Do the turbines, pipes, tanks, and other equipment used to build a power plant qualify for Illinois's Enterprise Zone sales tax exemption on building materials?

Plain-English summary

A company building a natural gas-fired electric power plant on land it purchased in an Illinois county asked the Illinois Department of Revenue (IDOR) to confirm, in advance, that a long list of construction materials and equipment would qualify for the state's Enterprise Zone building materials exemption. That exemption, found at 35 ILCS 120/5k and 86 Ill. Adm. Code 130.1951(e), lets a retailer deduct receipts from sales tax when it sells building materials that get incorporated -- through remodeling, rehabilitation, or new construction -- into real estate located in an enterprise zone, as long as the purchaser holds an active Enterprise Zone Building Materials Exemption Certificate at the time of purchase.

The equipment list was extensive: turbines, generators, heat recovery steam generators, fire protection systems, air-cooled condensers, water pumps, cooling systems, an auxiliary boiler, storage tanks, a combined control/administration/warehouse building, electrical equipment enclosures, piping, valves, natural gas facilities, electrical systems, instrumentation and controls, air compressors, structural steel, pollution control facilities, and repair/replacement materials. The plant site was in the process of being added to a local Enterprise Zone, which was later confirmed and approved.

IDOR applied the "intention test" it has used in prior letter rulings (citing ST 08-0003-PLR and ST 00-0156) to decide whether an item counts as "permanently affixed" to real estate. That test looks at three things: (1) whether the item is physically affixed to the realty, (2) whether it is applied to the use or purpose the realty is put to, and (3) the intent of the person affixing it -- with whether the item is essential to the real estate's use as another factor commonly considered.

Reviewing the company's detailed, item-by-item description of how each piece of equipment would be bolted or welded to concrete foundations, structural steel, or other permanently-affixed components, IDOR concluded that, based on those descriptions, essentially the entire equipment package qualifies for the Enterprise Zone building materials exemption. This tracks a long line of the Department's own prior rulings -- including ST 99-0009 and ST 00-0013, plus roughly a dozen more issued between 2000 and 2008 -- finding that turbine generators, transformers, cabling, piping, and similar permanently-affixed power-plant components qualify.

IDOR flagged two limits, though. First, two specific referenced items -- "standalone specialty foam type fire protection skids" and general "supporting fire protection equipment" -- were too vaguely described for IDOR to determine whether they qualify ("It is unclear what items are encompassed within these references"). Second, IDOR reiterated that items must actually be permanently affixed to qualify, giving the example that "fire extinguishers and gloves do not qualify for the exemption" -- portable or handheld safety items are not covered even if they're used at the site. IDOR also reminded the company that the exemption additionally requires the property to be located within the enterprise zone and the purchaser to hold an active Exemption Certificate at the time of purchase -- both facts that depend on things outside the four corners of the letter itself.

This is a Private Letter Ruling issued under 2 Ill. Adm. Code 1200.110. It binds the Department only as to this taxpayer, only for 10 years, and only to the extent the facts given were accurate and complete.

What this means for you

Power-plant and industrial developers building in Enterprise Zones

If you're developing a power plant or similar large industrial facility inside (or expanding into) an Illinois Enterprise Zone, this ruling is a strong signal that IDOR will treat the vast majority of major equipment -- turbines, generators, boilers, tanks, cooling systems, electrical systems, piping, structural steel -- as exempt "building materials" as long as it is permanently affixed (bolted, welded, or hard-piped to a foundation, structural steel, or other affixed components) rather than portable. But you still need an active Enterprise Zone Building Materials Exemption Certificate in hand at the time of each purchase, and the property must actually be located within the zone -- the exemption doesn't apply automatically just because equipment qualifies as a "building material."

Construction contractors

If you're the EPC (engineering, procurement, and construction) contractor purchasing materials on the developer's behalf, document how each item will be physically affixed -- anchor-bolted to a concrete foundation, welded or flanged to piping/structural steel, or hardwired -- since that item-by-item factual showing is exactly what IDOR relied on here. Vague, generic descriptions (like the undefined "supporting fire protection equipment" in this ruling) won't get a favorable answer. And don't assume small portable items like fire extinguishers or hand tools are covered; they aren't, no matter how essential they are to site safety.

Accountants and tax professionals

The core legal test to apply is the three-factor "intention test" (affixed to the realty, applied to the realty's use, and the affixer's intent), which the Department has used consistently since at least ST 00-0156 and reaffirmed here and in ST 08-0003-PLR. Because the exemption determination is made item-by-item, expect to need itemized descriptions of installation method for each major equipment category when advising a client on this exemption, and remember the ruling only binds the Department for this specific taxpayer, for 10 years, and only if the underlying facts stay accurate and complete.

Common questions

Q: Does all the equipment for a new power plant qualify for the Enterprise Zone building materials exemption?
A: Not automatically, but in this ruling, essentially all of the detailed equipment list did qualify, because each item was shown to be permanently affixed to the real estate (bolted or welded to concrete foundations, structural steel, or other affixed components). Two vaguely-described fire protection items were left undetermined, and purely portable items are never covered.

Q: What is the "intention test" IDOR uses?
A: It's a three-factor, fact-specific inquiry into whether an item is "permanently affixed" to real estate: (1) whether the item is physically affixed to the realty, (2) whether it's applied to the use or purpose the realty is put to, and (3) the intent of the person affixing it. Whether the item is essential to the real estate's use is another factor commonly considered.

