# Presentation: 393233

## Action Summit on Renewable Energy

**Notes:**
SEE Intro remarks

## Renewable Energy
Bio Fuels – Ethanol and Biodiesel
Wind
Hydrogen
Income Tax Incentives
Income Tax Exemptions
Property Tax Exemptions
Sales Tax Exemptions

- Bio Fuels – Ethanol and Biodiesel
- Wind
- Hydrogen
**Income Tax Incentives**
**Income Tax Exemptions**
**Property Tax Exemptions**
**Sales Tax Exemptions**

**Tax Incentives**

**Notes:**
I will discuss tax incentives specific to renewable energy development.

I will also cover more general tax incentives that also benefit renewable energy development.

## Bio Fuels - Ethanol

**Reduction of fuel tax**
- $.23 to $.01
- $1.2 million gallons

**Notes:**
Biofuels straddle two of the industries North Dakota has targeted for growth in its strategic plan: energy and value-added agriculture.

Encourage the use of E-85, reduction of fuel tax from $.23 to $.01 for $1.2 million gallons of E-85.

The Incentive was very successful and effective.

The incentive ending April 30, 2006, and increased the number of E-85 pumps in the state from 3 to 31 across the state.

## Bio Fuels – Biodiesel

**B2 blending credit**
- Corporations
- Costs to establish, adapt or retrofit facility to blend 2% biodiesel fuel – B2
- Credit = 10% per year for 5 years
- $250,000 maximum credit for all years

**Notes:**
Corporations may claim a tax credit equal to 10% per year for five years of costs incurred to establish, adapt, or retrofit a facility to produce or blend at least two percent biodiesel fuel.

The credit is first allowed in the year the facility begins producing or blending biodiesel fuel.

Credits may be carried forward five taxable years.

A corporation is limited to a cumulative credit of $250,000 for all taxable years.

For tax years beginning after December 31, 2002.

## Bio Fuels – Biodiesel

**B5 blending credit**
- Fuel suppliers
- Blending 5% biodiesel fuel – B5
- Credit = 5¢ per gallon
- Carry forward 5 taxable years

**Notes:**
Fuel suppliers who blend at least five percent biodiesel fuel are entitled to a tax credit of five cents per gallon of blended fuel.

Credits may be carried forward five taxable years.

For tax years beginning after December 31, 2004.

## Bio Fuels – Biodiesel

**Sellers credit**
- Retailers
- Cost to adapt or add equipment for selling 2% biodiesel fuel – B2
- Credit = 10% per year for 5 years
- Carry forward 5 taxable years
- $50,000 maximum credit for all years

**Notes:**
Retailers of at least two percent biodiesel fuel blends are entitled to a tax credit equal to 10% per year for five years of the seller’s direct costs incurred to adapt or add equipment to their facilities to enable them to sell the biodiesel blend.

The credit is first allowed in the year the facility begins selling the biodiesel fuel.

Credits may be carried forward five taxable years.

The seller is limited to a cumulative credit of $50,000 for all taxable years.

For tax years beginning after December 31, 2004.

## Bio Fuels – Biodiesel

**A sales tax exemption on new equipment enabling the sale of 2% biodiesel – B2**

**Notes:**
The sale of equipment not installed by the seller to a licensed facility that enables the facility to sell diesel fuel containing at least two percent biodiesel fuel by volume is exempt from sales tax.

## Wind

**Reduction of assessed value of centrally assessed wind turbine electric generation unit**
- 3% of assessed value
- 1 1⁄2% of assessed value

**Notes:**
The taxable value of a centrally assessed wind turbine electric generation unit with a capacity of 100 kilowatts or more, which construction is completed before January 1, 2011, is calculated at 3% of assessed value instead of 10% (which applies to other property).

The taxable value of a centrally assessed wind turbine electric generation unit for which a purchased power agreement was executed before January 1, 2006, and construction is started before July 1, 2006, must be calculated at 1 1/2 percent of assessed value. The reduced valuation applies for that property for the duration of the initial purchased power agreement for that generation unit.

We worked hard on this during the closing weeks of the last legislative session.

## Wind

**Sales Tax Exemption for Wind-Powered Electrical Generating Facilities**
- For purchasing
- Building materials
- Production equipment
- Other tangible personal property used in the construction
- July 2001 – January 2011

**Notes:**
A sales and use tax exemption is allowed for purchasing building materials, production equipment, and other tangible personal property used in the construction of wind-powered electrical generating facilities between July 2001 and January 2011.

To be eligible, a facility must have at least one single electrical energy generation unit with a nameplate capacity of one hundred kilowatts or more.

