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Appellate Tax Board Expands Solar Panel Tax Exemption

Solar tax exemption expands after new Appellate Tax Board Case

Solar tax exemption expands with new Appellate Tax Board case

In a case that greatly expands the Massachusetts solar- and wind-power tax exemption, the Appellate Tax Board ruled that the exemption covers commercial use. The case is KTT, LLC v. Board of Assessors of the Town of Swansea.

KTT involved a solar array that sold 98% of its energy credits to four branch locations of a commercial bank, under a net metering agreement. The owners of the array used the final 2% of credits to offset their personal electricity bills.

The Solar Tax Exemption

G.L. c.59, s.5, cl. 45 (Clause Forty-Fifth) expressly exempts from taxation solar and wind-energy systems used to heat or power taxable properties, for twenty years from the date of installation.

Until 2014, the Department of Revenue interpreted Clause Forty-Fifth as not applicable if the power was used at off-site properties. The Massachusetts net metering program authorizes renewable energy generation to be allocated to off-site properties within the same utility service territory, but the DOR did not view such “virtual” net metered systems as eligible for the exemption.

That changed with Forrestall Enterprises, Inc. v. Board of Assessors of the Town of Westborough. In Forrestall, the owner of a solar array also owned remote properties, to which he allocated 100% of the array’s net metering credits. Following the DOR, the Westborough Board of Assessors unsuccessfully argued that Clause Forty-Fifth should only exempt solar arrays that powered properties located on the same or contiguous parcels as the array itself.

The Appellate Tax Board rejected that argument, saying that the statute’s plain language did not support it.

The difference in this case is that the owners of the solar array do not own the remote properties with which they contracted to sell power credits. The Board did not find that ownership of the remote properties made any difference, however.

“If the Legislature had meant to limit the scope of Clause Forty-Fifth to exempt only solar arrays which supply the energy needs of properties owned by the same taxpayer, it could easily have done so,” said the Board.

An appeal of the decision to the Massachusetts Appeals Court is likely.

Photo creditAndoryuu Enydonyaa

About the Author

Kevin D. Batt – Senior Counsel

Kevin represents public clients in general municipal, land use, environmental, energy and construction matters.

Please contact him at (617) 621-6514 or by emailing kbatt@andersonkreiger.com.

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