Property taxes and projects on federal land

Property taxes and projects on federal land

August 13, 2021 | By Keith Martin in Washington, DC

Projects on federal land are probably not exempted from local property taxes, but it depends on the facts.

A solar company lost another round in court in July in an effort to avoid having to pay property taxes on a utility-scale solar project inside Eglin Air Force Base in Florida.

The solar company owns the project. It subleases the 240 acres of land underneath the project from the Gulf Power Company, which in turn leases it from the US Air Force.

The company argued that the state cannot collect property taxes on a project inside a US military base.

It lost in the trial court. It lost again in a state appeals court.

The appeals court said the Military Leasing Act — the federal statute that authorizes the US military to lease surplus land to private parties — says the “interest of a lessee of property leased under this [statute] may be taxed by state or local governments.”

If that were not enough, the 1951 deed under which Florida ceded land to the US government for use as a military base said the property is exempted from Florida property taxes while it remains “owned and occupied by the United States” for the purposes in the deed and “not otherwise.”

The case is Gulf Coast Solar Center I, LLC v. Busbee. The appeals court released its decision on July 19.

Last October, a New York appeals court held that property taxes must be paid in New York on a private solar project that sits on land leased from Cornell University. Cornell is not subject to property taxes, but the court said it is not the owner of the solar project. (For more details, see “Solar Projects and New York Property Taxes” in the October 2020 NewsWire.)

In some states, developers use PILOT statutes as a way to put ownership of projects nominally in state hands. This avoids not only property taxes, but also sales taxes on equipment purchased for use in the project in some cases. The developer pays a negotiated property tax amount each year. “PILOT” stands for payments in lieu of taxes.