Q: Do fire extinguishers or safety gloves qualify for the exemption?
A: No. IDOR specifically said "fire extinguishers and gloves do not qualify for the exemption" because they are not permanently affixed to the real estate, even though they're used at the facility.

Q: What else does a purchaser need besides qualifying "building materials" to get the exemption?
A: The property must be located within an established enterprise zone, and the purchaser must hold an active Enterprise Zone Building Materials Exemption Certificate issued by the Department at the time of the purchase. Both are separate requirements from whether an item counts as a qualifying building material.

Q: Can other taxpayers rely on this ruling?
A: No. A Private Letter Ruling binds the Department only as to the taxpayer who requested it, only to the extent the facts given were correct and complete, and only for 10 years from issuance under 2 Ill. Adm. Code 1200.110(e).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0002-plr.pdf

Original ruling text

ST 19-0002-PLR 07/08/2019 ENTERPRISE ZONES
Under the Enterprise Zone building materials exemption, a deduction from Illinois Retailers’
Occupation Tax liability exists for gross receipts from retail sales of materials that will be
incorporated, by remodeling, rehabilitation, or new construction, into real estate located in an
enterprise zone established by a county or municipality under the Illinois Enterprise Zone Act.
(See 35 ILCS 120/5k and 86 Ill. Adm. Code 130.1951(e).) (This is a PLR.)

July 8, 2019

Dear Xxxx:
This letter is in response to your letters dated May 23, 2019, and June 28, 2019, in which you
requested information. The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the Department,
but only as to the taxpayer who is the subject of the request for ruling and only to the extent the facts
recited in the PLR are correct and complete. Persons seeking PLRs must comply with the
procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The
purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department regulations or
other sources of information regarding the topic about which they have inquired. A GIL is not a
statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code
1200.120. You may access our website at www.tax.illinois.gov to review regulations, letter rulings
and other types of information relevant to your inquiry.
Review of your request disclosed that all the information described in paragraphs 1 through 8
of Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY, for the issue or issues presented in this ruling, and is
subject to the provisions of subsection (e) of Section 1200.110 governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that neither COMPANY, nor a
related taxpayer is currently under audit or involved in litigation concerning the issues that are the
subject of this ruling request. In your letter you have stated and made inquiry as follows:
COMPANY (“Company”) hereby respectfully requests a Private Letter Ruling (“PLR”)
pursuant to 2 Ill. Admin. Code Section 1200.110.
General Information:

1. We have enclosed a copy of Power of Attorney Form IL-2848, executed by an
   authorized agent of the Company, authorizing NAME and NAME 1 of the law
   FIRM, to act on the Company’s behalf.
2. This PLR request is not based on alternative plans of proposed transactions or a
   hypothetical situation, but is instead based on the Company’s actual business

ST 19-0002-PLR
Page 2
transaction, the development and construction of a gas fired electrical generation
plant, which is described in detail below.

3. The issue that is the subject of this PLR request is not currently being considered
   or examined by the Illinois Department of Revenue (“Department”) in an audit of
   the Company’s returns for any earlier tax period. The Company is not currently
   under audit by the Department.
4. Neither the Company, nor any related taxpayer, is engaged in litigation with
   respect to this issue with the Department. The Company is not currently involved
   in any litigation in which the Department is a party.
5. There are no regulations or dispositive case law concerning the transactions that
   are the subject of this request.
6. The Company knows of no authority contrary to the authorities referred to and
   cited in this request.
7. To the best of the knowledge of both the Company and its representatives, the
   Department has not previously ruled on the same or similar issue for the
   Company or its predecessor; nor has the Company or any representatives
   previously submitted the same or similar issue to the Department and withdrawn
   the request before a PLR was issued.
8. The Company requests that all identifying information included in this request, all
   information concerning the location of its property, all information concerning the
   Company’s permits, financing and communications with other governmental
   entities, and the detailed materials exhibit (Exhibit A) and the plant diagram
   (Exhibit B) be deleted by the Department from any publicly disseminated version
   of the PLR.
   Statement of Facts:
9. The Company has entered into a contract to purchase 120 acres of land located
   in XXXX County, Illinois, and is in the process of developing the FACILITY, a
   YYYY MW natural gas-fired combined cycle electrical power generation facility
   that will be constructed on the property (“Facility”).
10. In connection with the development and construction of the Facility, the Company
    has performed a detailed environmental review of the property, and obtained the
    necessary permits to initiate construction; including a Construction Air Permit and
    Title IV Acid Rain Permit from Illinois Environmental Protection Agency, a
    Nationwide Permit from the Army Corps of Engineers, and a Site Development
    Permit from XXXX County. The Company is currently in the process of securing
    the financing to commence construction.

