NOTICE IS HEREBY GIVEN THAT, pursuant to section 227.11 (2) (a), Stats., the Department of Revenue will hold a public hearing to consider permanent rules creating section Tax 11.10, relating to wind, solar, and certain gas powered products.

The hearing will be held:

Handicap access is available at the hearing location.

Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person listed below no later than February 3, 2012, and will be given the same consideration as testimony presented at the hearing.

This rule is not subject to s. 227.135 (2), as affected by 2011 Wisconsin Act 21. The statement of scope for this rule, published in Register No. 666 on June 14, 2011, was sent to Legislative Reference Bureau prior to the effective date of 2011 Wisconsin Act 21.

Section 77.54 (56), Stats.

Section 227.11 (2) (a), Stats.

Section 227.11 (2) (a), Stats., provides that each agency may promulgate rules interpreting the provisions of any statute enforced or administered by it, if the agency considers it necessary to effectuate the purpose of the statute.

Section Tax 11.68 (4), (5), and (6) provide information on the determination of the classification of property, including products defined and exemplified in this rule, after installation.

This rule defines the term “product" as it applies to the sales and use tax exemption under s. 77.54 (56), Stats., provides examples of items that are and are not considered products, and clarifies the exemption requirements and scope.

There is no existing or proposed federal regulation that is intended to address the activities to be regulated by the rule.

Minnesota and Iowa have sales and use tax exemptions relating to equipment involved in converting wind or solar energy into electricity or heat, Michigan and Illinois do not.

M. S. 297A.67. Subd.29, Solar energy products. A solar energy system, as defined in section 216C.06, subdivision 17, is exempt.

M. S. 297A.68.Subd.12, Wind energy conversion systems. Wind energy conversion systems, as defined in section 216C.06, subdivision 12, that are used as an electric power source are exempt, and the materials used to manufacture, install, construct, repair, or replace them are exempt.

Minnesota has no rules pertaining to these statutes.

Iowa Code sec. 423.3.54, The sales price from the sale of wind energy conversion property to be used as an electric power source and the sale of the materials used to manufacture, install, or construct wind energy conversion property used or to be used as an electric power source.

For purposes of this subsection, “wind energy conversion property" means any device, including, but not limited to, a wind charger, windmill, wind turbine, tower and electrical equipment, pad mount transformers, power lines, and substation, which converts wind energy to a form of usable energy.

Iowa Code sec. 423.3.90, The sales price from the sale of solar energy equipment. For purposes of this subsection, "solar energy equipment" means equipment that is primarily used to collect and convert incident solar radiation into thermal, mechanical, or electrical energy or equipment that is primarily used to transform such converted solar energy to a storage point or to a point of use.

Iowa has a rule (701—230.7(423)) relating to the statutory exemption for “wind energy conversion property." However, the rule merely reiterates the statutory language and does not interpret the statute.

In reviewing the language of s. 77.54 (56), Stats., the department concluded that in order to administer the sales and use tax exemption being created, it needs to promulgate rules interpreting and clarifying the underlying statutory provisions.

As explained above, this rule is created to administer changes in Wisconsin's sales and use tax laws. As the rule itself does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.

This rule does not have a significant fiscal effect on the private sector.

This rule does not have a significant effect on small business.

Please contact Dale Kleven at (608) 266-8253 or dale.kleven@revenue.wi.gov, if you have any questions regarding this rule.

Comments may be submitted to the contact person shown below no later than one week after the public hearing on this rule is conducted. Information as to the place, date, and time of the public hearing will be published in the Wisconsin Administrative Register.

SECTION 1. Tax 11.10 is created to read:

Tax 11.10 Wind, solar, and certain gas powered products. (1) General. Section 77.54 (56), Stats., provides a sales and use tax exemption for the following:

(a) The sales price from the sale of and the storage, use, or other consumption of a product whose power source is wind energy, direct radiant energy received from the sun, or gas generated from anaerobic digestion of animal manure and other agricultural waste, if the product produces at least 200 watts of alternating current or 600 British thermal units per day, except that the exemption does not apply to an uninterruptible power source that is designed primarily for computers.

(b) Except for the sale of electricity or energy that is exempt from taxation under s. 77.54 (30), Stats., the sales price from the sale of and the storage, use, or other consumption of electricity or energy produced by a product described in par. (a).

(2) Definition. In this section and in s. 77.54 (56), Stats., “product" means tangible personal property that converts wind energy, direct radiant energy received from the sun, or gas generated from the anaerobic digestion of animal manure and other agricultural waste into alternating current electricity or heat.

(3) Items which are products. Products include the following items described in sub. (2):

(a) Wind turbine generators, including blade assembly and tower.

(b) Gas powered electric generators.

(c) Gas fueled furnaces, space heaters, and water heaters.

(d) Photovoltaic cells, modules, and arrays, including tracking equipment that maintains optimal orientation to the sun.

(e) Solar thermal collectors.

(f) Inverters used to transform direct current produced by an item described in sub. (2) into alternating current, including property used to convey the direct current from the product to the inverter.

(g) Hardware required for installation of an item described in pars. (a) to (f).

(4) Items which are not products. Items which are not products include the following:

(a) Tangible personal property that consumes electricity or heat produced by an item described in sub. (2).

Example: A refrigerator that consumes electricity produced by a wind turbine generator is not itself a product whose power source is wind energy.

(b) A foundation for an item described in sub. (2).

Example: A solar tracking device that holds an array of photovoltaic cells is installed onto a concrete foundation. The concrete foundation is not a product whose power source is direct radiant energy received from the sun.

(c) Except as provided in sub. (3) (f), property necessary to convey, transfer, or alter electricity or heat generated by an item described in sub. (2).

(d) Tangible personal property used to store electricity or heat produced by an item described in sub. (2).

Example 1) A tank that stores hot water heated by a solar collector is not itself a product whose power source is direct radiant energy received from the sun.

Example 2) Batteries used to store electricity produced by a wind turbine generator or photovoltaic cells are not themselves products whose power source is wind energy or direct radiant energy received from the sun.

(5) Exemption for products. (a) For purposes of the exemption under sub. (1) (a), a product that produces direct current shall be considered to produce alternating current if the direct current is modified to alternating current prior to the direct current being stored, used, consumed, or sold by the producer.

Example 1) An array of photovoltaic cells produces direct current. All of the current produced by the array is transferred directly to an inverter. The alternating current from the inverter is then either used to power equipment or it is sold to a utility. The photovoltaic array is considered to meet the requirement that it be a product that produces alternating current.

Example 2) A wind turbine generator produces direct current. The current is used to charge batteries. When needed, the batteries supply direct current to an inverter, producing alternating current used to power various devices. The direct current generator does not qualify for exemption since the direct current is being stored by the producer prior to changing it to alternating current.

(b) In order to qualify for the exemption under sub. (1) (a), a product using gas as a power source shall use gas from the anaerobic digestion of animal manure and other agricultural waste exclusively as its power source. A product that uses other fuels such as natural gas, propane, or gas generated from a landfill does not qualify for exemption.

(c) Products that qualify for the exemption under sub. (1) (a) include the following:

1. An alternating current wind turbine generator rated by the manufacturer to produce at least 200 watts of alternating current with a wind speed of 25 miles per hour.