City Council To Consider Solar Panel Tax Exemption

Sam Nickels -- March 5th, 2011

UPDATE: The issue of a solar panel tax exemption in Harrisonburg arose because EMU requested an exemption, and City Council is trying to find a way to manage that request while simultaneously preventing a tax on residential solar additions.

In an email to a local environmental list-serve, Harrisonburg attorney and solar advocate Tom Domonoske drew attention to an environmental issue on the City Council’s agenda for Tuesday night – a proposed solar tax ordinance.

Domonoske is concerned that the City may approve a tax related to the added property value of solar panels. He writes, “if someone puts $25,000 in redoing their bathroom or kitchen, then their real estate taxes do not go up….If someone though puts $25,000.00 into solar equipment, their taxes will go up $145.50 per year, every year.”

Workers install solar panels at EMU, 2010. Photo courtesy Erik Curren.

Domonoske is also concerned about low income residents of the City who have become homeowners through the Habitat for Humanity housing program. “For the past several years all these houses have been equipped with solar hot water heaters, and these homeowners are least able to afford a tax increase simply because they live in a more sustainable, energy efficient house.”

Cathy Stickler, Chair of the Climate Action Alliance of the Valley, said that after talking with a Harrisonburg City Council member, she wants people to know the situation is complicated. She said, “The Harrisonburg City Council says they are working on this ordinance in order to help people feel confident that they can place panels on their property and not be liable for additional taxes.”

Miriam Dickler, Public Information Officer of the City of Harrisonburg, confirmed that the Harrisonburg City Council requested staff look into comparable ordinances from other jurisdictions.

Harrisonburg Mayor Richard Baugh said the ordinance will not tax residential solar panels. “If you look at two houses side by side, one has panels and one does not, currently they are taxed the same.” He stated that the ordinance is necessary to assist Eastern Mennonite University, which came to Council seeking an exemption from liability on a new large solar array they recently installed. The ordinance, said Baugh, “allows a path for local government to reduce or eliminate a tax.” In this case, a current tax related to EMU.

But concerned residential owners want to know how much of an exemption the Harrisonburg City Council will pass for this ordinance. City staff returned to Council with a proposed ordinance that would tax such property additions as solar panels, but provide a 20% discount. Baugh and other council members are considering a 100% exemption. “I will certainly do what I can to provide an incentive for solar energy,” said Baugh.

Councilman Kai Degner, in an email on the same topic, assured City residents that no one is out to dis-incentivize solar. He encouraged people to come speak at the council meeting, particularly on “the unintended impact on personal property owners that would occur if an ordinance aimed at exempting some of a business’ solar tax is adopted at a rate of less than 100% of the tax for the lifetime of the equipment,” as well as “the importance of incentivizing solar.”

Domonoske is looking to citizens to turn out in support of the full exemption.

The Harrisonburg City Council will consider the “ordinance to permit Solar Tax Exemption as permitted under Virginia State Code § 58.1-3661: Certified solar energy equipment, facilities or devices and certified recycling equipment, facilities or devices” as item #12 on the March 8 agenda.

UPDATE: Here is more of Degner’s response to Domonoske’s email:

. . . The reason the ordinance is in front of us at all is to consider how much the city wants to incentivize solar projects like the one underway at EMU. In exploring a tax exemption for the EMU / Secure Futures solar project, our only tax exemption option NECESSARILY includes a tax exemption for solar installations on residential property. Currently, residential installations aren’t taxed because the Commissioner of Revenue doesn’t factor them into the property assessment (just like she wouldn’t consider what kind of water heater you have). We are PROHIBITIED from creating an ordinance with a different exemption for business or residential solar equipment. So, that means by drafting an ordinance which would RELIEVE a business from a portion of the cost of their normally required machinery and tools tax applied to solar equipment, we are forced to create a scenario where by in an effort to SUPPORT solar installations by businesses we introduce a NEW tax (even if reduced) to the personal property owner. This effect is being weighed carefully by council members, who don’t want to “punish” home owners by relieving a well-intentioned solar power manufacturing for-profit business of some of their required machinery and tools tax.

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31 Responses to “City Council To Consider Solar Panel Tax Exemption”

  1. Renee says:

    I’m not sure what to think about this yet, except that clean energy needs to be supported by governments, even if it means some reduced tax income when homes become more and more self-sustaining. Appreciate the article bringing it to our attention!

       0 likes

  2. Daniel says:

    You can’t even make this stuff up. What a crock.

       0 likes

  3. Emmy says:

    Sounds like Congress undoing all of the eco-friendly changes to the Capitol.

       0 likes

  4. Kai Degner says:

    C’mon, Sam. My email, which you quote, makes a point to explain that this ordinance has come up in the context of trying to support solar projects like that at EMU. Without that context it looks like someone’s “out to get” solar, when that’s totally not the case.

       0 likes

    • bazrik says:

      It better not be. If there’s a tax passed, then solar IS targeted – which goes against every claim that’s been made by local politicians that green energy should be supported. Let’s keep a close eye on this one…

         0 likes

      • Kai Degner says:

        Hopefully your close eye noticed a 4-1 vote for a 100% tax exemption on solar equipment for 20 years.