ST 19-0002-PLR
Page 3

3. The Facility will include two heavy duty combustion turbines arranged in a single
   shaft arrangement with two heat recovery steam generators and two steam
   turbines.
4. The Facility will include all associated infrastructure and facilities required to
   generate and deliver electricity, and to monitor, maintain, and operate the
   generation facility, including a control building and facilities for cooling,
   mechanical, and water treatment. The Facility will connect to the existing power
   grid via the existing high voltage transmission lines, and the existing natural gas
   infrastructure via the existing high-pressure natural gas pipelines.
5. The Company is constructing the Facility for the sole purpose of generating
   electricity for wholesale.
6. A complete list of the building materials to be installed at the Facility is set forth in
   Exhibit A, which includes the following information for each of the categories
   listed: a detailed description of all items included in the category, an explanation
   of the purpose of each item, and an explanation of how the materials will be
   affixed to the real estate at the Facility.
7. A diagram of the Facility is included in this request as Exhibit B.
8. Each of the items listed in Exhibit A is critical to the Facility’s design and
   operations and will be incorporated into and integral to the Facility. Each item is
   intended to be permanently affixed to the real estate, and will be specifically
   designed, fabricated, and constructed for exclusive, permanent, physical
   incorporation into the facility for the purpose of generating electricity.
9. The Company is currently negotiating contracts for the purchase of the items
   listed in Exhibit A. The Company will enter into two key agreements that cover
   these purchases:
   1.

The Engineered Equipment Package (“EEP”) Agreement – under this
agreement, the Company will purchase the major generation equipment
directly from the equipment manufacturer. This agreement includes the
purchase of:
•

Power Generation Equipment consisting of gas turbines, steam turbines
and electric generators;

•

Heat recovery steam generators; and

•

Fire protection systems for the Power Generation Equipment.

2. The Engineering, Procurement, and Construction (“EPC”) Agreement – under
   this agreement, the Company will contract with an EPC contractor who will be
   responsible for purchasing the balance of the items not included in the EEP
   Agreement. This includes the purchase of the following items, all building

ST 19-0002-PLR
Page 4
materials required for their construction and/or installation of these items, and
all building materials required for the installation of the items purchased under
the EEP Agreement:
d. Air-cooled condensers;
e. Balance of plant fire protection systems;
f. Water pumps;
g. Closed cooling water system;
h. Auxiliary boiler;
i.

Large field erected tanks;

j.

Control/administration/warehouse building;

k. Chemical feed & electrical equipment enclosures;
l.

Piping materials;

m. Valves and specialties;
n. Natural gas facilities;
o. Major electrical;
p. Electrical – balance of plant;
q. Instrumentation and controls;
r. Air compressors and dryers;
s. Structural steel; and
t. Pollution control facilities.

10. In addition to the items listed in paragraph 9, the Company will make purchases
    of any repair and replacement materials needed for the items listed.
11. The Company has been working with the officials from the Village of VILLAGE,
    Illinois and the Counties of ZZZZ and XXXX, to assist in an expansion of the
    Village of VILLAGE Enterprise Zone, to encompass the Facility. The Village of
    VILLAGE has submitted an application to the Illinois Department of Commerce
    and Economic Opportunity for the expansion.

ST 19-0002-PLR
Page 5

12. Upon the expansion of the enterprise zone, the Company will submit the
    information required by 86 Ill. Code 130.1951(c)(2)(A) to the Enterprise Zone
    Administrator and request that the Administrator apply for Exemption Certificates
    from the Department for the Company and all contractors making purchases in
    connection with the Facility.
    Ruling Requested
    The Company respectfully requests a ruling by the Department finding that:
    The materials, including all listed components, as summarized in statements of fact 9
    and 10, above and as described in detail in Exhibit A, are “building materials to be
    incorporated into real estate” within the meaning of the exemption set forth in 35 ILCS
    120/5k (the “EZ Exemption”).
    The Company notes and understands that for the EZ Exemption to apply, these items
    must be purchased in a “qualified sale” by a purchaser who has been issued an
    Enterprise Zone Building Materials Exemption Certificate by the Department, as
    provided by 35 ILCS 120/5k(a) and (b), and whose exemption certificate is “active” at
    the time of the sale.
    Supporting Authorities and Analysis
    The Illinois Retailers’ Occupation Tax (“ROT”) Act imposes a tax on persons engaged in
    the business of making retail sales of tangible personal property. 35 ILCS 120/2. The
    ROT is measured by the retailer’s gross receipts. 35 ILCS 120/2-10. The Use Tax Act
    imposes a tax on “the privilege of using in this state tangible personal property
    purchased at retail from a retailer.” 35 ILCS 105/3. The Use Tax is typically based on
    the “selling price” of the tangible personal property. Together these taxes comprise what
    is commonly referred to as the “sales tax” in Illinois.
    The EZ Exemption is set out in section 5k of the ROT Act, and provides that “[e]ach
    retailer who makes a qualified sale of building materials to be incorporated into real
    estate in an enterprise zone established by a county or municipality under the Illinois
    Enterprise Zone Act by remodeling, rehabilitation or new construction, may deduct
    receipts from such sales when calculating the tax imposed by [the ROT] Act.” 35 ILCS
    120/5k(a). This section further provides that “on and after July 1, 2013, ‘qualified sale’
    means a sale of building materials that will be incorporated into real estate as part of a
    building project for which an Enterprise Zone Building Materials Exemption Certificate
    has been issued to the purchaser by the Department.” 35 ILCS 120/5k. This exemption
    is also applicable to the Use Tax. See 86 Ill Admin. Code 150.101(c).
    The Department’s regulation that “[i]n order to qualify for the building materials
    exemption under this Section, the materials being purchased must be building
    materials. That is, they must be purchased for physical incorporation into real estate.”
    86 Ill. Adm. Code 130.1951(e). The regulation provides several examples of building
    material, including “common building materials such as lumber, bricks, cement,
    windows, doors, insulation, roofing materials and sheet metal…plumbing

