Owners of a solar energy generating facility are required to file Form SCT-603 and pay the tax to the Vermont Department of Taxes if all of the following apply:
- It is an operating solar plant;
- the plant has a capacity of 50 kW or more; and
- the plant was in operation as of December 31.
Tax Due for Solar Plants
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 must be filed if a group of solar generating 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.
Energy Storage Facilities Subject to the Uniform Capacity Tax
Owners of a stationary grid-connected energy storage facility are required to file Form SCT-603 and pay the tax to the Department of Taxes if the facility has a plant energy rating of 600 kWh or larger and it is not connected to a renewable energy plant.
An energy storage facility is defined as “a stationary device or system that captures energy produced at one time, stores that energy for a period of time and delivers or may deliver that energy as electricity to the grid for use at a future time.” Energy storage facilities are typically used to store energy from the grid in batteries for future use by the grid.
Energy storage facilities that are connected to a solar energy generating plant, and are included on the plant’s CPG, pay the tax as part of the plant. Form SCT-603 should be filed for the plant as a whole; there is no need to file a separate return for an energy storage facility that is part of the plant.
Tax Due for Energy Storage Facilities
The Uniform Capacity Tax is imposed at the rate of $0.50 per kWh of plant energy rating. The Department uses the plant energy rating stated on the facility’s Certificate of Public Good to determine the rating unless the taxpayer can demonstrate that another method is more accurate.
Implications for Property Tax
Education Property Tax
Solar plants and energy storage facilities subject to the UCT are exempt from the statewide education property tax.
Municipal 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. Vermont law requires a solar plant to be valued using the discounted cash flow method as described in 32 V.S.A. § 3481(1)(D). The appraisal value is 70% of the value calculated by the valuation model based on the expected 25-year project life. The assessment will remain unchanged for either 25 years or the remaining life of the project, whichever comes first. For net-metered systems that are not exempt, an assessing official must reduce the plant capacity by 50 kW before calculating an appraisal value.
Energy storage facilities that are subject to the UCT are subject to municipal taxes through a different valuation process specified in law. The appraisal value for real and personal property of the facility must be calculated as $0.25 per kWh of plant energy rating.
Assessing officials should contact their PVR district advisor to assist with this process.
Plants and Facilities Too Small for UCT Taxation
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. The underlying land is nevertheless subject to property taxation.
Owners of an energy storage facility with a plant energy rating of less than 600 kWh are not required to pay UCT, education tax, or municipal tax for the facility. The underlying land is nevertheless subject to property taxation.
Land Underlying a Facility Subject to Uniform Capacity Tax
In addition to the UCT applied to the solar plant or energy storage facility, the underlying land is subject to property tax, but with some differences unique to this type of property. The presence of a solar plant or energy storage facility on exempt land does not alter the exempt status of the underlying parcel. For example, the underlying land is exempt from property taxation when a plant subject to UCT is located on a parcel that qualifies for the property tax exemption for public, pious, and charitable uses.
When the underlying land is not exempt, it is valued based on the land value without regard for the plant or facility. The standard “highest and best use” approach to appraisal should not be used for the land underlying facilities subject to UCT. The municipality is instead required to value the land is if it were vacant. The municipality should instead value the land using their existing land schedule without consideration of the highest and best use as a solar facility.
Land Underlying a Facility Not Subject to Uniform Capacity Tax
The following facilities are not subject to the Uniform Capacity Tax, Municipal Property Tax, and Education Property Tax:
- A solar plant with a plant capacity of less than 50 kW; and
- An energy storage facility with a plant energy rating of less than 600 kWh.
In both cases, the underlying land is nevertheless subject to education and municipal property taxes. When this occurs, the land should be valued based on its highest and best use. Market and income approaches are typically appropriate for determining value.
Quick Reference Chart
|Uniform Capacity Tax||Statewide Education Property Tax||Municipal Property Tax|
|Solar Plant with 50 kW or More Plant Capacity||$4.00per kW of plant capacity, paid annually to the Department of Taxes.||Exempt||Unless locally exempted, must be taxed based on an alternative valuation methodology set out in statute.*|
|Solar Plant with Less than 50 kW Plant Capacity||Exempt||Exempt (if operated on a net-metered system or not connected to the electric grid)||Exempt (if operated on a net-metered system or not connected to the electric grid)|
|Energy Storage Facility with Plant Energy Rating of 600 kWh or larger||$0.50per kWh of plant energy rating, paid annually to the Department of Taxes.||Exempt||Unless locally exempted, the appraisal value must be $0.25 per kWh of plant energy rating.|
|Energy Storage Facility with Plant Energy Rating less than 600 kWh||Exempt||Exempt||Exempt|
|Land Underlying a Solar Plant or Energy Storage Facility that is Subject to Uniform Capacity Tax||Not Applicable||Valued as if the plant or facility is not present. The municipality should instead value the land using their existing land schedule without consideration of the highest and best use as a solar facility.||Valued as if the plant or facility is not present. The municipality should instead value the land using their existing land schedule without consideration of the highest and best use as a solar facility.|
- 24 V.S.A. § 2741 Municipal Corporations; Property Values Fixed by Contract
- 30 V.S.A. § 8002 Definitions (Chapter 89: Renewable Energy Programs)
- 32 V.S.A. § 5401(10)(J) Definitions (Chapter 135: Education Property Tax)
- 32 V.S.A. § 3802 Property Tax (Chapter 125: Property Tax Exemptions)
- 32 V.S.A. § 3481 (D)(i) Miscellaneous Provisions Pertaining to the Listing of Property for Taxation
- 32 V.S.A. § 8701 Uniform Capacity Tax