           5 likes

        • JB Reeves says:

          Many THANKS to HBurg Council for Mar. 8 exemption (@ 100%) for certified solar equipment- business or residential, and for helping city citizens better understand these complexities. And, overall, it seems past time for Va. G.A. to: a)separate any solar/wind eq. taxing between business vs. residential, b)help phase-out of most machinery & tools taxes; our government needs to encourage investment in newer/better equipment.

             0 likes

        • Renee says:

          Nice. Thanks, Kai.

             0 likes

        • bazrik says:

          Yes it did, thanks Kai, sardonic tone aside. Forgive me if I’m gun-shy regarding green values being touted one minute and then ham-strung the next. I’m not saying you do this, by any stretch – just politics in general.

             0 likes

  5. JGFitzgerald says:

    Wow. Two out of five council members are saying they’re trying to make solar easier, and yet we have story and responses indicating the opposite is true, complete with anonymous “concerned residential owners”. Wouldn’t it have been more accurate to report that council is considering a tax exemption? Parts of this discussion are DNR-worthy.

       1 likes

  6. Lowell Fulk says:

    A couple of thoughts on this:

    Isn’t it true that if one does an improvement of a nature which requires a building permit, then the value of the home for tax assessment purposes does increase?
    Therefore wouldn’t an exemption be appropriate for the Council to consider?

    And,

    If such an exemption is approved (as mentioned by Mayor Baugh), tax revenue would not be reduced, because it has yet to be generated by taxing solar arrays.

    Is it within the authority of Council to set different rates of exemption for residential and commercial in such a situation? I know that the state legislature must specifically grant localities permission to do most anything.

       1 likes

  7. Bubby Hussein, Hillbilly Sheikh says:

    The legislation is Code of VA § 58.1-3660

    The property tax issue relates to exterior improvements (or addition of structure square footage). They trigger an immediate property tax assessment increase. A $50K kitchen re-hab not so much.

    What would be really great is if we could convince our local state representatives to focus on creating jobs eligible for the Solar Photovoltaic Manufacturing Incentive Grant Program (Code of Virginia § 45.1-392)

    This is a performance-based incentive designed to encourage the product development and manufacture of a high-technology, renewable energy source in Virginia. Any manufacturer who sells solar photovoltaic panels manufactured in Virginia is entitled to receive an annual grant of up to 75 cents per watt of the rated capacity of panels sold.

    Build that plant in the Valley…you know when we’re done obsessing on VDOT audits, giving away the ABC, or regulating women’s reproductive rights.

       0 likes

  8. JGFitzgerald says:

    There’s a section in the Presto movement of Beethoven’s seventh where a horn blows a long clear note while the rest of the orchestra plays a more forceful version of the theme that runs throughout the symphony. I have a textbook rendering of it where the horn note is a guide, a suggestion, a tone to follow. I have a version conducted by Leonard Bernstein in which the horn is an insistent, intimidating scream. Difference of interpretation.

    Which is what I thought of when I saw a warning that a city council dominated by progressives was going to impose a tax on solar panels. Probably not. My mind went back to when a local political analyst who’s only wrong about half the time told me I’d voted to allow something while I was on council. I went back to check and found that the provision he’d mentioned was technically a part of a state law that we’d adopted as local ordinance in order to collect the fines from it instead of letting them go to the state.

    Government is complicated, which is why you should always vote for wontmuckituptoobad over itsreallythissimple. My guess would be the people doing the solar panels want to be sure they won’t be taxed in the future, but in order to give them the exemption, the city has to pass an ordinance establishing something to give them an exemption from. And the different exemption for residences is probably a case of “council has to follow state law” or “look out for that sentence on page four of this five-page ordinance” or “this is in violation of the Mayan calendar.” I really doubt that a council dominated by progressives on this topic is going to create a new tax on solar panels.

       2 likes

  9. Daniel says:

    “I really doubt that a council dominated by progressives on this topic is going to create a new tax on solar panels.”

    I would not put it past them.

       0 likes

    • JGFitzgerald says:

      All due respect, that comment, from somebody with no last name, directed at people doing a thankless job, lacks gravitas.

         0 likes

      • Chris Foster-Baril says:

        I’m generally confused by this article.

        Let me get this straight.

        This ordinance does not yet exist, right? Is there a draft of it that includes language that is worrisome? Or is the basis of this article centered around the email that Domonoske wrote?

           0 likes

  10. Charles Chenault says:

    Perhaps I can simplify and do my best to explain. First, thanks Joe because everything you wrote is dead on. There are necessarily two taxes involved by state law on solar exemptions. Real estate tax on residential property and machinery and tools on EMU’s solar panels. EMU has requested a 100% exemption from manchinery and tools tax for a long period of time. To deal with this, we are forced to deal with the residential component that is covered by the same state statute. I do not believe there is any compunction to tax residential solar usage (in fact, many realtors and appraisers will tell you that solar panels decrease property value). We are at this point to deal with EMU’s request and assumedly future request of the same nature by other industries.
    Thanks – Charlie Chenault

       2 likes

  11. Sam Nickels says:

    As writer of the article, I should respond. Chris – the article was generated in response to Domonoske’s letter and responses from others I received to his letter. It’s complicated, so I talked to a number of parties, including the city and council members. Two have responded here. I thought the article was clear that although there is concern in the community, the council members I talked with were clearly not interested in adding solar taxes to anyone. However, none of them stated there was a clear majority for a 100% exemption, so I could not include that in the article.

