as defined under Section 2 shall, before selling the system to any person within this State, make application to the Division of Energy, Agriculture and Natural Resources within the Governor's Office, on forms to be provided by that division, for certification of performance of systems to be sold and installed within this State.

(B) The certification of performance issued by the Division of Energy, Agriculture and Natural Resources, and the allowable tax credit for active solar energy systems, must be based upon design calculations similar to the f-Chart solar design method or other documentation as specified by Tax Commission regulations and must include the maximum practical yearly amount of energy produced based upon millions of British thermal units as certified by the Solar Rating and Certification Corporation or the Florida Solar Energy Center. The certification of performance must include the maximum amount of tax credit permitted for the active solar system based upon millions of BTU's produced on a yearly basis. Further, the certification of performance must include a Cost/Performance Ratio (CPR) of the system along with the required payback time based upon the reported, installed price of the system. The required payback time must be based upon a life-cycle cost analysis showing the number of years before the investment will pay for itself in saved energy costs.

(C) Upon certification by the Division of Energy, Agriculture and Natural Resources, a person offering to sell a renewable energy resource system shall, before selling the system to any person, give the person a copy of the certification of performance, a copy of which must be included with that person's claim for the tax credit filed with the Tax Commission. Upon certification by the division, a copy of the certification of performance must be supplied to the Tax Commission by the division for inclusion in the commission's records.

(D) The Division of Energy, Agriculture and Natural Resources shall inspect each year a representative number of selected renewable energy resource systems which have been certified and installed for purposes of claiming the income tax credit to insure compliance with the standards established under this act.

(E) Each year by October first the Tax Commission shall provide the Joint Legislative Committee on Energy, the House Ways and Means Committee, and the Senate Finance Committee a report containing information on the number and types of different qualifying renewable energy source systems claiming the tax credit during the preceding calendar year along with the total dollar amount of credits claimed for each type system, with the dollar tax credit amounts carried over to the next five succeeding taxable years as allowed under this act.

SECTION 4. Installation contractors shall provide the customers purchasing solar systems a minimum one-year transferable parts and labor warranty on the entire solar system, its installation, and operation. This warranty does not become effective before the day the system is completed and operational and accepted in writing by the purchaser.

SECTION 5. (A) The Tax Commission shall establish procedures, by the promulgation of regulations in accordance with Article 1, Chapter 23, Title 1 of the 1976 Code, for the administration of the provisions of this act.

(B) The regulations promulgated by the Tax Commission must establish performance standards and qualifications for renewable energy resource systems installed within this State for which a tax credit is claimed. The performance standards must be established to:

(1) produce the maximum practical amount of energy;

(2) conform, where feasible, with national performance standards promulgated or recognized by the federal government, the Florida Solar Energy Center, or the Tennessee Valley Authority (TVA) for renewable energy resource systems.

(C) The solar systems collectors must have been tested and approved by an independent test facility according to procedures in ASHRAE 93-77 and must comply with the "Test Methods and Minimum Standards for Solar Collectors" as published by the Interstate Solar Coordination Council (ISCC Document 80-1). In addition, the solar systems collectors must be tested or evaluated to withstand wind loads of fifty-five psf at a minimum.

(D) The cost performance ratio (CPR) of the installed system must not exceed 4.9 based upon a percentage of twenty-five percent (twenty-five percent state tax credit). The CPR must be determined by the following formula:

"Seventy-five percent times the manufacturer's (contractor's) suggested installed price equals cents per kwh divided by twenty years times the manufacturer's estimated kwh saved per year." (In general, the lower the CPR, the more cost-effective the solar system will be.)

(E) All solar systems, components, and installations must conform to applicable state and local codes and nationally recognized standards. The installation contractors must be licensed general contractors within South Carolina and shall have received training and certification on the installation of the systems from the manufacturers of the systems they install.

SECTION 6. A taxpayer may claim as an income tax credit all qualified renewable energy source expenditures made during a taxable year to the amount authorized in Section 1. If the amount of the tax credit exceeds the taxpayer's tax liability for that taxable year, the amount which exceeds the tax liability may be carried over for credit against income taxes in the next five succeeding taxable years until the total amount of the tax credit has been taken.

SECTION 7. A person who intentionally files fraudulent information with the Division of Energy, Agriculture and Natural Resources for purposes of obtaining the certification of performance of a renewable energy resource system as meeting the requirements of this act or the regulations promulgated by the Tax Commission under this act is guilty of a misdemeanor and, upon conviction, must be punished by a fine of not less than five hundred dollars but not more than one thousand five hundred dollars or by imprisonment of not less than sixty days but not more than one hundred eighty days, or both fine and imprisonment.

SECTION 8. This act takes effect upon approval by the Governor and is effective for tax years beginning after December 31, 1991.