(1) Various tax benefits are allowed for investments in "recognized nonfossil forms of energy generation." The term "recognized nonfossil forms of energy generation" is defined in 15-32-102, MCA, and ARM 42.4.110. The term does not include commercial systems, which may be eligible for a separate credit as described in subchapter 41 of this chapter. In this rule, the term "alternative energy generating systems" is used generically to describe all of the recognized nonfossil forms of energy generation listed in ARM 42.4.110.
(2) The tax benefits for installing an alternative energy generating system are:
(a) a credit against their individual income tax liability to resident individuals who install the generating system to provide energy for their principal dwelling (equal to the cost of the system, including installation costs, less grants received, not to exceed $500) as provided in 15-32-201, MCA;
(b) if the system uses a "low emission wood or biomass combustion device" as defined in 15-32-102, MCA, and ARM 42.4.110, that a resident individual installs to provide heat for their principal dwelling, a credit against their individual income tax equal to the cost of the system, including installation, not to exceed $500, as provided in 15-32-201, MCA;
(c) if the energy generating system is a geothermal system that transfers energy from the ground by way of a closed loop or from ground water by way of an open loop that a resident individual installs in their principal dwelling to heat or cool the dwelling, a credit against their individual income tax equal to a portion of the installation costs of the system, not to exceed $1,500, as provided in 15-32-115, MCA;
(d) if the energy generating system is a geothermal system described in (2)(c), that is installed by a builder constructing a new residence to heat or cool the dwelling, a credit against the builder's individual or corporate income tax liability, as applicable, equal to a portion of the installation costs of the system, not to exceed $1,500, as provided in 15-32-115, MCA;
(e) a property tax exemption for a portion of the appraised value of a capital investment in the alternative energy generating system for ten years after installation, as described in 15-6-224, MCA, and ARM 42.19.1104 (the system may be installed in a residential dwelling or a commercial structure); and
(f) a property tax exemption for machinery and equipment used in qualifying small electric generating systems that are powered by an alternative renewable energy source, as described in 15-6-225, MCA, and ARM 42.4.4105.
(3) A taxpayer "completes installation of an energy system using a recognized nonfossil form of energy generation" as outlined in 15-32-201, MCA, when the following components of a system have been installed and placed in service:
(a) a source of alternative energy production, such as:
(i) solar photovoltaic modules;
(ii) solar thermal collectors;
(iii) a wind turbine;
(iv) a hydropower turbine; or
(v) a geothermal ground loop;
(b) a point of interconnection to the dwelling's electrical, heating, or hot water system; and
(c) if the source of alternative energy production does not produce energy in a usable form, a means of converting energy to a usable form, such as:
(i) for electrical energy systems, an inverter; or
(ii) for thermal energy systems, a heat exchanger.
(4) The cost for repair or replacement of a component installed in an existing system is not eligible for the credit.
(5) The cost of additional components installed to expand the output of an existing system is eligible for the credit. For example, if a taxpayer expands their solar photovoltaic energy system from one module to four modules, the energy credit is only available for the three new components, not all four.
(6) Energy generating systems that are standard components of conventional structures do not qualify for the property tax exemption provided in 15-6-224, MCA, or the alternative energy system credit provided in 15-32-201, MCA. ARM 42.4.110 defines standard components.
(7) To qualify for the property tax exemption provided in 15-6-224, MCA, or the alternative energy system credit provided in 15-32-201, the predominant use of the alternative energy system must be energy generation. The predominant use of a system is not energy generating if it possesses any two of the following characteristics:
(a) it is a structure that will be occupied more than four hours in a day;
(b) it is a structure that serves as a regularly used entry way to the building for which it provides energy;
(c) it is a structure that receives heat from a source other than the energy it generates;
(d) it is a structure that contains more space than is reasonably necessary for energy collection, generation, and distribution (about 200 to 230 sq. ft. to provide heat to a building with at least 1,000 sq. ft. of living area); or
(e) it is part of the living area of the structure for which it provides energy.
(8) Meeting the minimum system standards imposed to obtain a federal tax credit for solar energy systems, including solar water heating and photovoltaic systems, or for geothermal, wind energy, or fuel cell systems, is not a condition of qualifying for the Montana alternative energy system or geothermal system credits.
(9) The credits against individual income tax liability described in (2)(a) and (2)(b) are claimed on Form ENRG-B, Alternative Energy System Credit. The credits for the geothermal systems described in (2)(c) and (2)(d) are claimed on Form ENRG-A, Geothermal System Credit.