Solar Plants Subject to the Uniform Capacity Tax

You are required to file Form SCT-603, Solar Energy Capacity Tax and pay the tax to the Vermont Department of Taxes if all of the following apply to you:

  1. you own an operating solar plant;
  2. the plant has a capacity of 50 kW or more; and
  3. the plant was in operation as of December 31.

Tax Due

The Uniform Capacity Tax is imposed at a rate of $4.00 per kW of plant capacity. Plant capacity is the total AC nameplate capacity of all inverters used to convert the plant’s output to AC power. The Department uses the rated nameplate capacity stated on the plant’s Certificate of Public Good (CPG) to determine plant capacity unless the taxpayer can demonstrate that another method is more accurate. Owners—as named on the CPG—must pay the tax for the prior calendar year to the Department no later than April 15 each year.

When Multiple Facilities are Connected

A group of solar-generating facilities is considered one “plant” under Public Utility Commission (PUC) Rule 5.100. One form SCT-603, Solar Energy Capacity Tax, must be filed if a group of solargenerating facilities uses common equipment and infrastructure such as roads, control facilities, and connections to the electric grid, and the facilities are not found by the PUC to be separate plants. Calculate and pay the UCT based on the total capacity of the connected facilities.

Implications for Property Tax

Solar plants subject to the UCT are exempt from the statewide education property tax. A municipality may vote to exempt or stabilize a solar plant for municipal property tax purposes. Municipalities that impose municipal property taxes on solar plants are required to follow a property valuation methodology specified in law.

In addition to the UCT applied to the solar plant, the underlying land is subject to property tax as normal. The presence of a solar plant on exempt land does not alter the exempt status of the underlying parcel. When the underlying land is not exempt, it is valued based on the highest and best use. Market and income are the appropriate valuation methods.

Owners of solar plants with a plant capacity of less than 50 kW are not required to pay the UCT. Further, an owner is not required to pay education or municipal property tax on a solar plant that has a capacity less than 50 kW and is either (a) operated on a net-metered system or (b) not connected to the electric grid and only provides power on the property on which it is located.

Valuing and Taxing Enclosures and Buildings that House Batteries

Solar renewable energy plants with a capacity of 50 kW or more are subject to the Uniform Capacity Tax (UCT).  A plant subject to the UCT is exempt from statewide education property tax. Those plants may nevertheless be subject to municipal property taxation and are valued using a standard property valuation methodology. 

The UCT is limited to solar renewable energy plants. 32 V.S.A. § 8701. The relevant part of the definition of a “renewable energy plant” is an “independent technical facility that generates electricity from renewable energy.” 30 V.S.A. § 8002(18). Accordingly, the UCT does not apply to a facility that is not a renewable energy generating plant.

An enclosure or building housing batteries does not generate solar electricity, which means it does not qualify as a solar renewable energy plant when operating independently. For some projects, however, a battery enclosure is integrated into the renewable energy system through design and function. Integrated projects tend to fall under one Certificate of Public Good (CPG), while standalone battery facilities tend to have their own separate CPG. You can use the following link to the Public Utility Commission’s website for information relating to projects that have requested a CPG in your municipality.

The Vermont Department of Taxes recommends that assessing officials consider whether an enclosure or building housing batteries is authorized under the same CPG as an associated renewable generation plant. If the facilities share a CPG, the official should value both facilities for municipal taxation (unless the plant is locally exempted).

For the energy generating portion of the facility, the official should use the discounted cash flow methodology required by statute and published by PVR. 32 V.S.A. § 3481(1)(D). An enclosure or structure housing batteries should be valued for municipal taxes as real property. For example, if batteries are stored in a shed, the shed should be valued as a shed is usually valued. The official should not value any portion of the combined facilities for education property taxation if the solar plant’s capacity is 50 kW or more because they are exempt due to being subject to the UCT.

If a battery facility is not authorized by the same CPG as a solar renewable energy plant, the official should value it as real property for both municipal and education taxes. That is because the facility is not subject to the UCT, meaning that it is not exempt from statewide property taxation.

A municipality should contact its district advisor if it believes unique circumstances warrant a deviation from this general advice.

LAWS, REGULATIONS AND GUIDANCE
32 V.S.A. § 8701 Uniform Capacity Tax
30 V.S.A. § 8002 Definitions (Chapter 89: Renewable Energy Programs)
32 V.S.A. § 3802 Property Tax (Chapter 125: Property Tax Exemptions)
32 V.S.A. § 5401(10)(J) Definitions (Chapter 135: Education Property Tax)
32 V.S.A. § 3481 (D)(i) Miscellaneous Provisions Pertaining to the Listing of Property for Taxation
24 V.S.A. § 2741 Municipal Corporations; Property Values Fixed by Contract
Taxation of Solar Plants

Contact

Commissioner Craig Bolio
(802) 828-2505 | Department Directory

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