Solar and Wind Energy Production Taxes · 2019. 6. 19. · Solar Energy Production Tax For purposes of filing solar energy production taxes, the nameplate capacity of multiple systems

Solar and Wind Energy Production Taxes

Holly Soderbeck | Revenue Tax Specialist

Working together to fund Minnesota’s future | www.revenue.state.mn.us

• Wind Energy Production Tax

• Solar Energy Production Tax

• Solar Energy Growth in Minnesota

• Property ID creation

• Classification of Real Property

Agenda

Wind Energy Production Tax


• Tax on the production of electricity from Wind Energy Conversion Systems (WECS)

• Enacted in the 2002 legislative session

• Real and personal property of a WECS is exempt

• Land is subject to property tax

• MN Statute 272.029

General Information


January 15:

February 28:

April 1:

December 31:

Department Timeline

Report filing deadline

Tax notices sent to owners & counties

Department’s deadline to issue corrections

Deadline to correct “clerical” errors


Definitions

Wind Energy Conversion System (WECS)

Any device, such as a wind charger, windmill, or wind turbine which converts wind energy into a form of usable energy; including a substation that is used by one or more wind energy conversion facilities

Large‐scale WECS WECS greater than 12 megawatts (MW)Medium‐Scale WECS

WECS greater than 2 megawatts (MW)

Small‐scale WECS WECS less than or equal to 2 megawatts (MW)Small‐scale WECS Maximum rated output of the electricity generator


Nuclear Facility Nameplate Capacity Example

90%

90% x 200 MW = 180 MWAvg. Capacity Factor x Nameplate Capacity = Average Output


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Capacity Factors by Energy Typebased on 2017 EIA data

Natural Gas Coal Nuclear Hydro Wind Solar

Data retrieved from Energy Information Administration


Large‐scale system (> 12 MW):

Medium‐scale system (>2 ≤ 12):

Small‐scale system (≥ 2):

Tax Rate

$1.20 per megawatt hour




5,000 MWh x $0.36 = $1,800

Production Tax Calculation Example

Annual Production Tax Rate* Tax

* for a medium‐scale WECS


What is included on the production tax report?

• Company Information

• Number of towers

• Nameplate capacity (MW)

• Location information

• MWh production amounts


Owners are taxed at 60% of the nameplate capacity of the system

Late Filer/Non‐Filer Consequences


• Wind Energy Conversion System (WECS) located in a job opportunity building zone (JOBZ)

• Small‐scale WECS with a capacity of 0.25 MW or less

• Small‐scale WECS with a capacity 2 MW or less and are owned by a political subdivision

Exemptions


For purposes of filing the wind energy production taxes multiple WECS’s nameplate capacities are combined if they:

Combining Multiple WECSs

• Are located within five miles of each other

• Constructed within the same 12‐month period

• Are under common ownership

In the case of a dispute, the Department of Commerce will determine the size of the system


Tax Notices• Tax Notice sent to counties by February 28

• Corrections allowed up until April 1

• Examples of possible Corrections

• Parcel IDs• City/township• Missing records• Production amount


Billing and Tax CollectionCompanies pay the county treasurer as personal property taxes

County Responsibility


Tax Distribution

City20%

80%

City

County


County


20%

80%

Report to the Department of Education


Auditor reports to the Department of Education the amount of production tax revenue is allocated to school districts


Question 1: What is the tax liability?

WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by

Electric cooperative

2 MW

5,075 MWh

January 15




Electric cooperative

2 MW

5,075 MWh

January 15

Tax rate $0.12 per MWh

Annual Production x Tax Rate = Tax5,075 MWh x $0.12 = $609




City of Duluth

1.5 MW

4,306 MWh

January 15




City of Duluth

1.5 MW

4,306 MWh

January 15

The wind energy conversion system is exempt from production tax, since the system is owned by a political subdivision.

The answer:




Private corporation

201 MW

700,027 MWh

January 15




Private corporation

201 MW

700,027 MWh

January 15


Annual Production x Tax Rate = Tax700,027 MWh x $1.20 = $840,032.40


Question 4: Now imagine if the conversion system in problem 3 did not file. They are taxed at 60% of their nameplate capacity instead of the amount of actual production for the assessment year. What is their tax liability?




Private corporation

201 MW

700,027 MWh

Did not file

Since they did not file, they are taxed at 60% of their nameplate capacity instead of the amount of actual production for the assessment year.



