North Dakota

North Dakota offers a corporate income tax credit for the cost of acquiring and installing a geothermal, solar, biomass or wind-energy system in a building or on property owned or leased by the taxpayer in North Dakota. For systems installed after December 31, 2000, and before January 1, 2015, the credit is equal to 3% per year for five years of the actual cost of acquisition and installation of the system.

The installation costs do not include costs of redesigning, remodeling or otherwise altering the structure of a building in which the renewable-energy system is installed. If an eligible renewable-energy system is a part of a system that uses other means of energy, only the portion of the total system directly attributable to the cost of the renewable-energy system is included in determining the credit amount.

In general, if the amount of credit exceeds the taxpayer’s income tax liability, the excess may be carried over to each of the five succeeding taxable years. However, any excess tax credits earned for wind-energy systems installed after September 30, 2008, and before January 1, 2012, may be carried over to each of the 20 succeeding taxable years. For geothermal, solar or biomass systems installed after September 30, 2008, and wind energy devices installed after December 31, 2011, any excess may be used as a credit carryover to each of the 10 succeeding taxable years.

A pass-through entity that installs an eligible system in or on a property it owns or leases is considered to be the taxpayer. The amount of the credit allowed with respect to the entity's investments is determined at the pass-through entity level and must be passed through to the corporate partners, shareholders or members proportionally.

For eligible systems installed after December 31, 2006, if system ownership is transferred at the time installation is complete and the system is fully operational, the purchaser of the device is eligible for the tax credit under this section. Subsequent purchasers of the device are not eligible for the credit.

North Dakota offers an income tax credit to individuals, estates and trusts for the cost of acquiring and installing a geothermal energy system in a building or on property owned or leased by the taxpayer in North Dakota. For systems installed after December 31, 2008, and before January 1, 2015, the credit is equal to 3% per year for five years of the actual cost of acquisition and installation of the system. Any excess may be used as a credit carryover to each of the 10 succeeding taxable years.

If the taxpayer holds an interest in a pass-through entity (such as a partnership or S-corporation) that installs a geothermal system, the credit is passed through to the taxpayer in proportion to its interest in the entity.

In 2001, North Dakota established property tax reductions for commercial wind turbines constructed before 2011. Originally, the law reduced the taxable value of centrally-assessed* wind turbines with a capacity of 100 kilowatts (kW) or greater from 10% to 3% of assessed value, resulting in a property tax savings of 70%. This law has since been amended, resulting in the establishment of slightly different tax valuation procedures for some installations.

Currently, all centrally-assessed wind turbines with a capacity of 100 kW or greater that are constructed after June 30, 2006, and before January 1, 2015, are valued at 1.5% of their assessed value, as are units constructed after April 30, 2005, and before July 1, 2006, and for which a power purchase agreement (PPA) was executed after April 30, 2005, and before January 1, 2006. For the latter category, the reduced valuation applies only for the duration of the original PPA. All other centrally-assessed wind turbines with a capacity of 100 kW or greater are valued at 3% of assessed value.

North Dakota also offers a property tax exemption for some types of locally-assessed renewable energy systems.

*While most property tax assessments in North Dakota take place at the local level, the State Board of Equalization values investor-owned utilities (IOUs) for property tax purposes. Thus, this reduction will generally apply only to IOUs engaged in the operation of commercial wind farms.

North Dakota exempts from local property taxes any locally-assessed* solar, wind, or geothermal energy device serving a new or existing building or structure. Stand-alone systems and systems that are part of conventional systems are eligible. For solar, wind or geothermal systems that are part of a conventional energy system, only the renewable energy portion of the total system is eligible. This exemption is applied only during the five-year period following installation. To apply for this exemption, system owners must contact their local tax assessor or county director of tax equalization.

North Dakota also offers a property tax reduction for centrally-assessed* wind turbines larger than 100 kilowatts (kW). These systems are not eligible for the exemption described above.

* While most property tax assessments in North Dakota take place at the local level, the State Board of Equalization values investor-owned utilities (IOUs) for property tax purposes. The locally-assessed provision was added in 2007 by H.B. 1072, presumably to clarify the different valuation procedures for commercial and non-commercial renewable energy facilities.

Electrical generating facilities are exempt from sales and use taxes in North Dakota. The exemption is granted for the purchase of building materials, production equipment, and any other tangible personal property that is used for constructing or expanding the facility. In order to qualify, the facility must have at least one electrical generation unity with a capacity of at least 100 kilowatts (kW).  For wind facilities, the equipment must be purchased between July 2011 and January 2015. For non-wind and non-coal facilities, the facility must sell the electricity it produces or use it on site for a business-related activity.  In order to receive the exemption, a request must be made in writing to the Tax Commissioner and must include a description of the equipment, the cost of the equipment, and an explanation of how the equipment enables the business to expand its operations. The Tax Commissioner will notify the taxpayer in writing if the project qualifies for an exemption. For more information, see the North Dakota Tax Incentives for Business brochure.

