Clinic Study Recommends Changes to State Property Tax Exemption for Solar Projects

A new analysis by the Emmett Environmental Law and Policy Clinic at Harvard Law School recommends the Massachusetts legislature remove confusion about tax incentives for solar photovoltaic (PV) projects, to enable more homeowners and business owners to install renewable energy.

Under a state law that dates back to the 1970s, some solar PV installations are eligible for a 20-year exemption from local property taxes.  For many years, solar developers believed that this important renewable energy incentive applied to virtually all solar installations in Massachusetts.  Recently, however, the Department of Revenue has interpreted the exemption to apply only when energy produced by the system is “consumed on site at all times.”  Because even the smallest rooftop PV system will send energy back to the electric grid at least some of the time, this interpretation eviscerates the exemption.  Even though many local assessors have not followed the Department’s interpretation, the Department’s action has created uncertainty for the solar industry.  To make matters worse, there is also significant legal uncertainty both about whether solar PV systems should be taxed as real or personal property, and about when municipalities have the authority to enter into payment-in-lieu-of-taxes (PILOT) agreements with solar developers.

The paper, titled The Solar Property Tax Exemption in Massachusetts: Interpretations of Existing Law and Recommendations for Amendments, reviews the sources of legal uncertainty and surveys the approaches taken by other states to exempt solar projects from property taxes.  The report recommends that:

  • The legislature create a property tax exemption for small solar PV systems (a capacity of less than 60 kW and/or less than 125 per cent of the historic annual energy needs of the property);
  • The legislature authorize municipalities to enter into PILOT agreements for larger PV installations; and
  • The Department of Revenue issue guidance clarifying that solar PV installations should usually be assessed as personal property.

The paper was co-authored by Irina Rodina (JD ’14) and Senior Clinical Instructor Shaun Goho.

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