The Commonwealth of Massachusetts' Appellate Tax Board (the "Board") has again ruled that a 'virtual' net-metered solar PV project is exempted from property taxation under clause "forty-fifth" of Massachusetts General Laws, Chapter 59, Section 5. This time, the board promulgated its Findings of Fact and Report in KTT, LLC v. Board of Assessors of The Town of Swansea.
Beyond Forrestall
The Findings represent yet another major change in the application of the Commonwealth's property tax exemption for off-site, net-metered and virtual-net-metered wind and solar systems. Until late 2014, the Massachusetts Department of Revenue ("DOR") had taken the position that certain net metered solar and wind systems, in particular off-site or virtually net-metered systems, do not qualify for the exemption available under clause "forty-fifth" of Massachusetts General Laws, Chapter 59, Section 5. That all changed with the Board's decision in Forrestall Enterprises, Inc. v. Board of Assessors of The Town of Westborough. See our blog post back then here. See the text of the exemption here. (Hint: Search for "solar".) This case is a bit different.
In Forrestall, a single taxpayer owned both an offsite-net metered solar PV system as well as separate properties to which 100% of the net metering credits were allocated for payment of utility bills due for electric service to those properties. In that decision, the Board found that "because [Forrestall] is using [his] solar panels as a source of electricity for taxable property of its sole owner," the solar facility is exempt from tax under the plain meaning of the exemption." Remarkably, the Board went on to find that the denial of that exemption was based on an "illusory distinction" with "no basis in the" [exemption] and that an "incorrect" interpretation of a statute by an administrative agency is entitled to no deference."
In KTT, the taxpayer owned land on which a virtually-net-metered solar project was constructed. The project generated net metering credits only 2% of which were allocated to the residential bills of the taxpayer and 98% of which were allocated to the electricity bills of several branches of a local bank located in different towns. Still, the Board determined that the solar project clearly met the standard under clause forty-fifth. Significantly, the Board also determined, based on evidence that included property cards showing the bank branch properties to which the net metering credits were allocated were "taxable under" MGL Chapter 59, that the solar project was "exempt under the unambiguous language of Clause Forty-Fifth" the Board further found that "If the Legislature had meant to limit the scope of Clause Forty-Fifth to exempt only solar arrays which supply the energy needs of properties owned by the same taxpayer, it could easily have done so."
Broader Applications?
Unlike in Forrestall, where the facts of the case appeared to be limited to application in situations where the same taxpayer owns the off-site solar facility qualifying for the exemption and also owns the buildings whose electricity bills receive allocation of the net metering credit, this KTT case contemplates different facts and clearly finds that the clause forty-fifth exemption is directly applicable to the common situation in which a third party owned virtually net metered solar or wind project sells electricity or allocates net metering credits to third party purchasers.
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