Tax Type
Corporation Income Tax
Description
Power cogenerators; Conversion of purchased coal
Topic
Credits
Date Issued
04-20-1999
April 20, 1999
Re: Request for Ruling: Corporation Income Tax
Dear****
This will respond to your letter in which you request a ruling concerning whether * * * * * (the "Taxpayer') is eligible to receive the Qualifying Cogenerators and Small Power Producers Credit.
FACTS
Currently, the Taxpayer does not use coal mined in Virginia in its energy producing plants. To date, the Taxpayer has been unable to locate a Virginia supplier of coal that meets the coal requirements for its plants.
The Taxpayer requests a ruling as to whether or not it would be eligible for the Qualifying Cogenerators and Small Power Producers Credit under Code of Virginia § 58.1-433 if the Taxpayer purchases coal mined in Virginia, sells the coal to a third party for conversion into an alternative fuel, and then purchases the fuel from the third party for the purpose of producing electricity for sale to a public service corporation in Virginia.
DETERMINATION
Code of Virginia § 58.1-433 provides a corporate income tax credit to cogenerators and small power producers as defined by Code of Virginia § 58.1-2600. The credit is equal to two dollars per ton of coal purchased by a cogenerator or small power producer. In order to qualify for the credit, the coal purchased must be mined in Virginia and the cogenerator or small power producer must sell electric power to a public service corporation.
Code of Virginia § 58.1-2600 defines a cogenerator as "a qualifying cogenerator or qualifying small power producer within the meaning of regulations adopted by the Federal Energy Regulatory Commission in implementation of the Public Utility Regulatory Policies Act of 1978 (P.L. 95-617).'
The Public Utility Regulatory Policies Act of 1978 (PURPA) defines a qualifying cogenerator as the owner or operator of a facility which produces electric energy and steam or other forms of useful energy used for industrial, commercial, heating, or cooling purposes and meets the requirements (including those respecting minimum size, fuel use, and fuel efficiency) of the Federal Power Commission. Such a facility may not be owned by a person primarily engaged in the generation or sale of electric power (other than electric power solely from cogeneration facilities or small power production facilities).
PURPA defines a qualifying small power producer as the owner or operator of a facility which produces electric energy solely by the use, as a primary energy source, of biomass, waste, renewable resources, geothermal resources, or any combination thereof, and has a power production capacity which, together with any other facilities located at the same site (as determined by the Commission), is not greater than 80 megawatts which the Commission determines, by rule, meets such requirements (including requirements respecting fuel use, fuel efficiency, and reliability) as the Commission may prescribe by rule. The facility must also not be owned by a person primarily engaged in the generation or sale of electric power (other than electric power solely from cogeneration facilities or small power production facilities). The definitions of a qualifying cogenerator and qualifying small power producer are codified under U.S.C.A. 16 § 796 and U.S.C.A. 16 § 824a-3(j), copies enclosed.
Assuming the Taxpayer fits the definition of a cogenerator, the Taxpayer would be eligible to receive the Qualifying Cogenerators and Small Power Producers Credit for the purchase of coal mined in Virginia and sold to an E-fuel or Syn-fuel producer. The Code of Virginia only requires that the coal be mined in Virginia and the electric power produced by a cogenerator be sold to a public service corporation in Virginia. The fact that the Taxpayer in this case adds a step in between the two requirements where the coal is converted into an alternative fuel does not affect the application of the credit. So as long as the Taxpayer is a cogenerator, purchases Virginia mined coal, and sells electric power to a public service corporation in Virginia, the Taxpayer will be eligible to receive the credit.
This ruling has been made subject to the facts presented to the department as summarized above. Any change in these facts or the introduction of facts by another party may lead to a different result. If you have any additional questions regarding this ruling, please feel free to call * * * * * in the Office of Tax Policy at * * * * *.
Sincerely,
Danny Payne
Tax Commissioner
Rulings of the Tax Commissioner