Two solar companies are suing the Arizona Department of Revenue over its hotly-disputed decision to tax leased solar panels, an additional charge that would hit Arizona’s growing solar leasing industry.
SolarCity Corp. and Sunrun Inc. filed a lawsuit Monday against the state Department of Revenue alleging that the department’s interpretation of a state law to mean that Arizonans who lease solar panels aren’t eligible for tax exemptions granted to those who own them is illegal. This tax on leased solar panels would result in $152 extra in property taxes for the first year of a homeowner’s leased $34,000 solar-panel array, a charge that would decrease each year as the value of the array goes down. For larger, commercial arrays, the taxes will be higher — a leased 80-kilowatt, $360,000 system would carry a $1,615 charge its first year, and a 250-kilowatt system would be charged $4,485.
The first payments would be due from solar companies in October 15, and Bryan Miller, vice president of public policy and power markets for Sunrun Inc, say the additional cost to the companies will be passed along to the consumer.
“This would absolutely be the end for solar in Arizona,” Miller said. “It would burden those solar owners with a large tax increase that they were promised would never happen by top policy makers.”
The lawsuit alleges that Arizona “has made it clear that the subject property, when used ‘primarily for on-site consumption’ of the electricity generated by such property, is ‘considered to have no value and to add no value’ to the property on which it is installed, and thus it should not be separately assessed for property tax purposes.”
Until last year, both owners and leasers of solar panels didn’t have to pay property taxes. But after the state Department of Revenue reviewed the state’s law and decided that “leased panels are more like merchant power plants and should pay property taxes like them,” that changed, causing significant backlash from solar supporters in the state. Solar companies like SolarCity and Sunrun were worried about the burden the additional tax would impose on their customers who lease solar panels, who are often middle-class people who want solar energy but can’t afford to buy an array. Last year, a study by the Center for American Progress found that middle class households are leading the residential solar boom in the U.S., with the majority of installations happening in zip codes with median incomes of $40,000 to $90,000.
But it’s not just solar companies that are upset about the new tax. In June, more than 200 Arizonans rallied at the state capitol against the new solar tax. And last week, Arizona solar advocate Lesley Lillywhite delivered a petition to “Protect solar energy” with more than 3,100 signatures to Gov. Jan Brewer’s office.
“Today we stand to ask our governor to do the right thing,” former Republican Senator and co-chairman of Tell Utilities Solar won’t be Killed (TUSK) Barry Goldwater said at the rally. “Arizona has an abundance of sunshine and entrepreneurs. We should be able to look out on buildings and see nothing but rooftop solar. The sun will always be there. We’re asking Gov. Brewer to tear down this tax.”
Arizona’s fight over solar taxes is just one example of the outrage being felt in states around the country over new fees on solar. Utah’s main utility recently proposed a new monthly $4.25 fee on its residential solar customers, a group of solar users that’s growing rapidly in the state. Oklahoma, too, announced this year that it will charge customers who get their energy from solar panels or small wind turbines on their property. These fees are evidence of the apprehension utilities feel as rooftop solar becomes more and more popular in the U.S., a trend that threatens to overturn the traditional energy utility business model.