Solar Taxation
Rhode Island legislation was passed dictating how municipalities could treat and tax the real estate located underneath a solar array. This legislation applied to properties assessed on or after December 31, 2022. If any parcels were not in compliance with this new legislation prior to that date, the town would not be responsible for refunds or reimbursements for taxes previously collected. The law for how the panels of the solar array are taxed has stayed the same. An explanation for both is below.
Real Estate
Municipalities cannot reclassify or revalue the land due to the presence of renewable energy resources. If a project had to receive a zone change to allow the construction of a solar array, the town cannot increase the value of the land due to the presence of a solar array. If the land value had been increased prior to implementation of this legislation, the land value must revert back to the value and classification prior to the developer taking an interest in the parcel.
Important Key Notes:
- The legislation was not retroactive. Municipalities did not have to refund any taxes previously collected.
- The new legislation does not exempt real estate under a solar array.
- This legislation prohibits municipalities from increasing assessed values due to the presence of a solar array.
Tangible Property
The tangible property of a solar array means the actual solar panels that are used to convert solar into energy. Per Rhode Island General Law §44-5-3, the equipment used for a commercially operating solar array can be taxed at $5.00 per kilowatt of nameplate capacity. The tangible property is billed separately from the residential tax. The tangible tax varies for each commercial solar array since most projects have different wattage capacities.
If a solar array is used for net metering, the panels are tax exempt. Net metering refers to the situation in which a photo-voltaic system generates electricity solely to meet the consumption needs of the residence. The most common example of a net metered system is solar panels on the rooftop on residential homes.