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A BILL to amend the Code of Virginia by adding in Chapter 19 of Title 45.2 an article numbered 4, consisting of sections numbered
45.2-1918
through
45.2-1922
, and by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered
58.1-439.12:13
, relating to Department of Energy; Virginia Solar Energy and Battery Energy Storage Systems Program and tax credit; solar energy and battery energy storage projects.
Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia is amended by adding in Chapter 19 of Title 45.2 an article numbered 4, consisting of sections numbered
45.2-1918
through
45.2-1922
, and by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered
58.1-439.12:13
as follows:
Article 4.
Virginia
Solar Energy and
Battery
Energy Storage Systems
Program
.
§
45.2-1918
. Definitions.
As used in this
article
, unless the context requires a different meaning:
"Qualified commerci
al and industrial project" means
a
new
solar energy and short duration battery energy storage project (i) approved by the Department pursuant to §
45.2-192
1
; (ii)
that
began
construction
on or after July 1, 2026; and
(iii)
used for
commercial or industrial use as determined by the customer rate class used to determine billing related to
such project
.
"Qualified
project" means a qualified commercial and indust
rial project, qualified residential project, or a qualified utility-scale project.
"Qualified
residential
project" means a
new
solar energy and
short duration
battery
energy storage project
or a
new
standalone
short duration battery energy storage project
(i)
approved by the
Department
pursuant to §
45.2-192
0
;
(ii)
in service
on or after July 1, 2026
; and
(iii)
used for residential purposes
as determined by the customer rate class used to determine billing related to
such
project
.
"Qualified utility-scale project"
means a short duration battery energy storage project
added to an existing solar facility or a
new standalone short duration battery energy storage project
(i) approved by the Department pursuant to §
45.2-1921
; (ii) that began construction on or after July 1, 2026; and (iii) used for
utility-scale
use as determined by the customer rate class used to determine billing related to such project.
"Short duration battery energy storage project" means the installation of battery energy storage equipment and technology that is capable of absorbing energy, storing such energy for less than 10 hours, and redelivering such energy after it has been stored.
"Solar energy project" means
the installation of a system of components
designed to convert solar radiation into useable thermal or electrical energy
.
§
45.2-1919
.
Virginia
Solar Energy and
Battery
Energy
Storage
Systems
Program
.
The Virginia Solar Energy and
Battery
Energy
Storage
Systems
Program
is hereby
established and shall be administered by the Department
for the purposes of
(i) coordinating and supporting the development
of
solar energy and
short duration battery
energy
storage industries and projects
by other public or
private
entities
;
(ii)
evaluating and approving solar energy and
short duration battery
energy storage projects as qualified projects for the purposes of
the tax credit in
§
58.1-439.12:13
;
and (
iii
) determining
which
items and services are considered
el
igible project costs for a given qualified project
. The
Department
may consult with research institutions, businesses, nonprofit organizations, and stakeholders as the
Department
deems appropriate.
§
45.2-192
0
. Qualified
residential
project requirements.
A. The
Department
shall evaluate and approve solar energy and
short duration battery
energy storage projects as qualified
residential
projects for the purposes of the tax credit in §
58.1-439.12:13
. To receive approval as a qualified
residential
project, the following conditions shall be met:
1. The project shall be fully operational and installed in the Commonwealth
by the time specified in subdivision 4
;
2
. The project
meets the qualifications of one of the provisions of the
federal Inflation Reduction Act (P.L.
117-169
)
as of June 30,
2025
,
that
would have qualified for federal tax credits or other federal incentives
;
3
. The project
is in service
on or after July 1, 2026
,
but
prior to the expiration of the tax credit in §
58.1-439.12:13
,
and construction is certified to be completed within five years of
the date on which construction began
; and
4
. The energy storage portion of the project provides a minimum storage duration of up to
two
hours.
B. No solar energy and
short duration battery
energy storage project shall receive a tax credit pursuant to §
58.1-439.12:13
without approval by the
Department
pursuant to this section.
§
45.2-192
1
.
Qualified
commercial, industrial, and utility-scale project
requirements.
A.
