April 10, 2018 | By Keith Martin in Washington, DC

Arizona remains an active battleground for renewable energy advocates.

The state supreme court said in March that the state tax department cannot assess property taxes on solar rooftop systems that solar companies lease to residential and commercial customers. The court left open whether such taxes can be assessed by county assessors.

The Arizona Department of Revenue started notifying solar rooftop companies in April 2014 that it planned to send property tax assessments for the 2015 tax year.

SolarCity and Sunrun promptly asked the state tax court for a declaratory judgment that the state tax department is not authorized to make such assessments.

By law, the state can assess all property owned or leased by gas, water, electric, sewer and wastewater utilities, including “all property, owned or leased, or used by taxpayers in the following businesses . . . (4) [o]peration of an electric generation system.” An electric generation system is a system that generates electricity “to be delivered to customers through a transmission or distribution system.”

The supreme court said the solar rooftop systems in this case are not being used by the two solar companies to deliver electricity to customers. The customers use the systems themselves to generate electricity for their own use and, even though some of the electricity moves to the grid through net metering, the two solar companies have no part in such transmissions.   

The court said if any property taxes are to be paid, they must be assessed locally. County assessors in Arizona assess both “real property” and “business personal property,” but some types of business personal property must be assigned a zero value.

The court said the rooftop solar panels are “business personal property” rather than “real property.” 

It refrained from addressing whether county assessors have authority to assess the rooftop systems and, if so, at what value at the urging of the two solar companies, since counties have not sought to date to tax them and were not parties to the litigation. The case has moved back to the state tax court, where it originated, to give the counties an opportunity to join if they want a decision on the county-level issues. 

The Arizona Department of Revenue said in a statement on March 19 that it is “committed to following the direction of the state supreme court outlined in its ruling.”

The case is SolarCity Corporation v. Arizona Department of Revenue. The supreme court released its decision on March 16. (For earlier coverage, see “Arizona Property Taxes and Rooftop Solar” in the June 2017 NewsWire.)

Meanwhile, a group called Clean Energy for a Healthy Arizona has petitioned the state to include on the November ballot a proposal to require Arizona utilities to supply at least 50% of their electricity from renewable energy by 2030. At least 10% would have to come from distributed sources like rooftop solar. The group needs 233,953 voter signatures by July 5.

The current renewable portfolio standard in Arizona is 15% renewable energy by 2025.

The governor, Doug Ducey (R), signed a bill on March 23 to limit the penalties that utilities face for falling short on their renewable portfolio targets to a maximum of $5,000 per day per offense. Rep. Vince Leach (R), who sponsored the bill in the state legislature, said the measure is needed to protect Arizona utility customers from costly mandates.