Arizona Renewable Energy Credits

Arizona SB 1229, effective retroactively to taxable periods beginning from and after 12/31/2006, creates an exclusion from tax imposed on the retail classification for sales and other transfers of renewable energy credits or other unit created to track energy derived from renewable energy resources. The legislation also creates a corresponding use tax exclusion. “Renewable energy credit” is defined as a unit created administratively by the corporation commission or governing body of a public power entity to track kilowatt hours of electricity derived from a renewable energy resource or the kilowatt hour equivalent of conventional energy resources displaced by distributed renewable energy resources. The legislation also specifies that the term “business” does not include the transfer of electricity from a solar photovoltaic generation system to an electric utility distribution system and that the utility classification does not include sales and other transfers of renewable energy credits or other unit created to track energy derives from renewable energy resources. Lastly, there is a deduction from the tax base for the utilities classification for the portion of gross proceeds of sales or gross income attributable to transfer of electricity by any retail electric customer owning a solar photovoltaic energy generating system to an electric distribution system, if the electricity transferred is generated by the customer's system.