In North Dakota, materials purchased for building or expending gas processing facilities are exempt from sales and use taxes. Building materials, equipment, and other tangible property are eligible for the exemption. In addition, any tangible property used to build or expand a facility that compresses, processes, or gathers gas may qualify for the exemption. Equipment purchases that exceed $100,000 that are purchased in order to reduce emissions, increase efficiency, or enhance the reliability of a gas processing facility may also qualify for the exemption. In order to receive the exemption, a request must be made in writing to the Tax Commissioner and must include a description of the equipment, the cost of the equipment, and an explanation of how the equipment enables the business to expand its operations. The Tax Commissioner will notify the taxpayer in writing if the project qualifies for an exemption. For more information, see the North Dakota Tax Incentives for Business brochure.

In North Dakota, the sale of hydrogen used to power an internal combustion engine or a fuel cell is exempt from sales tax. In addition, any equipment used by a hydrogen generation facility for the production and storage of hydrogen is exemption from sales tax. Stationary and portable hydrogen containers or pressure vessels, piping, tubing, fittings, gaskets, controls, valves, gauges, pressure regulators, safety relief devices are included as eligible equipment. In order to receive the exemption, a request must be made in writing to the Tax Commissioner and must include a description of the equipment, the cost of the equipment, and an explanation of how the equipment enables the business to expand its operations. The Tax Commissioner will notify the taxpayer in writing if the project qualifies for an exemption. For more information, see the North Dakota Tax Incentives for Business brochure.

North Dakota's State Facility Energy Improvement Program provides grant funding to state institutions and agencies for the installation and implementation of energy-efficiency measures. An energy audit is required to identify potential energy conservation measures, respective costs, energy savings and payback periods. The state will cover half the cost -- up to $50,000 -- of an energy audit. Energy-efficiency measures recommended by the audit and approved by the state will be funded.

Past grants have supported energy conservation measures at state-funded colleges and universities, buildings in the Capitol Complex, the State Penitentiary and the North Dakota Department of Transportation.

Northern Plains Electric Cooperative is a member-owned electric cooperative that serves customers in east-central North Dakota. This EMC offers a low-interest loan program residential and commercial customers that wish to install energy efficient electric space conditioning systems, electric water heaters, and pursue weatherization improvements.  Loans of up to $5,000 are available for qualified energy saving programs; loans must be repaid in seven years and are loaned at a 5% rate. Customers should contact Northern Plains, or visit the program website, for more information on how to apply for this loan.

Otter Tail Power Company's Dollar Smart Financing Program offers $150 - $40,000 loans to its residential and business customers. Customers who have satisfactory 12-month payment histories with Otter Tail or another utility may use the 8.5% interest rate loan to finance purchases of new electric technologies. Loans may not exceed 80 percent of the project's total cost, and the maximum residential loan is $7,000 with the exception of geothermal heat pump installations and combination electric systems such as a thermal storage central furnace with an air source heat pump, which are eligible for up to $20,000 in financing. The maximum loan amount for businesses is $25,000, or $40,000 if installing a commercial geothermal heat pump. Other projects may be available for CIP financing, which provides rebates up to $100,000. Contact Otter Tail Power Company for more program information.  General household appliances such as refrigerators, ranges, dishwashers, etc. do not qualify for DollarSmart financing.

Bright Energy Solutions offers energy efficiency cash incentive programs to residential and business customers of municipal utilities that are members of Missouri River Energy Services. In North Dakota, this includes:

• Cavalier Municipal Utilities
• Hillsboro Municipal Utilities
• Lakota Municipal Light Plant
• Northwood Municipal Utilities
• Valley City Public Works

For commercial customers, rebates are available for compressed air system efficiency, heating and cooling, lighting, and VFDs and pumps. Applications are available on the program web site.

Otter Tail Power Company offers incentives to all of its customers to install energy efficient equipment in their homes or facilities. Rebates are available for high-efficiency electric heating technologies such as demand control equipment, hot water heaters and thermal storage technologies. Residential customers who install a Residential Demand Control unit on the RDC rate (Rate 241) are eligible for a $300 rebate. Receipts must be turned in with the program application in order to qualify for the rebate. Contact Otter Tail Power Company or visit the utility's website for more program information.

Bright Energy Solutions offers energy efficiency cash incentive programs to residential and business customers of municipal utilities that are members of Missouri River Energy Services. In North Dakota, this includes:

• Cavalier Municipal Utilities
• Hillsboro Municipal Utilities
• Lakota Municipal Light Plant
• Northwood Municipal Utilities
• Valley City Public Works

 For residential customers, rebates are available for ENERGY STAR ceiling fans, clothes washers, decorative light strings, dehumidifiers, dishwashers, refrigerators, room air conditioners, and heating and cooling systems. Applications are available on the program web site.