Taxes

Residential solar systems add to the value of the property; in California an average PV system led to a $17,000 sale premium. This increase in home value usually increases property taxes as well, adding to the full cost of the system for homeowners. In some cases, jurisdictions have not released any guidance on the issue, such as whether PV systems are real or personal property, how to account for system value in home valuations, and how they impact other tax benefits such as productive use of agricultural land. All of this creates uncertainty for homeowners and solar developers, increasing costs and slowing development. However, tax systems present an opportunity to reduce soft costs, and even incentivize solar development through tax incentives.

Key topics and strategies:

• Several valuation guides or tools have been created to standardize property valuation for solar resources, and ensure consistency in tax assessments. Examples from Sandia National Laboratory, and the Solar Energy Industries Association.

• Most states have some type of exemption for taxes on solar systems. For example, Oregon law states that the value of a residential PV system is exempt from property taxes; Ohio waives property taxes for renewable systems under 250 kW, with additional requirements for tax exemption on larger systems.
• Several states have applied the Payment-in-Lieu-of-Taxes financing model to support the development of municipal and community solar: exempting property taxes in exchange for size-based system charges. Ohio and New York offer this financing option.
• Missouri, Florida, and California have all approved Residential Property Assessed Clean Energy (R-PACE) financing to renewable energy systems. This allows systems to be paid off over time by additional charges on property tax bills. From 2010-2018, nearly $1.2 billion in renewables were funded through R-PACE.