Under current law utility-scale solar facilities with a rated capacity of 5 megawatts (MW) or less, are fully exempt from local taxation. SB 502 (Lewis) and HB 1087 (Leftwich) modify this mandated exemption by providing an 80% exemption for the first 5 years of operation; 70% exemption for years 6-10; and 60% exemption for years 11 and beyond. Both bills have passed their respective chambers. This change in the mandated exemption makes it the same as is currently applied to projects greater than 5 MW and less than 150 MW (NOTE: there is no state mandated exemption from local taxation for projects 150 MW or more in rated capacity).
The legislation also stipulates that (1) tax on the solar equipment shall not exceed the applicable real estate rate; (2) if a locality has adopted a revenue share ordinance (aka energy tax of $1,400 annually per MW) then it applies to projects 5 MW or less in lieu of partial tax exemption; and (3) the provisions of this new law shall not apply to any projects 5 MW or less that were approved by a locality prior to July 1, 2022.
VACo Contact: Joe Lerch, AICP