## Hydrogen

**A sales tax exemption on hydrogen to power an internal combustion engine or fuel cell**

**Notes:**
Sales of hydrogen used to power an internal combustion engine or fuel cell are exempt from sales tax.

Equipment used directly and exclusively in the production and storage of this hydrogen by a hydrogen generation facility is also exempt from sales tax.

## Income Tax Incentives

**Agricultural Commodity Processing Facility Investment Tax Credit**
- Must be certified by Commerce Department
- 30% income tax credit
- Credit = 30% of the investment
- $50,000 max per year
- Unused credit may be carried forward 5 taxable years

**Notes:**
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for investing in an agricultural commodity processing facility in North Dakota certified by the Department of Commerce. 

In the case of a passthrough entity, such as a partnership or S corporation, the credit is passed through to its owners in proportion to their respective interests in the entity.

The credit is equal to 30% of the investment, up to a maximum credit of $50,000 per tax year.

Not more than 50% of the credit is allowed in any tax year. The credit in any tax year may not exceed 50% of the tax liability.

Credits may be carried forward five taxable years.

A taxpayer is allowed no more than $250,000 in credits for all tax years.

Incentive is getting a great deal of use due to the number of ethanol facilities that have been announced since last session.

## Income Tax Incentives

**Geothermal, Solar, or Wind Energy Credit**
- Income tax credit
- For installing device
- Credit = 3% of cost
- For each of first 5 tax years
- Credit expires January 1, 2011

**Notes:**
An individual, estate, trust, partnership, corporation, or limited liability company is allowed an income tax credit for installing a geothermal, solar, or wind energy device in a building or on property owned or leased in North Dakota.

The credit is equal to 3% of the cost of acquisition and installation and is allowed in each of the first five tax years (for a total of 15%).

The credit is first allowed in the year the installation is completed. For taxable years beginning after December 31, 2004, any credit in excess of the year’s tax liability may be carried forward to the five succeeding tax years.

For passthrough entities, such as a partnership or S corporation, the credit is determined at the entity level and passed through to the entity’s owners in proportion to their respective interests in the entity.

For tax years beginning after December 31, 2004, the credit allowed to any corporation included in a consolidated North Dakota corporation return may be used to reduce the aggregate tax liability of all corporations in the return.

This credit expires on January 1, 2011.

(Note: This credit is not allowed to an individual, estate, or trust that uses Form ND-1 or Form 38 [Schedule 1].)

## Income Tax Exemption

**For primary sector business that adds value to a product, process, or service that produces new wealth in North Dakota**
- Limited to new business or existing business that expands operations in North Dakota

**Notes:**
A primary sector may qualify for an 100% income tax exemption for up to five years.

“Primary sector” refers to a business that adds value to a product, process, or service that produces new wealth in North Dakota.

Eligibility is limited to a new business or to an existing business that expands its operations in North Dakota.

## Property Tax Exemption

**New or expanding business project**
- 5 year maximum
- Agricultural processors may be granted a partial
- or full exemption for up to five additional years
- Payments in lieu of taxes up to a maximum of 20 years

**Notes:**
Any new or expanding business project may be granted a property tax exemption for up to five years.

Agricultural processors may be granted a partial or full exemption for up to five additional years.

In addition to, or instead of, an exemption, local governments and any project operator may negotiate payments in lieu of property tax for a period of up to 20 years from the date project operations begin.

Like the ag commodity process facility investment tax credit, this has also been an important incentive to the new ethanol and biodiesel plants.

## Sales Tax Exemptions

**Manufacturing Exemption**
- New or expanding plant primarily used for agricultural processing

**Notes:**
A new or expanding plant may exempt machinery or equipment from sales and use taxes if it is used primarily for manufacturing or agricultural processing.

The expansion must increase production volume, employment, or the types of products that can be manufactured or processed.

## Sales Tax Exemptions

**Agricultural Processing Plant Construction Materials**
- Construction materials

**Notes:**
Construction materials used to construct an agricultural processing facility are exempt from sales and use taxes.

The processor must apply to the State Tax Commissioner for a refund of the tax paid by a contractor.

## Other Sales Tax Exemptions

**Carbon Dioxide for Enhanced Oil & Gas Recovery**

**Notes:**
The sale of carbon dioxide to be used for enhanced recovery of oil or natural gas is exempt from sales and use tax.

## For More Information

**Contact the Office of State Tax Commissioner**
- taxinfo@state.nd.us
- www.nd.gov/tax
- 701.328.2770
- 600 E Boulevard Ave, Dept. 127
- 	Bismarck ND 58505-0599

**Notes:**
SEE closing remarks