    My apologies to Kai that this was apparently not clear, or that it fanned the flames. As my first attempt at writing for hburgnews, I clearly have some more to learn. I appreciate your comments, all. I hope they will result in better writing/reporting. Joe’s suggestion of focusing on “tax exemption” would have been a better approach.

    Sam Nickels

       0 likes

  12. We’ve made changes to the story in response to your comments and questions here. See updates above.

    Thanks for asking questions and weighing in. Your feedback is important, and we will always do our best to follow-up with corrections or additions.

       2 likes

  13. Chris Foster-Baril says:

    Thanks!

       0 likes

  14. Renee says:

    Thanks for the updates & clarifications!

       0 likes

  15. Well, obviously if Councilman Chenault is right that solar panels reduce property values, there simply is no issue here. One will presumably get a tax break, assuming the assessors accurately account for this. However, I must confess that I am completely mystified as to why solar panels would reduce the value of a property. Anybody, Councilman Chenault, a local realtor, anybody, got an explanation for this one, please?

       0 likes

    • Ross says:

      They look “tacky”, kinda like having junk cars and stuff around the yard, only on the house.

         0 likes

      • bazrik says:

        I’m not sure I even know how to comment on that statement, Ross. Wow.

           0 likes

        • I am going to make this personal. I am right now in the process of installing solar panels on my house in the 200 block of Franklin Street in Harrisonburg, first on the block to do so. Have not had any neighbors complaining that we are going to ruin the neighborhood or lower property values with our tacky maneuver. More like interested curiosity going on. Made the decision before any question about tax breaks from the city arose and have presumed all along that there would be an increased assessment, although if Councilman Chenault and Ross are right, I shall look forward to the reduced assessment and taxes on our house as a result of this, to go along with the reduced utility bills.

          So, let me be more direct. Is there anybody out there who can name a single case where somebody put solar panels on their house and not only did it sell for less than it would have otherwise, but the city actually lowered the assessment on the house? Of course the law is that houses are to be assessed at real market values, so if the market value does go down, so should the assessment. Anybody? More generally, what does happen to the assessment when solar panels go on?

             0 likes

          • Scott Rogers says:

            Some home buyers do not like the look of solar panels, at least on the front of the house.

            I searched all properties sold through the HRAR MLS over the last 10 years for “solar” hoping to find a variety of properties with solar panels on their roofs, visible from the street, to allow me to analyze the market impact of solar panels.

            Unfortunately, I only found one such house, which is located on Dogwood Drive. (http://goo.gl/JfmVt)

            The property sold in 2006, with a “days on market” time of 148 days. Of the 250 single family homes that sold in the City of Harrisonburg through the HRAR MLS in 2006, the average “days on market” was 122 days — so this 148 days wasn’t terribly longer than was normal at the time.

            If you look at the Assessment tab on the link above, the assessment of this house keeps going up — though I’m not sure when the solar panels were installed.

            I would think that someone from the City real estate office could tell us what adjustments they actually make (up, down, none) when someone adds solar panels…..

               0 likes

  16. Thanks, Scott. Actually the assessment on improvements declined between 2000 and 2003, so maybe that was the tackiness factor prior to the benefits from utility savings came to be understood. Needless to say, energy costs are rising, so the benefits will be rising also. But, it would be nice to know what in fact the assessor’s office actually does as that importantly affects this discussion. If in fact they really do lower assessments after the installation of panels, well, there is the tax break, which strikes me as somewhat absurd.

       0 likes

    • Solar panels up and operational on our house as of today. Anybody wanting to check them out for tackiness can see them on 200 block of Franklin, only house with a “Sustainable Solutions” sign out front. I will shake Councilman Chenault’s hand if the city lowers our assessed value for this, although a little bird (or maybe a little byrd) tells me that this will not happen, :-).

         0 likes

      • Bubby Hussein, Hillbilly Sheikh says:

        Are you selling your photovoltaic electricity back to the Co-op? ‘Cause that can pay for a heap of property taxes. And I assume that you will pick up the 30% Federal tax credit in 2011.

           0 likes

        • Lowell Fulk says:

          I admire Barkley for numerous reasons, but I’m afraid, Bubby, that he may not qualify for the 30% tax credit. You see, that credit was part of the hated “stimulus” package and will almost certainly not be renewed by the Congress elected in November of 2010. Had Barkley completed or paid for the project by December 31st., he most likely would have been eligible.

             0 likes

          • Lowell Fulk says:

            And if all who are interested in freeing ourselves from fossil fuel addiction had bothered themselves to get up off their collective asses and vote, the tax credit for intelligent investment toward a sustainable energy future would most likely have been extended…
            But such is life and history…

               0 likes

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