A bipartisan group of Michigan lawmakers introduced a bill
last week that aims to clear up confusion over tax collections for small-scale
distributed generation projects.
HB
5143 would reinstate a tax exemption for “alternative energy personal
property” that was in place for 10 years under the Michigan Next Energy
Authority Act of 2002. That law —
signed by former Republican Gov. John Engler — granted the exemption to 13
different kinds of small-scale renewable energy systems meant to offset any
portion of a property’s energy use.
The latest bill was introduced by Republican Rep. Tom
Barrett and has two Democrat and four Republican co-sponsors, including House
Energy Policy Chairman Gary Glenn, who has said he favors
incentives for solar energy over mandates. It has been referred to the
House Tax Policy Committee.
While it applies to all types of properties, advocates say
the bill is meant to provide clarity particularly for residential property
owners with solar panels. Over the past several years, Michigan has seen a
patchwork of communities that assess solar installations because they are
improvements and boost the value of the property.
This has been particularly
contentious in Ann Arbor, a city with a strong clean energy track
record but that some residents say gives disincentives for installing solar
because it would amount to a tax increase. Assessors in other communities have
reportedly said they don’t assess panels.
“There’s been a real patchwork of approaches in the
assessment of personal property tax,” said Liesl Eichler Clark, president of
the Michigan Energy Innovation Business Council, which supports the bill.
“Generally if you think about it, it’s weird: You don’t tax my generator, why
tax my solar panels? This creates a level playing field across the state.”
Eichler Clark said in some cases it has surprised residents
with unforeseen costs, ultimately impacting the pay-back period of a project.
The bill covers small-scale projects that offset a portion
or all of a property’s energy use, but advocates say it represents broader
disparities in tax treatment for renewable energy projects in
Michigan.
“In some cases they get panels up and then get a bill in the
mail and installers had no idea assessors are assessing in that community,”
Eichler Clark said. “It can really impact the economics of the project.”
Depending on how the system depreciates in value, Eichler
Clark said savings could be a few hundred dollars a year.
City officials in Ann Arbor have said they support clarity
from the state, suggesting their hands are tied into forcing an assessment on
such property.
“The assessor is not the bad guy here. This bill creates
clarity,” Eichler Clark said.
State: ‘Must be assessed’
The original exemption sunsetted at the end of 2012, and
since then the state of Michigan has eliminated
the Personal Property Tax on various types of equipment for commercial
and industrial properties. However, it appears this doesn’t apply to something
like residential solar panels.
Ron Leix, spokesperson for the Michigan Department of
Treasury, said the agency is evaluating the bill and hasn’t yet taken a
position.
Leix said local assessors must assess residential solar
panels “because the state law says all property must be assessed unless
explicitly exempt. Residential solar panels are personal property and assessed
as residential personal property.”
In some cases, assessors may have some flexibility, he
added.
“The State Tax Commission has provided guidance for the
basic valuation for solar panels. There may be cases where that guidance
doesn’t account for unusual functional or economic obsolescence. In those
situations, the ultimate responsibility for true cash value (is) with the local
government’s assessor,” he said.
The House Fiscal Agency reported
this week that while “it is not possible to predict how broadly the
exemption will be utilized or the taxable values of the alternative energy
systems that would become exempt, based on estimates when the exemption was last
available in 2012, the initial impact (including property previously exempt)
would likely be less than $10 million.”
A spokesperson for the Michigan Municipal League, an
advocacy group representing local units of government, said the group is also
reviewing the bill and hasn’t yet taken a position on it.
Larry Ward, executive director of the Michigan Conservative
Energy Forum, said the current situation allows local assessors to pick whether
solar panels on homes are taxed. Ward testified before
the House Tax Policy Committee Thursday in support of the bill, saying it is an
issue of clarity, fairness and incentivizing self-generation.
“This clarifies what one random assessor does and what
another doesn’t do,” Ward said, adding that other types of clean energy
improvements — such as an energy-efficient furnace — are not similarly taxed.
“We don’t want solar to be treated any different than these other home energy
items you do to your house.”
Seeking relief
Some Michigan residents who have seen property tax increases
after installing solar panels are already seeking relief.
Ann Arbor resident Mark Clevey, who is a member of the
city’s Energy Commission, is appealing to
the Michigan Tax Tribunal the city assessor’s bill on his panels. In 2016,
Clevey installed a $9,200 project on his property.
“Residential personal property is exempt from property tax,”
he says in a prepared statement he plans to give to the tribunal next month.
“In addition, the cost of the system was less than $80,000. The Ann Arbor
Assessor improperly increased the assessed and taxable value of my property by
treating the solar PV installation as real property.”
According to a letter
to the tribunal, Ann Arbor City Administrator Howard Lazarus sides with
Clevey.
“We do ask that the (tribunal) review its position and
exempt small-scale residential and commercial solar installations from property
tax valuations, not only in Mr. Clevey’s case but on a statewide basis,” Lazarus
writes.
Ultimately, such taxation has a negative impact on the
city’s clean energy goals, Lazarus says.
“Residential solar is an important part of our strategy to
reduce carbon emissions, unfortunately the position of the Michigan Tax
Tribunal (MTT) that these improvements are treated as real property
improvements creates a strong economic disincentive to property owners,”
Lazarus wrote to the tribunal. “The MTT position also creates a conflict
between our Climate Action Plan and our desire to comply with MTT guidance.”
No comments:
Post a Comment