Most California solar projects remain exempted from annual property taxes, even if they are transferred during construction, according to draft guidelines the State Board of Equalization issued in mid-October.

California collects annual property taxes that are generally at least 1% of the assessed value of power projects. The actual rate varies by county. However, a project must be assessed first, and there is a one-time exemption for solar projects from assessment. Ordinarily, a project is subject to final assessment at the end of construction. Transferring a project also triggers an assessment.

Questions have come up whether the one-time exemption is used up if a solar project is transferred during construction. The State Board of Equalization said it is not.

However, utility-scale projects may not be able to benefit from the exemption. Most projects are assessed at the county level. The new guidelines do not apply to projects that are assessed at the state level. Projects that are 50 megawatts or larger in size are assessed at the state level if they are owned by “electrical corporations,” meaning power companies — or affiliates of such power companies — that make retail sales of electricity rather than sell all of their electricity at wholesale.

The new guidelines are also unclear about whether a change in ownership of the solar company during construction or a sale-leaseback of a project after construction is ignored. Most sale-leasebacks are done within three months after a project is put into service.

The SBOE is accepting comments on the guidelines through November 23, 2011. A public meeting will be held in January 2012.

Keith Martin