SB 22-051

Senate Bill 22-051 aims to reduce emissions from buildings in Colorado by offering tax incentives and exemptions for energy-efficient products. Starting January 1, 2023, residents and businesses can get a 10% income tax credit when they buy and install certain types of heat pumps or water heaters that use less energy. Additionally, these products are exempt from state sales taxes. The bill also removes sales tax on specific building materials that help reduce carbon emissions starting July 1, 2024. This legislation benefits homeowners and businesses looking to upgrade their heating systems or construction projects with more environmentally friendly options. Since the bill has been signed into law, these incentives are now in effect for eligible purchases made after January 1, 2023.

Official Summary

For income tax years beginning on or after January 1, 2023, but before January 1, 2025, any purchaser of an air-source heat pump system, ground-source heat pump system, water-source heat pump system, or variable refrigerant flow heat pump system (heat pump system) or a heat pump water heater that installs a residential or commercial heat pump system or a residential or commercial heat pump water heater into real property in the state is allowed an income tax credit in an amount equal to 10% of the purchase price of the heat pump system or heat pump water heater. For income tax years beginning on or after January 1, 2023, but before January 1, 2025, any purchaser of an energy storage system that installs the energy storage system in a residential dwelling in the state is allowed an income tax credit in an amount equal to 10% of the purchase price of the energy storage system. For the heat pump system and heat pump water heater income tax credit and for the energy storage system income tax credit, the purchaser may assign the income tax credit to the seller of the heat pump system, heat pump water heater, or energy storage system (seller) at the time of purchase. If the purchaser assigns the credit, the seller must compensate the purchaser for the full nominal value of the tax credit. The act specifies the requirements of the purchaser, seller, and the department of revenue in connection with the assignment of either income tax credit. Beginning July 1, 2024, all sales, storage, and use of eligible decarbonizing building materials are exempt from state sales and use tax. "Eligible decarbonizing building materials" are building materials that have a maximum acceptable global warming potential as determined by the office of the state architect (office) and that are on a list of eligible materials maintained by the office. Manufacturers may submit the environmental product declaration of an eligible material to the office for the office's review. The office is required to compile a list of eligible materials and the manufacturers of those materials based on the information voluntarily submitted to the office by the manufacturers. Beginning January 1, 2023, all sales, storage, and use of heat pump systems or heat pump water heaters that are used in commercial or residential buildings are exempt from state sales and use tax. To be eligible for the sales and use tax exemption under certain circumstances, the purchaser of the heat pump system or heat pump water heater is required to certify that all necessary mechanical, plumbing, and electrical work performed in connection with the installation of the heat pump system or heat pump water heater will be performed by a certified contractor on a certified contractor list created pursuant to current law or by employees of a utility, subject to state licensing requirements and all applicable state and local rules, codes, and standards. Beginning January 1, 2023, all sales, storage, and use of energy storage systems that are used in a residential dwelling are exempt from state sales and use tax. A statutory town, city, or county may exempt the same items that are exempt from state sales and use tax pursuant to the act only by express inclusion of the exemption in its initial sales tax ordinance or resolution or by amendment thereto. After January 1, 2023, an investor-owned gas utility may apply to the public utilities commission for approval to measure the amount of use for billing purposes in either fuel commodity units or for energy services provided. The public utilities commission is required to approve, deny, or modify the utility's application. (Note: This summary applies to this bill as enacted.)

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