The Department shall evaluate and approve solar energy and
short duration
battery
energy storage projects as qualified
commercial and industrial
projects for the purposes of the tax credit in §
58.1-439.12:13
. To receive approval as a qualified
commercial and industrial
project, the following conditions shall be met:
1. The project shall be fully operational and
have
beg
u
n construction
in the Commonwealth by the time specified in subdivision
3
;
2.
The project meets the qualifications of one of the provisions of the federal Inflation Reduction Act (P.L.
117-169
) as of June 30, 2025
,
that would have qualified for federal tax credits or other federal incentives
;
3. The project
has begun construction
on or after July 1, 2026
,
but prior to the expiration of the tax credit in §
58.1-439.12:13
,
and construction is certified to be completed within five years of
the date on which construction began
; and
4
. The energy storage portion of the project provides a minimum storage duration of up to four hours.
The Department shall
a
lso
evaluate and approve such
qualified
commercial and
industrial
projects
pursuant to this subsection
based
upon the applicant's willingness to opt-in for the State Corporation Commission
's
v
irtual
p
ower
p
lant
p
ilot
p
rogram
established in §
56-585.1:16
.
B.
The Department shall evaluate and approve solar energy and
short duration battery
energy storage projects as qualified
utility-scale
project
s
for the purposes of the tax credit in §
58.1-439.12:13
. To receive approval as a qualified
utility
-scale
project, the conditions
listed in su
bdivisions
A 1 through
4
shall be me
t.
The Department shall evaluate and approve such utility
-
scale project
pursuant to this subsection
based upon the applicant
's ability to reduce electric utility costs for ratepayers.
C.
No solar energy and short duration battery energy storage project shall receive a tax credit pursuant to §
58.1-439.12:13
without approval by the Department pursuant to this section.
§
45.2-192
2
.
Regional uptake
dashboard for approved solar energy and
short duration battery
energy
storage projects
; reports.
A.
The
Department
shall monitor allocation of the tax credit in §
58.1-439.12:13
and publish quarterly transparency reports summarizing such
allocation
.
B. The
Department
shall maintain
a public dashboard displaying regional uptake, demographic distribution
such as
low to moderate income and non-low
to moderate income data
,
and
sectoral progress
toward
allocated targets.
§ 58.1-
439.12:13.
Tax credit for investments in
solar
energy equipment
and
short duration
battery energy storage
.
A. For purpose
s
of this section:
"Eligible project costs" means
(i) for residential projects,
costs incurred for the construction,
installation,
purchase, or lease of qualifying solar energy equipment
or qualifying energy storage
resources
,
including labor costs incurred for installation and electrical integration,
and costs incurred for permitting, inspection, engineering, and system design services necessary for such project
;
(ii) for commercial and industrial projects,
costs incurred for such project that would otherwise be eligible for residential projects
, feasibility studies and resources assessments, environmental review and mitigation measures, interconnection studies and utility interconnection applica
tion fees, project-specific legal and financial services, site preparation,
purchase or lease of land solely dedicated to project operation, onsite electrical upgrades, switch
gear, and transformer installation necessary for grid compliance
;
and (iii) for utility-scale projects,
costs incurred for such project that would otherwise be eligible for commercial and industrial projects, and high-voltage interconnection and substation construction, transmission-level engine
ering, permitting, and intertie infrastructure, long-term site development, roadwork, and land lease or purchase strictly for operational footprint.
"Eligible project costs" include
s
only costs directly associated with energy generation, storag
e, and grid integration.
"Eligible projects costs" does not include land acquisition unrelated to system
operation
,
or where the project is not completed
,
general property improvements, renovations, or unrelated construction
;
transmission upgrades not directly attributable to project interconnection
;
costs associated with speculative land banking or site prospecting without approved interconnection plans
;
legal fees, lob
bying, or administrative costs unrelated to project execution
;
backup generators, fossil fuel systems, or hybrid diesel-photovoltaic integrations
;
energy efficiency upgrades such as insulation
or
lighting
;
heating, ventilation, and air conditioning
(
HVAC
)
unless integrated with
a
solar and storage projec
t and separately itemized
; or any leased residential systems
.
