Property Valuation for Commercial Wind Energy Equipment

Summary

Note: The Trending Factor used for Assessment Year 2024 is 1.52.

In October 2007, Illinois passed Public Act 095-0644, providing consistent valuation procedures for commercial wind farm equipment (amended via H.B. 4797 in 2010). Beginning in the 2007 assessment year, wind energy devices larger than 500 kilowatts (kW) and producing power for commercial sale will be valued at $360,000 per megawatt (MW) of capacity, annually adjusted for inflation according to the U.S. Consumer Price Index; the Department of Revenue annually publishes this adjustment ("trending factor"), available here. This figure is termed the trended real property cost basis. Because Illinois assesses property for property tax purposes at one-third of its fair cash value, in practice the assessed value of commercial wind energy property is $119,988 per MW.

The law also defines an allowance for physical depreciation of the device, calculated by dividing the age of the turbine by 25 and then multiplying the result by the trended real property cost basis. The physical depreciation allowance may not exceed 70% of the trended real property cost basis, though additional depreciation allowances may be granted for functional or external obsolescence.

Background

Prior to 2007, wind energy devices generating electricity for commercial sale were assessed differently depending on where they were located. Some counties valued the entire turbine structure (tower plus generation equipment) as "real property", subject to taxation, while others deemed only the tower portion as taxable property. This difference in valuation procedure meant that the taxable value of identical wind turbines could vary by as much as 75% from county to county, creating dramatically different tax loads and complicating projects that cross county lines.