Hunton Andrews Kurth LLP
January 17, 2014 - Virginia
Calif. Tax-Exempt Property Meets Solar Energy Systems
by Ofer Lion
While helpful, California’s Board of Equalization has not exactly taken the most pro-renewable energy position in their new guidance on the effect of the installation of a solar power system on tax-exempt property. In what appears to be a fairly common acquisition structure, for example, a solar power company installs a solar power system that it retains ownership of, and the nonprofit provides the space for installation and then leases the system from the solar company. The nonprofit expects to save more on its energy bills than it pays on the lease. The solar power company, in many cases, can sell or otherwise utilize excess capacity generated by the system,
often during nonpeak use hours or on weekends.
The guidance provides that a nonprofit organization may install a solar energy system that it does not own or operate (to produce electricity for the nonprofit organization), without disqualifying any portion of the property’s exemption, including the system’s location.
Unfortunately, the new guidance also appears to indicate that if any of the power generated can be utilized by the for-profit, the entire portion of the property on which the solar power system lies loses its property tax exemption. A better position could involve the revocation of a property tax exemption only to the extent that the power is utilized or is expected to be utilized by the solar power company, rather than the nonprofit. While this may make the calculation of the partial revocation more difficult, the calculation may already be far from straightforward.
Read full article at: http://www.hunton.com/files/Publication/bfb1121e-879b-41c1-9f98-b778952313a0/Presentation/PublicationAttachment/c54afd90-946a-4c50-83ee-bc30a185b910/Calif_Tax-Exempt_Property_Meets_Solar_Energy_Systems.pdf