ST 19-0002-PLR
Page 6
systems…electrical systems” and other items that are “physically incorporated into the
real estate.” 86 Ill. Adm. Code 130.1951(e)(1)-(8).
In a recent letter ruling issued by the Department, involving a taxpayer that was in the
process of constructing a gas-fired power generation facility similar to the Facility being
constructed by the Company, Private Letter Ruling ST 17-0009- PLR (September 14,
2017), the Department explained the analysis used to determine whether purchases
qualify for the EZ Exemption:
“The Department has invoked the intention test in the context of letter rulings
concerning construction contractors. ST 08-0003-PLR (April 1, 2008) identifies a
number of letters invoking the test. ST 00-0156 sets forth the intention test as
follows:
'In determining whether an item is permanently affixed to real estate, a very factspecific inquiry must be made regarding whether the item is intended to remain with
the realty. In order to make a finding that the item is permanently affixed, at least
three factors must generally be examined. First, the item must be affixed to the
realty. The item must also be applied to the use or purpose to which the realty is put.
Finally, the intent of the person affixing the item must be examined. Another factor
often examined is whether the item is essential to the use to which the real estate
has been put.’
*

*

*

The specific question of whether the materials used in constructing an electric
generating facility qualify for the building materials exemption under 35 ILCS 120/5k
of the Retailers’ Occupation Tax has been addressed in numerous private letter
rulings issued by the Department in recent years. In Private Letter Ruling ST 990009 (March 9, 1999) the Department ruled that pipe racks, pipe, supports, and
piping tie-ins installed at a natural gas fired power plant qualified for the exemption
because they were permanently affixed to real estate. In Private Letter Ruling ST 000013 (July 7, 2000) the Department found that certain materials incorporated into
realty within an electricity generating facility qualified for the exemption. The
Department found that turbine generators, electrical transformers, electrical cabling,
piping and other materials that are permanently affixed to real estate qualified for the
exemption in 35 ILCS 120/5k and 86 1ll.(sic)Adm. Code Sec. 1951(a)(1). Thereafter,
the Department has consistently ruled that these materials qualified for the
exemption if it was demonstrated that they were permanently affixed to the real
estate (see, for example, Private Letter Rulings ST 00-0025 (October 19, 2000), ST
00-0026 (November 3, 2000), ST 00-0033 (December 11, 2000), ST 00-0034
(December 11, 2000), ST 01-0001 (January 9, 2001), ST 01-0012 (April 5, 2001),
ST 01-0014 (April 9, 2001), ST 01-0040 (September 24, 2001), ST 01-0045
(October 26, 2001), ST 02-0012 (June 10, 2002), ST 05-0020 (November 18, 2005)
and ST 08-0003 (April 1, 2008).
Generally, the determination of whether an item qualifies for the exemption must be
made on an item-by-item basis.”

ST 19-0002-PLR
Page 7

The materials listed in Exhibit A that will be purchased for installation at the Company’s
Facility meet the requirements of the EZ Exemption. They will be permanently affixed to
real estate and will be an integral part of the purpose to which the real estate has been
put, namely, the generation of electricity. For the purposes of this analysis, the materials
can be divided into three groups as described below.
Group 1 Materials
The materials in this group consist of the primary power generation facility systems and
are essential to plant operations. Group 1 materials include the following items that will
be purchased by the Company under the EEP Agreement:
• Power Generation Equipment consisting of gas turbines, steam turbines, and
electric generators;
•

Heat recovery steam generators; and

•

Fire protection systems for the Power Generation Equipment.

Also included in Group 1 are the following items that will be purchased by the
Company’s contractor, under the EPC Agreement:
•

Air-cooled condensers;

•

Balance of plant fire protection systems;

•

Water pumps;

•

Closed cooling water system;

•

Auxiliary boiler;

•

Large field erected tanks;

•

Natural gas facilities;

•

Major electrical;

•

Air compressors and dryers; and

•

Pollution control facilities.

The Group 1 materials will be permanently dedicated and affixed to the Facility and
physically incorporated into the real estate. As noted above, the generation of electricity
is the sole purpose for which the land and Facility is dedicated. Each of the above
systems are essential and integral to the operations of Facility.

ST 19-0002-PLR
Page 8

Company’s contractors will permanently affix each component material to the real
estate. Each material component, as explained in detail in Exhibit A, will be either (i)
directly anchor bolted to a concrete foundation, or (ii) will be permanently bolted or
welded to another component, steel framing, or a housing or building structure that is
anchor bolted to a concrete foundation. All piping interconnecting the various systems
for water, steam, gas, and chemicals, will be hard-piped to each applicable system
component (welded or flanged as required). All electrical connections are hardwired and
permanently fastened. As a result of the manner of affixing the materials to the real
estate and aligned with Company’s intentions and the dedicated use of the real estate,
the Group 1 materials will be permanently incorporated into real estate and immovable.
Group 2 Materials
The materials in Group 2 consist of the materials used to construct the following building
and enclosures, which house major facility components and personnel and storage
operations, and are essential to plant operations:
•
•

Control/administration/warehouse building; and
Chemical feed and electrical equipment enclosures.

