A Massachusetts property tax exemption for wind and solar projects does not apply to the extent net metering credits earned by the project are sold to entities, like schools and local governments, that do not pay property taxes.

United Salvage Corp. installed an 800-kilowatt solar system in 2012 on the roof of a building it owns in Framingham, Massachusetts. It supplies the electricity from the system to the local utility, Eversource, in exchange for net metering credits that can be used to pay for electricity purchased from Eversource. The solar system was assessed for property tax purposes at a little over $1.2 million in 2016 and a little less than that amount in 2017.

United Salvage Corp. signed a contract in 2013 to sell all of its net metering credits to the city for five years. The city used them to pay the electricity utility bills at three city facilities: the police station, the public library and the public sports arena.

The Massachusetts property tax statute exempts wind and solar facilities that are used to supply energy to “property taxable under this chapter.” The exemption is in clause 45th.

United Salvage Corp. argued that because the electricity goes into the Eversource grid, it ends up being supplied to all Eversource customers.

However, the policy of the Massachusetts property tax board is to treat electricity as used where the net metering credits are used. On appeal, the Appellate Tax Board declined to overrule that policy.

The case is United Salvage Corp. of America v. Board of Assessors of the City of Framingham. The appeals board released its decision in May.

The case is a warning to factor in property taxes on Massachusetts projects where the net metering credits will be used by a government or tax-exempt entity.