California Property Taxes

California Property Taxes

June 30, 2011 | By Keith Martin in Washington, DC

California property taxes have become a nettlesome issue for solar developers.

Efforts are underway in the state legislature to clarify a key issue.

California generally assigns a value to property for property tax purposes at one of three times: at the end of construction of new equipment, when the equipment is sold or when the project company that owns the equipment undergoes a change in control.

A special rule lets solar equipment go unassessed at the end of construction. That means that property tax assessors ignore the increase in value to a building or house from adding solar panels.

However, there has been some confusion about whether selling an interest in solar equipment to a tax equity investor triggers an assessment. For example, such a sale might be viewed as a change in control of the project company that owns the equipment.

The staff of the State Board of Equalization has advised informally that bringing in a tax equity investor to own equipment during construction will not trigger an assessment of solar equipment during or at the end of construction. Some tax equity investors have been uncomfortable relying on such informal advice, and there is no rulings process that would give the investors enough comfort. Therefore, they prefer to invest in deals before construction starts.

A bill has been introduced in the state Assembly to clarify how the rules work. The bill is A.B. 15. Discussions are still underway with committee staff in the state Senate about the text.

Keith Martin