Now, as a session law, Chapter 8 of the Acts of 2021 implements, without modification, the property tax reforms sought in the Act as it was earlier passed by the legislature.
The law makes several significant changes to Massachusetts law regulating cities' and towns' taxation of wind, solar, energy storage and fuel cell property, the scope of the existing "clause forty-fifth" state law exemption from such taxation for wind and solar projects under MGL Chapter 59, Section 5, as well as the practice of entering into payment in lieu of tax agreements or "PILOT" agreements under Chapter 59 that set contractually agreed upon annual payments in lieu of cities and towns assessing and taxing projects in the ordinary course.
The changes will go into effect 90 days after the passage of the Act into law (mark June 24, 2021 on your calendar).
Among other changes, the Law:
(1) Codifies, to an extent, the Forestall decision by the Massachusetts Appellate Tax Board ("MA ATB"), which overruled a town denying the exemption and found in favor of permitting a taxpayer the clause forty-fifth exemption for a solar project installed on one of his owned parcels that generated bill credits he applied to energy consumption on other, non-contiguous parcels he owned. Section 61of the Act completely amends and restates clause forty-fifth to require that an exempt project produce not more than 125% of annual electricity needs of the property on which it is located, but including "non-contiguous real property in the same municipality in which there is a common ownership interest."
(2) Overrules the KTT decision by the MA ATB, which found in favor of permitting a taxpayer the clause forty-fifth exemption for its solar project located in one town that allocated bill credits to taxable properties owned by banks in other surrounding towns. The changes in Section 61 appear to no longer permit such a taxpayer to exempt its system simply because it allocates bill credits to other taxable properties.
(3) Extends the exemption to tax exempt real property by removing the requirement in existing clause forty-fifth that an exempt wind or solar system supply "the energy needs of property taxable under this chapter". Nowhere in the new language of clause forty fifth added by Section 61 of the Law does that language appear. Instead, the new language simply states that an eligible project must be "capable of producing not more than 125 per cent of the annual electricity needs of the real property upon which it is located..." It no longer says anything about the tax treatment of such real property. Removal of this requirement appears to extend the exemption to solar projects that "supply the energy needs" of property owned by tax exempt nonprofit entities such as government buildings, schools, universities, nonprofit hospitals and other similar entities so long as the projects meet the 125% limitation across their campus.
(4) Extends the exemption and PILOTs to energy storage and fuel cells.
(5) Protects Existing PILOT Agreements. The Law provides that parties to PILOTs entered into prior to the enactment of the Law "shall not be required to ... amend, modify or renegotiate" such a PILOT.
(6) Makes Additional Changes to PILOT Processes. The Law moves out of Section 38H of Chapter 59 and into the new clause forty-fifth of Section 5 of Chapter 59 the authority for wind, solar (and now storage) assets to enter into PILOT agreements. It also makes clear the treatment of personal and real property, consistent with prior MA Department of Revenue ("MA DOR") guidance.
(7) Requires MA DOR to Issue Guidance on PILOT and Assessment Practices. The Law requires the MA DOR to "in consultation with the department of energy resources . . . issue guidance for municipalities and solar, wind and energy storage system owners that shall include, but not be limited to: (i) assessment of solar, wind and energy storage systems; (ii) standardization of agreement terms; and (iii) where feasible, standardization of tax policy when agreements for payments in lieu of taxes are not in place. The guidance shall be issued not more than 9 months after the effective date of this act." While 9 months may be a long time and it's unclear the extent to which the new DOR guidance may go beyond past guidance, standardization of PILOT terms, processes and non-PILOT valuation methods may be a welcome change.
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