Arizona Solar Property Tax Battle — SolarCity & SunRun Sue

  • Published on July 31st, 2014 by

rooftop solar leasesResidential leasing companies SolarCity and SunRun filed a lawsuit on June 30th against the Arizona Department of Revenue. The legal dispute is filed in opposition to property taxes levied onto leased PV systems in Arizona. Affirmations came independently from each company that the complaint was filed and delivered a replica of the official documents.

This taxes are a hindrance to the development with rooftop solar, and seemingly an unlawful one. How does the Arizona Department of Revenue (ADOR) presume that solar energy equipment is taxable if leased? The amount, 20% of the solar power system’s depreciated cost, ends up being about $152 a year for an average solar customer.

A law firm hired by SolarCity and Sunrun argues that third-party PV systems should not be subject to property taxes, since they are not part of the property owner’s… property. SolarCity notes that the tax will limit Arizona’s solar PV market.

Homeowners in Arizona, a state that was the nation’s fourth-largest market for residential, commercial, and institutional PV in 2013, are economically challenged with this change. Roy L Hales of CleanTechnica points out that 85-90% of the state’s rooftop solar installations are leased, rather than owned. It’s no secret that a new tax could have a strong negative impact.

Hales further explains: “The Arizona Legislature has made it clear that the Subject Property, when used ‘primarily for on-site consumption’ of the electricity generated by such property, is ‘considered to have no value and to add no value’ to the property on which it is installed, and thus it should not be separately assessed for property tax purposes.” Specifically, A.R.S. §42-11054(C)(2) states:

Solar energy devices, as defined in section 44-1761, grid-tied photovoltaic systems and any other device or system designed for the production of solar energy primarily for on-site consumption are considered to have no value and to add no value to the property on which such device or system is installed.

A former post on CleanTechnica, “Want To Pay Tax On Your Solar Panels?,” notes that this is an about-face for Arizona and its Department of Revenue. It is an about-face on PV tax policy. At this time, only solar panels owned outright are exempt from tax; leased panels are no longer eligible for tax exemption. Odd.

Hales notes that this move is hard to understand. (That is of course, unless some group of people is deliberately trying to stop renewable energy progress).

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Image: Triple Array done by Home Energy Systems (HES) Solar

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