Recent findings from the Massachusetts Appellate Tax Court could provide solar developers statewide the opportunity to challenge their property tax payments. According to the Boston Business Journal, "the debate is whether solar arrays are subject to property taxes if the electricity they generate is used for power on property that's not located in the same place as the solar panels."
Energy benchmarking for large commercial buildings is fast becoming U.S. law. According to The International Council of Shopping Centers (ICSC), ten cities — Austin, Texas; Boston; Cambridge, Mass.; Chicago; Minneapolis; New York City; Philadelphia; San Francisco; Seattle; and Washington, D.C. — have enacted energy-benchmarking requirements, as have the states of California and Washington. This year Montgomery County, Md., became the first county to pass such a law, mandating a benchmark deadline of Dec. 1, 2016, for private buildings measuring at least 250,000 square feet and a deadline one year later for those measuring at least 50,000 square feet.
In an effort to establish New York as a national leader in the solar industry, Governor Cuomo has signed into law a bill that extends real property tax breaks for installing electricity-generating solar panels on New York City buildings effective September 23, 2014. The new law extends the existing incentive program to January 1, 2017. Further, the new law doubles the possible tax breaks as compared to the existing incentive program from 2.5 percent to 5 percent of eligible installation expenditures. Although the cost of installing electricity-generating solar panels in New York City is higher than in most other cities due to stringent city regulations, the new law aims to offset those higher costs.
By Charles Oeler, Senior Managing Consultant, Houston
& Jonathan Sanders, Senior Managing Consultant / Principal, Houston
Two companies, SolarCity Corp. and Sunrun Inc., filed a lawsuit yesterday against the Arizona Department of Revenue (ADOR) over its decision last year to tax leased solar panels, which could cost thousands of solar users hundreds or thousands of dollars annually and kill the local solar market. According to the Phoenix Business Journal, the companies claim that in 2009 Arizona Gov. Jan Brewer signed into law legislation clarifying that no taxes should be given to leased solar panels, and that the department’s interpretation of a law calling for leased solar panel taxes is illegal. The two solar installer companies are also asking the court to declare that the ADOR has no authority to tax leased solar systems under a statute designed for the taxation of utility-owned electrical generation facilities that use the transmission and distribution systems to deliver power to their customers. These leased solar systems are not subject to valuation or assessment by ADOR under the law because “it is used primarily for on-site consumption,” according to the lawsuit.
When lawmakers passed California's $108 billion general fund budget, they slipped in a property tax break for the solar industry. According to Manteca Bulletin, SB871, which extends a property tax for solar credits through 2024, was never heard by a regular policy committee and the public had little chance to provide input before the Democratic Legislature rammed it through last weekend. The current tax benefit is not even set to expire, or “sunset,” until 2017. Critics of the bill disagree with the expedited process and believe it's too early to make any decisions, and have called called for Gov. Jerry Brown to veto the extension when he signs the rest of the budget in coming days. Despite their opposition, it passed and was sent to the Democratic governor with wide bipartisan support. Leno, chairman of the Senate budget committee, said the existing exemption has created tens of thousands of jobs, helped the state with its goal of having a million solar rooftops, reduced greenhouse gas emissions and limited increases on property taxes for residential property owners.
The Colorado Legislature approved 11 bills in 2014 that would grant tax credits or incentives of various sorts to businesses, despite the Capitol avoiding any kind of "tax breaks" for many years. The bills were passed in hopes to boost Colorado's economy, improve the business climate and spur job growth. However, legislative leaders don't expect the trend to last, because this year's tax breaks will take a significant amount of money from the budget and they agree it's not sustainable to keep adding them.
In January, Montgomery County Councilman Roger Berliner introduced a package of "green" bills aimed to drive the private sector to improve the energy efficiency of its real estate. However, because the real estate community voiced a number of concerns with the proposed energy benchmarking and auditing bill, Berliner is now proposing amendments to the bills in favor of the private sector. One of the original bills included an energy benchmarking requirement that would go into effect almost immediately for the largest residential and commercial buildings, as well as a mandate that property owners have their buildings audited and retro-commissioned to encourage less energy consumption.
Last week, the Florida House and Senate filed bills that would extend property tax exemptions to commercial properties for renewable energy projects, such as solar panels. The bills would encourage business owners to utilize renewable fuels without penalizing them on their property tax bills. The legislation would help to improve Florida's business climate by offering business owners the same opportunities for tax abatements on renewable energy improvements as residential homeowners.
By Manuel A. Ramos, Senior Managing Consultant / Principal, Fort Lauderdale