New South Dakota Law to Encourage Wind Energy

Press Release

New South Dakota Law to Encourage Wind Energy

Starting July 1, South Dakota will have a more stable and consistent tax climate for the wind industry thanks to new legislation that will provide tax incentives for wind energy facilities and related transmission.

"South Dakota is committed to its role as a leader in the energy industry," said Gov. Mike Rounds. "By making our business climate friendlier for those in the wind industry, we are optimistic that we'll see continued growth in this area."

The new legislation offers an incentive for the building of transmission lines and infrastructure. "We know we need additional transmission lines and infrastructure to get our wind energy to consumers and we are prepared to help offset some of those costs for new and expanding companies," said Gov. Rounds.

South Dakota, which is currently ranked fourth in overall wind generation potential, has seen tremendous growth in the past year and looks to continue that growth well into the future. Since June of last year, South Dakota has increased wind energy capacity by more than 300 percent, with two other wind energy projects currently under construction. Additionally, South Dakota has seen a boom in wind energy related manufacturing due its great business climate.

How the New Law Works:

The alternate tax has two parts, a "nameplate capacity" tax and a "gross receipts" tax. The nameplate tax is $3 multiplied by the nameplate capacity of the total wind farm, in kilowatts. The gross receipts tax is 2% of the wind farm's actual production of electricity multiplied by an established 2008 electricity rate of 4.75 cents per kWh. The established electricity rate will have a 2.5% annual rate of inflation.

All of the nameplate tax and 20% of the gross receipts tax goes to the local governments. Those taxes will be given to the local governments outside of the property tax caps. Each local government gets the same percentage of the tax as they would receive if the revenue was agricultural property tax. The remaining 80% of the gross receipts tax goes to the property tax reduction fund.

The maximum amount of the total rebate is 50% of the cost for the transmission lines and collector system for a wind farm or the cost for transmission lines to a new coal-fired power plant. The rebate lasts up to 10 years, and cannot be more than 90% of their gross receipts tax for years 1-5, and 50% of their gross receipts tax for years 6-10.

"We're very excited about the energy solutions that this will create," said Secretary Richard Benda, Department of Tourism and State Development. "And we pledge to continue to further expand our state's wind energy economy."

Source