"Qualified commercial and industrial project"
, "qualified project"
,
and "qualified residential project"
mean the same as t
hose
term
s
are
defined in §
45.2-1918
.
B. For taxable years beginning on and after January
1, 2027, but before January 1, 203
2, a taxpayer shall be allowed a
one-time,
refundable
, installment
credit
, in the manner provided in subsection C,
against the tax levied pursuant to §
58.1-320
or
58.1-400
in an amount equal to
:
1.
For
a
r
esidential
qualif
ied
project, 35 percent of eligible project costs
, not to exceed
$
6
,
0
00
.
2.
For
a
commercial and industrial
qualif
ied
project,
35 percent of eligible project costs
, not to exceed $2.5 million per project
.
3. For
a
utility-scale
qualif
ied
project, 35 percent of eligible project costs
, not to exceed $5 million per project.
The taxpayer shall submit purchase receipts with the income tax return satisfactory to the Tax Commissioner.
C.
One hundred
percent of t
he tax credit shall be earned in the year the
project
is placed in service and shall be claimed over a five-year period
in installments of
20 percent per year.
If
the amount of the credit allowed
in any given year
exceeds the taxpayer's liability for the taxable year
, the amount that exceeds the tax liability shall be refunded by the Tax Commissioner
on behalf of the Commonwealth for 100 percent of face value within 90 days after the filing date of the income tax return on which the individual applies for the refund.
However, no credit may be claimed for a taxable year during or after which the taxpayer disposes of, takes out of service, or moves outside of the Commonwealth any qualifying solar energy equipment.
In such instance, any remaining
, unpaid installments of
the credit allowed to such taxpayer for such given project shall expire and become non-claimable for
such
project
.
D.
The aggregate amount of credits allowed under this section shall not exceed $50 million per applicable budget cycle. Of this amount, $12.5 million shall be reserved for residential qualifying projects, and the remaining $37.5 million for commercial
and
industrial and utility-scale qualifying projects, or an amount appropriated by the General Assembly during the applicable budget cycle, with 25 percent allocated for
qualified residential projects
and 75 percent allocated for
qualified
commercial and industrial projects
. Credits shall be allocated subject to the availability of funds within each category and tranche, upon submission of a complete application as determined by the Department of Energy and the Department. If, after nine months from the start of the taxable year, the Department of Energy determines that
the
amounts reserved for
a given qualified project
are
unlikely to be fully allocated, the Department of Energy may reallocate any unreserved or uncommitted amounts, provided that such reallocation does not exceed the aggregate annual credit cap. Credits shall be allocated by the Department on a first-come, first-served basis.
E. The amount of any credit attributable under this section to a partnership, limited liability company, or electing small business corporation (S
corporation) shall be allocated to the individual partners, members, or shareholders, in proportion to their ownership or interest in such entity.
F.
To qualify for the tax credit under this section,
a project
shall be installed in
compliance with
Article 4
(§
45.2-1918
et seq.) of Chapter 19 of Title 45.2
.
1.
Once the taxpayer has satisfied all the requirements to the satisfaction of the
Department
of Energy
, the
Department of Energy
shall
provide the taxpayer with a certificate
of approval for a qualified project, i
dentifying whether the project qualifies as residential, commercial and industrial, or utility-scale. Such certificate shall include
the
amount of eligible costs
incurred
and t
he fiscal year in which such costs were incurred
for which
the taxpayer may claim a
tax credit
pursuant to this section
.
The
Department of Energy
shall send a copy of such certificate to the Tax Commissioner
in a reasonable time and manner as determined by the Commissioner.
2
.
The taxpayer shall retain all proof of cost documentation, including invoices and scope of work
,
and
any
certificate
of approval for a qualified project received pursuant to subdivision 1
for at least five years from the receipt of such certificate.
G.
The Tax Commissioner shall develop guidelines, in consultation with the
Department of Energy
, for claiming the credit provided by this section
, including establishing application procedures, reservation requirements, tranche schedules, and reallocation criteria consistent with this section
. Such guidelines shall be exempt from the provisions of the Administrative Process Act (§
2.2-4000
et seq.).
2. That the provisions of this act shall become effective on January 1, 2027.