Declaratory Ruling No. 1991-1

Sales and Use Taxes

ISSUES:

Was Conn. Agencies Regs. §12-426-28a adopted pursuant to the mandate and authority contained in Conn. Gen. Stat. §12-412(39)?

Are the provisions of Conn. Agencies Regs. §12-426-28a, including the application procedure described therein, valid or do they conflict with the provisions of Conn. Gen. Stat. §12-412(39)?

FACTS:

1. On August 19, 1986, notice of intent to amend Conn. Agencies Regs. §12-426-28a was published in the Connecticut Law Journal.
2. The Statement of Purpose, which was published along with the text of the proposed regulation in the August 19, 1986 issue of the Connecticut Law Journal, provided:

Public Act 85-534 amended section 12-412(39) of the Connecticut General Statutes so that the section now pertains to systems utilizing cogeneration technology as well as to renewable energy systems. Section 12-426(1) of the Connecticut General Statutes requires the commissioner of revenue services to enforce the provisions of the Sales and Use Tax Act and to promulgate regulations to administer and enforce the provisions of the Act. Section 12-412(39) requires the commissioner to establish procedures under regulations promulgated by him to activate the exemption from sales and use taxes conferred by that section. Section 12-426-28a is intended to satisfy the requirements imposed on the commissioner by section s 12-426(1) and 12-412(39).

3. The proposed regulation was approved by the Attorney General as to legal sufficiency in accordance with Conn. Gen. Stat. §4-169 on January 7, 1987.
4. The proposed regulation was approved by the Legislative Regulation Review Committee in accordance with Conn. Gen. Stat. §4-170 on February 17, 1987.
5. The regulation was filed with the Secretary of the State in accordance with Conn. Gen. Stat. §4-172 on February 25, 1987.

DISCUSSION:

Conn. Gen. Stat. §12-412(39) exempts from sales and use taxes "[s]ales or installation, storage, use or other consumption of … systems utilizing cogeneration technology, including their parts and components, prior to July 1, 1991, the primary purpose of which is reducing the use of conventional energy sources. . . ." [Emphasis added]

While Conn. Gen. Stat. §12-412(39) provides that "’cogeneration technology’ shall be construed as defined in section 16-1", it does not define the term "system". The General Assembly delegated the power to "[establish] standards and specifications for qualifying systems"; Conn. Gen. Stat. §12-412(39); to the secretary of the office of policy and management".

In Conn. Agencies Regs. §16a-14-101, the secretary of the office of policy and management established such standards and specifications, defining the term "system utilizing cogeneration technology" as "a cogeneration facility which has been determined by the secretary to meet the operating and efficiency standards adopted by the federal energy regulatory commission (FERC), or its successor, pursuant to the provisions of P.U.R.P.A. as codified in 18 C.F.R. 292.205(a) or (b)."

(Similarly, Conn. Agencies Regs. §12-426-28a(b)(4) defines the terms "cogeneration system" and "system" as meaning "a cogeneration facility, as defined in 18 C.F.R. §292.202, the primary function of which is reducing the use of conventional energy sources, and which has been determined by the secretary to meet the operating and efficiency standards set out in 18 C.F.R. §292.205(a) or (b) and the ownership criteria set out in 18 C.F.R. §292.206." [Emphasis added])

"[I]n the absence of any evidence to the contrary, we may assume that this regulation's submission to the legislative regulation review committee and its subsequent ratification ‘[support] the position that the regulation is consistent with the general statutory scheme that the regulation was designed to implement.’ Texaco Refining & Marketing Co. v. Commissioner of Revenue Services, 202 Conn. 583, 600, 522 A.2d 771 (1987)." Connecticut Water Co. v. Barbato, 206 Conn. 337, 344 (1988).

DECLARATORY RULING:

Conn. Agencies Regs. §12-426-28a was adopted pursuant to the mandate and authority contained in Conn. Gen. Stat. §12-412(39).

The provisions of Conn. Agencies Regs. §12-426-28a, including the application procedure described therein, are valid and do not conflict with the provisions of Conn. Gen. Stat. §12-412(39).

Allan A. Crystal
Commissioner of Revenue Services
4/18/91