Property taxes can be an ongoing cost for PV system owners and a determining factor in whether a solar system gets installed. In Connecticut, for instance, residential systems are exempt, and sometimes assessors choose to include commercial and industrial systems, and sometimes, probably in detriment to the finances of the project, they don’t.
A 3rd party investor was very interested in renting ground locations in Tennessee for solar and offering a good deal for the property owner. Their financial model was okay until they checked on the property tax they would have to pay. It was so high in some places and so confusing in other locations that the investor decided not to invest in Tennessee.
Justin Barnes, a Keyes, Fox & Wiedman Senior Policy Analyst and the lead author of the DOE Solar Outreach Partnership’s report Property Taxes and Solar PV Systems: Policies, Practices, and Issues stated that ” there are three generally accepted property tax valuation methods used by assessors: the comparable sales method widely used in residential real estate, the cost-based method in which a replacement cost is estimated, and the income method.”
According to Barnes, “Property tax issues don’t affect the value proposition of third-party ownership, but they figure in on what the property owner owes on taxes,” Barnes explained. “The assessment will affect what the third party owes to property taxes, and that filters down to what the customer pays in a lease or PPA rate.” He goes on to say “Colorado may have the most exemplary property tax system, and Ohio’s is noteworthy for its simplicity: “Systems below 250 kilowatts are exempt and those above 250 kilowatts pay a set fee. Simple. Easy.”