The building, enclosures and related materials will be permanently incorporated into
the real estate and dedicated to the Facility’s power generation operations. As noted
above, the generation of electricity is the sole purpose for which the land and Facility is
dedicated. The building and enclosures provide shelter and support structure to key
systems components and operations and are, therefore, essential and integral to the
power generation operations. Materials used to construct buildings and enclosures are
clear examples of “building materials to be incorporated into real estate” as indicated in
the Department’s regulation, 86 Ill Adm. Code Sec. 130.1951(e)(1)-(5).
The Company’s contractors will construct the building and enclosures, including
installation of prefabricated components, and permanently affix materials to the real
estate or to other permanently affixed materials described in detail in Exhibit A. As a
result of the manner of affixing the materials to the real estate, and aligned with
Company’s intentions and the dedicated use of the real estate, the Group II materials
will be permanently incorporated into real estate and immovable.
Group 3 Materials
The materials in Group 3 consist of various building materials such as communications
cable, electric cable, electric panelboards, conduit, pipe, hangers, valves, structural
steel, anchor bolts, component materials repair or replacement parts that will be used
throughout Facility in conjunction with various materials, components, and processes
and are essential to plant operations. They include the following major categories of
items:
•

Piping materials;

ST 19-0002-PLR
Page 9
•

Valves and specialties;

•

Electrical – balance of plant;

•

Structural steel; and

•

Repair and replacement materials.

The materials in this group will be permanently dedicated and affixed to the power
generation facility and physically incorporated into the real estate. As noted above, the
generation of electricity is the sole purpose for which the land and Facility is dedicated.
Each of the above materials are essential and integral to the operations of Facility.
The Company’s contractors will permanently affix each component to the real estate.
For example, piping materials and valves will be permanently installed underground or
welded or flanged to structural steel, large pieces of plant equipment, or dedicated pipe
support structural steel that is permanently affixed to concrete foundations with anchor
bolts. Electric and communication cable will be run through conduit or trays above and
below ground. Above-ground conduit will also be permanently fastened to such support
structures, Structural steel will be used throughout the plant to create support framing
and infrastructure and will be welded or bolted to structures or material components or
anchor-bolted to concrete throughout the plant as needed.
Repair and replacement materials (excluding any consumable maintenance items) will
be used as necessary to keep the plant operational. Such repair and replacement
materials will be affixed and incorporated into the facility in the same manner as the
original installation.
As a result of the manner of affixing the materials to the real estate and aligned with
Company’s intentions and the dedicated use of the real estate, the materials in Group 3
are permanently incorporated into real estate and are immovable.
Conclusion
All the items described in Exhibit A and in the foregoing analysis are intended to be
permanently affixed and incorporated into real estate and fully dedicated to the use for
which the real estate is put, which is the generation of electricity. The Company’s
contractors will permanently affix the materials and material components to real estate
making them immovable, consistent with the Company’s intent for the materials to
remain a permanent part of the real estate. For these reasons, these items constitute
“building materials to be incorporated into real estate” for purposes of the EZ
Exemption. Accordingly, we respectfully request the Department issue the Ruling
Requested above.
Thank you for your assistance in this matter. If you have any questions or require
additional information, please contact me.
EXHIBIT A

ST 19-0002-PLR
Page 10

Major Categories of building materials to be installed at the Three Rivers Energy Center
(“Facility”):
A.

Power Generation Equipment
The Facility will include natural gas turbines, steam turbines, and electric
generators that serve as the prime movers for the power generation process.
The Facility configurations will be single shaft power trains. The single shaft
power trains will feature a single Gas Turbine direct coupled to a generator that
converts the mechanical power to electric power. The generator will convert
mechanical power to electric power from the steam turbine that is coupled to the
opposite end of the generator via a clutch. Each power generation train is
arranged in a straight line, sharing a common shaft, therefore considered a single
shaft arrangement. All of the power generation equipment (gas turbines, steam
turbines, and electric generators) will be permanently affixed to a common
foundation via anchor bolts.

B.

Heat Recovery Steam Generators
The Facility will include triple pressure reheat Heat Recovery Steam Generators
(HRSGs). A HRSG is a boiler that coverts exhaust energy into steam that
powers the steam turbine. Each gas turbine will be connected to a dedicated
HRSG via fixed duct work. The gas turbine exhaust flows to the HRSG, where
the excess heat is captured to create steam before being discharged out of the
stack. This design feature is essential to the overall operation of the Facility as it
significantly improves the efficiency of the plant and increases the output of the
Facility.
The HRSG will be approximately XXX feet long and YYY feet high to the top of
the casing duct. Flue gas exiting the HRSG is released to the atmosphere via a
ZZZ foot stack. Each HRSG is a large component that is delivered to the project
site in many pieces and is permanently erected over several months. The HRSG
is fixed to a concrete mat foundation via a series of anchor bolts and baseplates
throughout the unit. Beyond the major heat transfer sections (modules) that
make up the internals of the HRSG, each unit is also comprised of steam,
feedwater, vent and drain piping that is permanently welded to the unit. Also
included in the HRSG are the catalyst sections that provide controls for the NOx
and CO emitted from the units.

C.

