United States: Ohio General Assembly Extends County's Option To Grant "Payment In Lieu Of Taxes" For Energy Projects

As the renewable energy industry continues to grow and alternative forms of clean energy (wind, solar, hydro, geothermal, biomass, etc.) proliferate nationwide, state lawmakers are more-than-ever discussing comprehensive approaches to energy policy. Indeed, states across the country are rapidly reconsidering the diverse array of laws that impact energy developers / public utilities, including those related to the tax treatment of renewable energy facilities. This article in particular focuses on Ohio's property tax laws as applied to commercial-scale renewable energy projects.

On July 18, 2019, in HB 166 (State Operating Budget), the Ohio General Assembly extended by two years the option for counties to offer renewable energy projects a "payment in lieu of taxes" ("PILOT"). The law now sunsets at the end of 2022.

Ohio's PILOT Statute: In 2010, the Ohio General Assembly passed Senate Bill 232 to ensure a reasonable, predictable tax climate for owners of renewable energy generation facilities. The permissive legislation created a new choice for counties to determine how to tax renewable energy projects. Under the PILOT statute, renewable energy developers remit to the county a fixed annual amount per megawatt payment in lieu of real and personal property tax. This payment in lieu of taxes enables developers whose projects meet certain conditions to avoid excessive property tax liability. Without the PILOT, building capital intensive (but fuel-free) large scale wind or solar facilities had proven to be cost-prohibitive.

Under the PILOT statute,1 wind developers pay $6,000 – $8,000 per MW annually, depending on the percentage of Ohioans employed during construction—which must be at least 50%. (The higher the ratio of Ohio-domiciled employees, the lower a project's tax liability). For solar projects, developers pay $7,000 per MW but must employ at least 80% Ohio residents. County commissioners may negotiate additional service payments, not to exceed $9,000 per MW in total when combined with the PILOT. Originally passed with a sunset, the law has been extended several times and in HB 166, the state legislature extended the PILOT option two more years—through 2022.2

Additionally, project developers receiving the PILOT must meet the following requirements:3

1. Road Repair: Developers must repair all roads, bridges, and culverts affected by construction and restore them to their preconstruction condition—as determined by the county engineer in consultation with the applicable local jurisdiction.

  • If the county engineer deems any road inadequate to support the construction / decommissioning of the facility, the road must be rebuilt or reinforced based on the county engineer's specifications.
  • Developers must post a bond (in an amount established by the county) to ensure funding for all roads affected during construction and decommissioning.

2. Fire / EMS Training: Developers must provide training for fire and emergency personnel to respond to emergencies related to the project. In addition, developers must provide the fire/emergency responders with proper equipment.

3. Industry Training / Apprenticeships: Projects must establish a relationship with a state institution of higher education4 to educate and train individuals for careers in the wind or solar energy industry. The relationship may include endowments, cooperative programs, internships, apprenticeships, research and development projects, and curriculum development.

Tax Liability without PILOT: Without the PILOT, a wind or solar project's equipment / real property would be taxed based on rates established by the jurisdiction in which the facility is located. But prior to applying the local tax rate, the state sets the "taxable value" of the property and considers asset depreciation. The process is described below.

1. Taxable Value: Under Ohio law,5 the taxable value for a facility's "taxable production equipment" is 24% of its true value. Taxable production equipment includes all taxable renewable resource equipment used to generate electricity, but excludes "energy conversion equipment." Energy conversion equipment is defined as "tangible personal property connected to a wind turbine tower . . . or connected to any other property used to generate electricity from an energy resource, through which electricity is transferred to controls, transformers, or power electronics and to the transmission interconnection point." The state categorizes this type of equipment as "other taxable property." The taxable value for "other taxable property" is 85% of true value.

2. Depreciation: After assessing the property's taxable value, the state considers asset depreciation. Ohio utilizes a 30-year depreciation schedule for all different types of energy equipment. Under the schedule, the year 1 tax value for production/transmission equipment would be 98.3%; year 2 would be 95%; and year 3 would be 91.7%.6

3. Tax Liability: Once the state determines the taxable value of all the project's property/equipment after depreciation, the applicable county will apply its local tax rate to determine the project's overall tax liability. The local tax rate is typically between 6% – 8%.

All things considered, Ohio's PILOT program reduces property tax liability for owners of commercial scale renewable energy generation facilities. However, the annual tax revenue generated under the PILOT for one wind project is typically between $500,000 and $1,000,000, all of which flows to schools and other local government entities. This has undoubtedly contributed to multiple Ohio localities deciding to utilize the PILOT, including Paulding and Hardin counties.

Footnotes

1 Ohio Rev. Code § 5727.75.

2 To be eligible for the PILOT, the law now requires that the project owner submit an application for a PUCO construction permit by December 31, 2022.

3 See R.C. 5727.75(F).

4 Developers may also establish a relationship with apprenticeship programs registered with the employment and training administration within the U.S. department of labor.

5 See R.C. 5727.111(H).

6 See https://www.tax.ohio.gov/Forms.aspx.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions