Real Property Taxation of Solar and Wind Energy Systems In New York State: Methodology for Projects

In 2019, the NYS Legislature enacted the Climate Leadership and Community Protection Act (“CLCPA”), which requires the State to rapidly decrease greenhouse emissions and scale up renewable energy capacity. Specifically, the CLCPA mandates that 70% of statewide electric generation be supplied by renewable energy by 2030 and that 100% be supplied by zero-emission sources by 2040. To foster a rapid buildout of wind and solar facilities, the Legislature has enacted a series of Real Property Tax Law amendments which materially affect the valuation of renewable energy projects for tax and assessment purposes.

Newly enacted Section 575-b directs the NYS Department of Taxation and Finance (the “Department”), in consultation with the NYS Energy Research and Development Authority (“NYSERDA”) and the NYS Assessors Association (“NYSAA”), to develop a Model to uniformly appraise solar and wind energy systems for real property tax purposes that local assessors are required to adopt Statewide. Section 487, which generally provides a 15-year solar and wind project tax exemption, was amended to encourage developers and taxing jurisdictions to engage in payment-in-lieu of taxes (“PILOT”) agreement negotiations.  GML Article 18 was amended to qualify renewable energy projects for IDA financial assistance and encourage IDAs to consider the contribution of the project to the CLCPA’s renewable energy goals and emission reduction targets.

A key component of the amendments, Section 575-b mandates that solar and wind projects of at least one megawatt must be assessed under the Discounted Cash Flow (“DCF”) methodology using the Model formula and discount rates established by the Department of Taxation and Finance.  The DCF method is a form of income valuation that attempts to project and forecast future cash flows that are then discounted to a net present value. Non-exempt property assessments determined under the Model remain subject to judicial review under the RPTL in that, assessments promulgated by 575-b and appearing on the assessment roll may be contested by an aggrieved party like any other property. However, the grounds for review of such assessment are limited to the accuracy of the appraisal model inputs made by the assessor.

Read more about the model here:

Appraisal methodology for solar and wind energy projects (ny.gov)

Thank you Michael P. Guerriero for this week’s Tax Tracker!