Wind and Solar-Electric (PV) Systems Exemption

Summary

All real and personal property of wind energy systems are exempt from the state's property tax, except for the land on which the wind energy system is located. Under H.B. 3167, beginning with taxes payable in 2015, personal property consisting of solar energy generating systems is exempt from property taxation, but the real property (i.e., the land on which the solar energy generating system is located) is still subject to property tax. Wind and solar energy production taxes have replaced more typical forms of property tax.

Wind

In lieu of a property tax on large wind-energy electricity generating systems, a production tax was implemented in 2002 for systems installed after January 1, 1991. The production tax for electricity generated by wind is:

• $0.0012 per kilowatt-hour (kWh) for systems greater than 12 megawatts (MW) nameplate capacity,
• $0.00036 per kWh for systems between 2 MW and 12 MW nameplate capacity, and
• $0.00012 per kWh for systems between 0.25 MW and 2 MW nameplate capacity.

Wind systems less than 250 kW are exempt from the production tax, as are systems with a capacity of 2 MW or less that are owned by political subdivisions and systems located in a designated job opportunity building zone. The wind energy production tax is considered to be a personal property tax.

For 2006 - 2009 (Minn. Stat. § 272.029 Subd. 6), the revenue generated by the production tax was required to be distributed to local taxing districts as follows: 80% to counties; 14% to cities and townships; and 6% to school districts. For 2010 and thereafter, the distribution of revenues is set at 80% to counties and 20% to cities and townships. For further details, please see the Minnesota Department of Revenue's Property Tax Administrators' Manual.

Notably, a provision in a separate statute (Minn. Stat. § 272.028) allows a mutually agreeable alternative to be negotiated between the local government authority and the wind facility owner for the purpose of maintaining "public infrastructure and services." For example, a lower tax might be negotiated by a local government in order to attract wind development.

Solar

In lieu of a property tax on large solar energy generating systems, a production tax is set beginning with taxes payable in 2015. The production tax for electricity generated by solar is $1.20 per megawatt-hour (MWh) for systems exceeding 1 MW (AC); systems 1 MW (AC) or less are exempt from the production tax. The solar energy production tax is considered to be a personal property tax.

Aggregated generation systems with over 1 MW of capacity on the same or adjacent parcels is classified as tax Class 3a, "Preferred Commercial," paying 1.5% on the first $150,000 of value and 2% on all additional valuation.

The owner of applicable solar energy generating systems must file a report with the commissioner of revenue on or before January 15 annually; on or before February 28, the commissioner of revenue must notify the owner of the tax due to each county for the current year.

The distribution of revenues is set at 80% to counties and 20% to cities and townships.