Disappointing property tax outcomes
Two property tax cases had frustrating outcomes.
The Missouri Supreme Court set aside a state statute in early August that exempted some solar projects from property taxes. The court said the state legislature had no authority under the state constitution to exempt such projects.
In the other case, a Connecticut appeals court said that wind turbines are real property rather than machinery for property tax purposes.
The Missouri legislature exempted “solar energy systems not held for resale” from property taxes.
A solar company entered into a power contract to supply all of the electricity from a five-megawatt solar project to City Utilities of Springfield. The project is on land belonging to the utility. The utility has an option to buy the solar system at the end of year seven and then again at the end of each subsequent contract year as well as the end of the contract term.
The county assessed property taxes on the solar project starting in 2017. The solar company said the solar system is exempt and pointed to a state law that exempts “solar energy systems not held for resale.”
The case landed in the state Supreme Court. The court never reached the question whether the purchase options mean the system is held for resale because it said the legislature has no authority under the state constitution to exempt solar systems from property taxes.
The state constitution has a list of exempted categories of property.
It then says, “All laws exempting from taxation property other than the property enumerated in this article, shall be void.”
The solar company argued that the fact that the legislature has authority under the constitution to set different rates for different types of property means it can set a zero rate for some types of property. The court said no.
The case is Johnson v. Springfield Solar I LLC.
The taxpayer in the Connecticut case owns two 2.85-megawatt wind turbines that it put in service in late 2015 near the town of Colebrook.
The local assessor said they were subject to real property taxes. The owner lost an appeal to the board of assessment and lost again in a trial court. It lost again in August in a Connecticut appeals court.
The appeals court said the turbines were so permanently affixed to the land — dismantling them would have required removing 124 anchor bolts set in concrete and cost $3 million — that they should be considered real property.
The trial court analogized the towers to sheds since a number of people could take shelter inside them at a time. The appeals court said it did not matter whether the turbines and towers are “buildings” as the trial court said or merely “structures,” since both are taxed as real property. It said it had previously found that a 385-foot communications tower is a structure.
It declined to treat the nacelles as machines. They are not the type of machinery used in a mill or factory and seem permanently affixed to the towers and land. However, the court said that associated equipment, such as cables, wires, poles and underground mains and conduits, are personal property.
The case is Wind Colebrook South, LLC v. Town of Colebrook.