Fire Protection System for the Power Generation Equipment
The Facility will include a plant wide fire protection system consisting of a fire
water piping loop, dedicated primary and backup pumps, dedicated on-site water
storage, on-site water supply wells, associated piping, hydrants, sprinklers,
power cabling, hard-wired controls, manual pull stations, smoke detectors, heat
detection, fire eyes, alarm horns as well as standalone specialty foam type fire
protection skids for various pieces of plant equipment. This equipment is
required to maintain the safe operation of the Facility. Piping pumps, storage
tanks, water supply wells, hydrants, sprinklers and supporting fire protection
equipment will be permanently installed at the Facility in a variety of ways,
including dedicated skids affixed to concrete foundations via anchor bolts and

ST 19-0002-PLR
Page 11
direct connections to structural and supporting steel. The part of the fire
protection system that will protect the power generation equipment will be
purchased under the EEP Agreement directly from the manufacturer.
D.

Air Cooled Condensers
The Facility will include air cooled condensers (ACCs) used to cool exhaust
steam from the steam turbine. In order to allow continuous operation of the
Facility, the steam turbine exhaust steam is cooled, condensed and collected in a
condensate receiver tank for reuse and recycling within the plant as a part of the
power generation process. There will be a ACC for each of the shaft power
trains. ACCs are elevated structures to allow for adequate air flow to cool the
steam from the steam turbine exhaust. Each ACC is supported by structural
steel that is in turn permanently affixed to a network of dedicated foundation pads
via anchor bolts. Each ACC features several rows of heat exchanger bundles,
fans, gearboxes and associated piping and valving, power cabling,
instrumentation and hard-wired controls in order to properly condense the steam.
All of these components are permanently affixed to the structural steel framing of
the ACC. To support air removal within the ACC, each unit will have a dedicated
air removal system consisting of pumps, piping, power cabling and controls. The
air removal system will be permanently affixed to dedicated concrete foundations
via anchor bolts.

E.

Balance of Plant Fire Protection System
As described above in item C, the Facility will include a plant wide fire protection
system. The part of the fire protection system that will protect the power
generation equipment will be purchased under the EEP Agreement directly from
the manufacturer. The fire protection system for the remainder of the Facility will
be purchased under the EPC Agreement, and the EPC Contractor will be
responsible for the construction and installation of the entire system, which will
be permanently installed at the Facility in a variety of ways, including dedicated
skids affixed to concrete foundations via anchor bolts and direct connections to
structural and supporting steel.

F.

Water Pumps – Various Systems
The Facility will utilize various water pumps within plant systems that are critical
to power generation both on the steam cycle and cooling systems. Major pumps
include, but are not limited to the following systems: boiler feed water,
condensate, demineralized water, well supply, water treatment, natural gas
heating, glycol/water component cooling, fire pumps, chemical treatment, service
water, and potable water. Each of these pumps will be standalone or skid
mounted, but in either configuration will be permanently affixed to concrete
foundations via anchor bolts.

G.

Closed Cooling Water System
The Facility will include independent closed cooling water systems. The systems
will be identical and will consist of an air-cooled heat exchanger, primary and
backup pumps, in-line strainers, expansion tank, chemical dosing tank, along
with associated piping, valves, power cabling, instrumentation and hard-wired

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controls. Each piece of equipment will be permanently affixed to concrete
foundations via anchor bolts.
H.

Auxiliary Boiler
The Facility will include a single auxiliary boiler, which will produce steam for
various plant systems during start-up, normal operation, shut-down, as well as
post-shutdown for freeze protection during cold weather events. The auxiliary
boiler will require associated piping, valves, power cabling, instrumentation and
hard-wired controls to support operation. The auxiliary boiler system will be
permanently affixed to a concrete foundation via anchor bolts.

I.

Large Field Erected Tanks
The Facility will include common storage tanks for the Demineralized Water,
Service Water, Fire Water, and Waste Water systems to support power
generation. Service Water and Fire Water will be a combined, dual service tank
with dedicated Fire Water capacity per NFPA and local applicable standards.
Demineralized Water and Waste Water tanks will be individual standalone tanks.
All large field erected tanks will be either welded or bolted construction and will
have dedicated concrete foundations, with the tanks permanently affixed via
anchor bolts.

J.

Control/Admin/Warehouse Building
The Facility will feature a combined control, administrative, and warehouse
building. This building will house the control room, office space for the staff, and
a warehouse to store spare parts and workspace for maintenance activities. The
building will be equipped with dedicated electrical, sanitary piping, potable water
piping, an HVAC system with hard-wired controls, fire detection and suppression,
and a lifting beam and hoist in the warehouse area. The building will also include
electric wiring and systems to monitor and control the entire Facility. The
building will be supported by a dedicated concrete foundation with the structure
permanently affixed via anchor bolts.

K.

Chemical Feed & Electrical Equipment Enclosures
The Facility design will include multiple chemical feed and electrical equipment
enclosures to support power generation at the Facility. The various systems
throughout the Facility that utilize chemicals for normal operation will be
equipped with a chemical feed skid and enclosure designed to house key
equipment, including the chemical feed pumps, chemical totes, spill containment
and associated power cabling, instrumentation and hard-wired controls. The
chemical feed enclosure will be mounted on a dedicated concrete pad with the
structure permanently affixed via anchor bolts.
The Facility will include electrical equipment enclosures to house and protect
critical electrical equipment. The various electrical equipment enclosures are
mostly elevated structures to allow cabling to enter from the bottom. The
electrical equipment enclosures are supported by structural steel stilts, which are
permanently affixed to a concrete foundation via anchor bolts. To the extent
electrical equipment enclosures are not elevated and are located at ground level,

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the enclosures will be permanently affixed directly to a concrete foundation via
anchor bolts.
L.

