HAR § 18-235-12.5-05 — Example 1: Assume Taxpayer installs and places into service a wind farm that services one community of 50 single-family homes and 10 separate commercial properties

Each property is equal in size and use, the allocation of the actual cost would be made equally to each property. Further assume that a $600,000 wind powered system were installed and placed in service for these properties, the credit would be calculated as follows: Allocation of cost: The actual cost of $600,000 would be divided equally among the properties, allocating $10,000 to each property. Single-family residential: Each single family residential property would be treated independently. In each case, twenty percent of $10,000, or $2,000, would be compared against the $1,500 single-family residential property cap. Under the facts of this example, each single family residential property would generate a $1,500 credit, for a total of $75,000 (50 properties times $1,500). Commercial: Each commercial property would be treated independently. In each case, twenty percent of $10,000, or $2,000, would be compared against the $500,000 commercial property cap. Under the facts of this example, each commercial property would generate a $2,000 credit, for a total of $20,000 (10 properties times $2,000). The total credit for the $600,000 wind- powered system is $1,500 for each single-family residential property ($75,000) plus $2,000 for each commercial property ($20,000) for a total credit of $95,000. Example 2: Taxpayer, an independent energy provider installs and places into service a wind farm that does not service any particular property, but is entirely directed into the energy grid of the local electricity provider. The renewable energy technology system will be considered to be servicing commercial property only; no allocation is necessary. However, if an identifiable connection exists to customers situated on the property where the power is produced in addition to a connection to the energy grid of the local electricity provider, then the cost of the system must be allocated among and between the particular property or properties being serviced and the connection to the energy grid, which is treated as servicing a single commercial property. Example 3: Taxpayer installs and places into service solar energy equipment for a condominium that contains both residential and commercial units. Each condominium unit has a separate title, so each unit would be treated as a separate property. The taxpayer must reasonably allocate the actual cost of the system between the residential and commercial properties. The condominium contains 50 single-family units and 10 commercial units of equal size and use, and a $600,000 photovoltaic energy system that has a total output capacity of 60 kilowatts. The credit is calculated as follows: Allocation of cost: The actual cost per kilowatt is $10,000 ($600,000 divided by 60 kilowatts). Since there are 60 separate units that have equal energy use, the actual cost of a 1 kilowatt portion of the installation must be allocated to each unit. Thus, actual cost of $600,000 would be divided equally among the 60 properties, allocating $10,000 to each property. Single-family residential: Although each system does not meet the total output capacity requirement, subsection 18- 235-12.5-03(b)(1) allows a credit to be claimed for each system because only one system has installed and placed into service on each property. Each single-family residential condo unit would be treated independently. In each case, thirty-five percent of $10,000, or $3,500, would be compared against the $5,000 single family residential property cap. Under the facts of this example, each single-family residential property would generate a $3,500 credit, for a total of $175,000 (50 units times $3,500). Commercial: Each commercial condo unit would be treated independently. In each case, thirty-five percent of $10,000, or $3,500, would be compared against the $500,000 commercial property cap. Each commercial property would generate a $3,500 credit, for a total of $35,000 (10 properties times $3,500). The total credit for the $600,000 photovoltaic energy system is $3,500 for each single- family condo unit ($175,000) plus $3,500 for each commercial condo unit ($35,000) for a total credit of $210,000. (2) For a system installed and placed in service to service a mixed-use property, the actual cost of the system is allocated between the residential use (which may be single-family use or multiple family use) and the commercial use. For a photovoltaic energy system, thirty-five percent of the cost allocated to residential use is compared against either the single-family §18-235-12.5-05 residential cap or the multiple-family residential cap; and thirty-five percent of the cost allocated to commercial use is compared against the commercial property cap. Example 4: Taxpayer is a farmer and has a dwelling and barn on one of the lots which is considered to be a mixed-use property. Taxpayer installs and places into service a renewable energy technology system that only services the barn. Allocation by use results in the system being subject only to the commercial property limitations. (Note: This is not an example of the directed use exception; an allocation would still be made, but it would be a 0% residential/100% commercial allocation based upon use.) Example 5: Same facts as Example 4, but the system services both the barn and the dwelling. A portion of the system’s actual cost would be subject to the commercial property limitations and the rest would be subject to the single family residential property limitations. Example 6: Taxpayer installs and places into service renewable energy technology equipment for an apartment complex that contains both residential and commercial units. Each unit is not separately titled, so each unit would not be treated as separate property. Instead, the titled property is the entire apartment complex. Since the titled property is mixed-use, the taxpayer will have to reasonably allocate the actual cost of the system between the residential and commercial uses of the property. The complex contains 50 single-family units and 10 commercial units of equal size and use, and a $600,000 photovoltaic energy system that has a total output capacity of 60 kilowatts. The credit would be calculated as follows: Allocation of cost: The actual cost per kilowatt is $10,000 ($600,000 divided by 60 kilowatts). Since each of the units has an equal energy use, the actual cost of $600,000 would be divided between residential use of the property and the commercial use of the property, allocating $500,000 ($10,000 times 50 units) to the residential use and $100,000 ($10,000 times 10 units) to the commercial use. Residential Use: Since the property contains more than one residence, the proper characterization of this use is multi-family residential. Because the installation serves 50 residential units, the total output capacity of each system must be at least 18 kilowatts (0.360 kilowatts times 50 units). The total output capacity of the residential portion of the installation is 50 kilowatts. For the purpose of calculating the credit, two systems that meet the total output capacity requirement and one system that fails to meet the requirement have been installed and placed into service. The actual cost for each of the two systems which meet the 18 kilowatt total output capacity requirement is $180,000 ($10,000 times 18 kilowatts) each. Thirty-five percent of $180,000, or $63,000, would be compared against the multi-family residential property cap, or $17,500 ($350 times 50 units). Because the credit is capped at $17,500 per system, the total credit for the two systems that meet the total output capacity requirement is $35,000 ($17,500 plus $17,500). The third system has an actual cost of $140,000 ($10,000 times 14 kilowatts). Although the system does not meet the total output capacity requirement the credit may be claimed under subsection 18-235-12.5-03(b)(2). Thirty-five percent of $140,000, or $49,000, would be compared against the multi-family residential property cap, or $17,500 ($350 times 50 units). The credit for the third system is $17,500 due to the cap. The total credit for the three systems serving the multi-family residential portion of the property is $52,500 ($17,500 times 3 systems). Commercial Use: Each system serving commercial property must have a total output capacity of at least 1,000 kilowatts. The total output capacity of the installation serving the commercial portion of the property is 10 kilowatts and the actual cost is $100,000 ($10,000 times 10 kilowatts). Since the portion of the installation serving commercial property fails to meet the total output capacity requirement and the credit is already claimed for a system that does not meet the applicable total output capacity requirement on a single property, a credit may not be claimed for the installation that serves the commercial portion of the property. The total credit for the entire $600,000 solar energy installation is $52,500. Note: A credit for the commercial part of the installation may have been claimed if the credit for the third multi-family residential system had not been claimed.