Renewable Energy Systems Tax Credit (Personal)

Summary

Utah's income tax credit for renewable energy systems includes provisions for both residential and commercial applications. The Utah Office of Energy Development administers the tax credit and has responsibility for revising the tax credit rules and certifying systems as eligible for the credit. Legislation (Section 5) enacted in 2007 extended these tax credits through at least 2012. On or before this time, and every five years thereafter, the Utah Tax Review Commission must review the tax credit and make recommendations as to whether the tax credit should be continued, modified, or repealed. This legislation also expanded the tax credit language to include geothermal resources, and modified the credit calculation for large wind, biomass, and geothermal electric systems. 

The revised tax credit is applicable to systems placed in service on or after January 1, 2007. Taxpayers wishing to use this tax credit must first apply through the Utah State Energy Program before claiming the tax credit against their Utah state taxes.

Residential Systems:

The individual income tax credit for residential systems is 25% of the reasonable installed system costs up to a maximum credit of $2,000 per residential unit for systems other than PV solar. Credits for PV systems began at $1,600 for systems installed between 2018 - 2020, beginning in 2021, credits decrease by $400 every year until 2024, after which no credit will be granted. The residential credit is nonrefundable, but unused credit may be carried over up to four years. A non-business entity that leases a residential system is eligible for the credit and may use the credit for no more than seven years from the initiation of the lease. Eligible residential systems include active and passive solar thermal systems; solar electric systems; wind systems; hydro (water) energy; geothermal heat pumps; direct-use geothermal; and biomass. Note that eligible biomass systems must produce either fuel or electricity. Biomass heating systems are not eligible.

Commercial Systems:

The tax credit for commercial systems is structured as a refundable credit. Eligible commercial systems include active and passive solar thermal systems; solar electric systems; wind systems; hydro (water) energy; geothermal heat pumps; direct-use geothermal; and geothermal electricity; and biomass systems. Note that eligible biomass systems must produce either fuel or electricity. Biomass heating systems are not eligible. Renewable energy systems may be used to supply energy to a commercial unit or as a commercial enterprise selling the energy. S.B. 14, passed in 2015, clarified that the corporate tax credit can be applied by any taxpayer that owns a "commercial energy system", and thereby eliminated the requirement that a "business entity" is the only one who can take the corporate credit.

For wind, geothermal electric, solar, or biomass systems with a total capacity of less than 660 kW, solar photovoltaic (PV) systems up to 2 megawatts (MW), the credit is worth 10% of the reasonable installed costs up to $50,000 per commercial unit. A taxpayer that leases a commercial system is eligible for the credit and may use the credit for no more than seven years from the initiation of the lease. 

For commercial wind, solar, geothermal electric, or biomass systems with a total capacity of 660 kW or greater, the credit is 0.35¢/kWh ($0.0035/kWh) for four years. The credit may not be carried forward or back. A taxpayer that leases a commercial system is also eligible for the credit.

Hydrogen:

In 2021, H.B. 223 introduced a new provision for hydrogen systems. The refundable credit may not be combined with other commercial credits offered under this program and is limited to less than 5,600 metric tons of hydrogen per taxable year. The credit is 12¢/kg of hydrogen ($0.12/kg of hydrogen) for four years.