Piping Materials
Piping materials will be installed throughout the Facility to convey fluids and
steam to/from critical equipment to support power generation. Pipe runs will
either be permanently installed underground or connected to the Facility via
welds and flanges and supported by connection to structural steel, large pieces
of plant equipment such as the HRSG, and/or dedicated pipe support structural
steel that themselves permanently affixed to concrete foundations via anchor
bolts. Major steam and water piping gathered together with a consolidated pipe
rack along each of the power trains. Pipe runs within the pipe rack are supported
by structural steel. A large majority of pipe runs will also have permanently
affixed heat trace cabling and instrumentation and insulation and cladding as
required for freeze protection and personnel protection.

M.

Valves and Specialties
Valves and specialty equipment are essential to control, monitor, and regulate
system conditions that are critical to the power generation Facility. Valves and
specialty components are permanently affixed either by being mounted within
pipe runs or directly mounted to the outer pipe wall utilizing welded or flanged
connections.

N.

Natural Gas Facilities
The Facility will utilize natural gas to generate power. Natural gas will be
delivered to the site via pipeline and metering facilities. Downstream of the
metering facilities, equipment will be installed to regulate the pressure and
temperature of the natural gas. The regulation, heating, and compression
equipment will be permanently affixed to a concrete foundation with anchor bolts.

O.

Major Electrical – Generated Power & Facility Source Power
The FACILITY will include major electrical equipment to transmit generated
power to the electric power grid and to source power throughout the Facility. In
order to transmit generated power to the electric power grid, each electric
generator will be connected to an electric transformer via power cabling that will
be connected to a high voltage electric substation via additional power cabling.
The high voltage electric substation will consist of power breakers, switching
equipment, bus work, and associated protection and controls. Lastly, high
voltage transmission cabling will be strung on new and existing aboveground
transmission poles to connect the high voltage electric substation to the existing
electric power grid. The electric transformers, power breakers, switching
equipment, bus work, and transmission poles will all be affixed to concrete
foundations either directly via anchor bolts or by structural steel anchored by a
concrete foundation. Facility source power will be distributed throughout the
Facility via an integral network of cabling which will either be permanently
installed underground or via connection to structural steel or large pieces of plant
equipment that are themselves permanently affixed to concrete foundations via
anchor bolts.

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P.

Electrical – Balance of Plant
Balance of Plant Electrical equipment includes but not limited to: Bus Duct, Motor
Control Centers, Essential Services System, Low Voltage System,
Uninterruptible Power Supply backup systems, Auxiliary Motors to drive
equipment, Relay Protection Systems, Standby Diesel Generator, Lightning
Protection, Metering, Cable Raceways, Cabling, Lighting, Plant Security System,
Electrical Heat Trace, Cathodic Protection Systems, Grounding Systems, Site
Access Control Systems, Communications Systems and Plant Control Systems.
The cabling will be routed both aboveground and underground, as required.
These systems are critical for both plant operation, as well as personnel and
plant safety. Bus Duct and cable raceways will be supported by structural steel
or standalone steel structures anchored, which are affixed to concrete
foundations via anchor bolts. The Standby Diesel Generator will be mounted on
a dedicated concrete foundation and permanently affixed via anchor bolts.
Electrical Heat Trace and Cathodic Protection Systems are permanently affixed
to the piping they are associated with. Cathodic Protection, and Grounding
Systems are predominately underground systems. Site Access Control, Lighting,
Plant Security, Communications and Plant Control Systems are a large network
of hard-wired connections installed throughout the Facility. The balance of plant
electrical systems are permanently installed and integral to the operation of the
Facility.

Q.

Instrumentation and Controls
The instrumentation and controls at the Facility are critical to the power
generation process as they provide the ability to safely monitor and operate the
plant equipment. Installed on equipment throughout the Facility, the plant
instrumentation and controls automate a number of activities and processes at
the plant, leading to a safer and more effective operation. The instrumentation
and controls gather information from the operating equipment and send signals
back to the control room, allowing plant operators to monitor and control the
operation of key equipment throughout the Facility from a common control
location. Plant instrumentation and controls are affixed to plant equipment and
hard-wired in place to provide reliable and safe operation of the Facility.

R.

Air Compressors and Dryers
Air compressors and dryers are utilized by the project to provide clean and dry
compressed air for both control air for instrumentation and control valves, as well
as service air. This air is critical for plant operations, controls, monitoring and to
support maintenance activities. The air compressors and dryers will be mounted
on a concrete foundation permanently via anchor bolts.

S.

Structural Steel
Structural steel is utilized to support all plant equipment that is not directly
supported by a concrete foundation. Structural steel supports are permanent
support structures that are affixed to a concrete pad or foundation via anchor
bolts or baseplates. In addition to supporting plant equipment, structural steel

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will also be utilized to affix pipe runs, conduit, cable raceways, bus duct and plant
lighting throughout the Facility.
T.

Pollution Control Facilities – Other
Pollution control facilities will be installed on various pieces of equipment at the
Facility and are integral to the compliant operation of the Facility. As described
above, the HRSG will include a catalyst section to provide controls for the NOx
and CO emitted from the units. Other pollution control facilities will be installed
within the HRSG proper and the combustion section of the gas turbines.
Pollution control facilities will also be installed on other equipment, including the
auxiliary boiler, fuel heater, fire water pump, backup diesel generators, and
wastewater treatment system. All major pollution control components are either
constructed as permanent internal components of the equipment or installed via
support structures that are permanently affixed to a concrete foundation with
anchor bolts.

U.

Repair and Replacement Materials
Repair and replacement materials for the equipment described above will be
purchased and stored at the Facility. In the event of an equipment failure or
maintenance event, the repair and replacement materials will be installed at the
Facility in a similar fashion as described above, becoming permanently affixed as
an integral component. Repair and replacement materials are purchased in
advance and stored at the Facility to significantly reduce the amount of time the
Facility is down and unable to operate due to an equipment failure or
maintenance event.

In your letter dated DATE, you state, in part, as follow:
The requested expansion of the VILLAGE Enterprise Zone was approved on DATE by
the Illinois Department of Commerce and Economic Opportunity. The site is now within
the VILLAGE Enterprise Zone. Enclosed is a copy of the certification issued by the
Department of Commerce and Economic Opportunity.
DEPARTMENT’S RESPONSE:
The Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. See 86
Ill. Adm. Code 130.101. Use Tax is imposed on the privilege of using, in this State, any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as “sales tax” in Illinois.
A "qualified sale" means a sale of building materials that will be incorporated into real estate as
part of a building project for which an Enterprise Zone Building Materials Exemption Certificate has
been issued to the purchaser by the Department. A construction contractor or other entity shall not
make tax-free purchases unless it has an active Enterprise Zone Building Materials Exemption
Certificate issued by the Department at the time of the purchase. 86 Ill. Adm. Code 130.1951(c)(1).

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The Department’s regulation at 86 Ill. Adm. Code 130.1951(e) provides examples of qualifying
building materials. The enterprise zone exemption includes component parts of building materials that
are permanently affixed to realty. While the examples in the Department’s regulation reflect more
conventional buildings, the fundamental concept of the building materials exemption is that, to qualify,
provided that the other requirements of the regulation are met, the materials at issue must also be
physically incorporated into real estate.
The Department has invoked the intention test in the context of letter rulings concerning
construction contractors. ST 08-0003-PLR (April 1, 2008) identifies a number of letters invoking the
test. ST 00-0156 sets forth the intention test as follows:
“In determining whether an item is permanently affixed to real estate, a very fact-specific
inquiry must be made regarding whether the item is intended to remain with the realty.
In order to make a finding that the item is permanently affixed, at least three factors
must generally be examined. First, the item must be affixed to the realty. The item must
also be applied to the use or purpose to which the realty is put. Finally, the intent of the
person affixing the item must be examined. Another factor often examined is whether
the item is essential to the use to which the real estate has been put.”
In your written request and the attachments, you have described each item of tangible
personal property, explained the functions of the items, and described how each item is
permanently affixed to the real estate. The specific question of whether the materials used in
constructing an electric generating facility qualify for the building materials exemption under 35
ILCS 120/5k of the Retailers’ Occupation Tax has been addressed in numerous private letter
rulings issued by the Department in recent years. In Private Letter Ruling ST 99-0009 (March
9, 1999) the Department ruled that pipe racks, pipe, supports, and piping tie-ins installed at a
natural gas fired power plant qualified for the exemption because they were permanently
affixed to real estate. In Private Letter Ruling ST 00-0013 (July 7, 2000) the Department found
that certain materials incorporated into realty within an electricity generating facility qualified for
the exemption. The Department found that turbine generators, electrical transformers,
electrical cabling, piping and other materials that are permanently affixed to real estate
qualified for the exemption in 35 ILCS 120/5k and 86 1ll. Adm. Code Sec. 1951(a)(1).
Thereafter, the Department has consistently ruled that these materials qualified for the
exemption if it was demonstrated that they were permanently affixed to the real estate (see, for
example, Private Letter Rulings ST 00-0025 (October 19, 2000), ST 00-0026 (November 3,
2000), ST 00-0033 (December 11, 2000), ST 00-0034 (December 11, 2000), ST 01-0001
(January 9, 2001), ST 01-0012 (April 5, 2001), ST 01-0014 (April 9, 2001), ST 01-0040
(September 24, 2001), ST 01-0045 (October 26, 2001), ST 02-0012 (June 10, 2002), ST 050020 (November 18, 2005) and ST 08-0003 (April 1, 2008).
Generally, the determination of whether an item qualifies for the exemption must be made on
an item-by-item basis.”
The Department has reviewed each of the items identified in the request, its regulations at 86
Ill. Adm. Code 130.1951, and its prior letters issued within the last 10 years. Based on its review, it is
the Department’s determination that the items would qualify for the building materials exemption in
Section 5k of the Retailers’ Occupation Tax Act.

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In paragraph (C) of Appendix A, there are references to “standalone specialty foam type fire
protection skids” and “supporting fire protection equipment.” It is unclear what items are
encompassed within these references. It should be noted that to qualify for the exemption, the items
must be permanently affixed to the real estate. Items such as fire extinguishers and gloves do not
qualify for the exemption.
To qualify for the exemption the property must be located within an enterprise zone and the
purchaser must possess an Exemption Certificate at the time the building materials are purchased.
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
I hope this information is helpful. If you have further questions related to the Illinois sales tax
laws, please visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.
Very truly yours,
Richard S. Wolters
Chairman, Private Letter Ruling Committee
RSW:rkn