Tax rateTotal possible production of the system60% of Nameplate capacity

$1.20 per MWh201 MWh X 7,760 hours = 1,760,760

1,760,760 MWh x .60 = 1,056,456 MWh

Annual Production x Tax Rate = Tax1,056,456 MWh x $1.20 = $1,267,747.20




Electric Cooperative

4 MW (2 MW + 2 MW)

10,150 MWh (5,075MWh x 2)

January 15




Electric Cooperative

4 MW

10,150 MWh

January 15


Annual Production x Tax Rate = Tax10,150 MWh x $0.36 = $3,654


$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

Total Wind Energy Production Tax in Minnesota, per taxes payable Year


0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2018 Wind Energy Production, per County

Wind Energy in Minnesota

GIS data from eia.gov

Southwestern Minnesota Wind Towers

Wind Energy in Minnesota

GIS data from eia.gov

Southeastern Minnesota Wind Towers

Solar Energy Production Tax


• Tax on the production of electricity from Solar Energy Generating Systems (SEGS)

• Enacted in the 2014 legislative session

• Personal property of SEGS are exempt from property tax

• Land is still subject to property tax

• MN Statute 272.0295

General Information


January 15:

February 28:

April 1:

December 31:

Department Timeline

Report filing deadline

Tax notices sent to owners & counties

Department’s deadline to issue corrections

Deadline to correct “clerical” errors


Definitions

Solar Energy Generating System (SEGS)

A set of devices whose primary purpose is to produce electricity by means of any combination of collecting, transferring, or converting solar generated energy.

Alternating Current

An electric current in which the flow of electric charge periodically reverses direction, whereas direct current, the flow of electric charge is only in one direction.


One rate:

Tax Rate

$1.20 per megawatt hour (MWh)

Tax Calculation Example5,000 MWh x $1.20 = $6,000 Annual Production Tax Rate Tax


What is included on the production tax report?

• Company Information

• Nameplate capacity of the system

• Location information

• MWh production amounts


Owners who do not file on time are taxed at 30% of the nameplate capacity of the system

Late Filer/Non‐Filer Consequences

Solar Energy Generating Systems that are less than or equal to 1 MW (alternating current)

Exemptions


For purposes of filing solar energy production taxes, the nameplate capacity of multiple systems are combined if they:

Combining Multiple SEGSs

1. Exhibit characteristics of being a single development

2. Constructed within the same 12‐month period

In the case of a dispute, the Department of Commerce will determine the size of the system


Tax Notices• Tax Notice sent to counties by February 28

• Corrections allowed up until April 1

• Examples of possible corrections

• Parcel IDs• City/township• Missing records• Production amount


Billing and Tax Collection

Companies pay the county treasurer as personal property taxes


80%

City



Tax Distribution

20%

80%

City

County



SEGS ownerNameplate capacityMegawatt hours produced for assessment yearFiled byTax rate $1.20 per MWh

Private corporation

10 MW

17,066 MWh

January 15




Private corporation

10 MW

17,066 MWh

January 15




Since they did not file, they are taxed at 30% of their nameplate capacity instead of the amount of actual production for the assessment year.


Private corporation

10 MW

17,066 MWh

Did not file



Tax rateTotal possible production of the system30% of Nameplate capacity

$1.20 per MWh10 MWh X 8,760 hours = 87,600 MWH

87,600 MWh x .30 = 26,280 MWh



$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

Total Solar Energy Production Tax in Minnesota, per payable Year


0

50,000

100,000

150,000

200,000

250,000

2018 Solar Energy Production, per County


North Star Solar Project• 100 MW nameplate capacity

• Covering ~800 acres

• Enough energy to power roughly 20,000 homes

• Energy produced in 2017: 188,018 MWh

• Production tax revenue:$225,622

https://mnnativelandscapes.com/portfolio‐item/north‐star‐solar/


Slayton Solar• 1.66 MW nameplate capacity

• Covers ~13 acres

• Enough energy to power roughly 325 homes

• Energy produced in 2017: 2,547 MWh

• Production tax revenue:$3,056

http://www.allcous.com/portfolio/slayton‐solar/

Solar Energy Growth in Minnesota

Solar Energy Growth in MN

2015 2016 2017 2018• 1 County• 2,726 MWh• $3,271 Tax

• 9 Counties• 23,798 MWh• $28,557 Tax

• 30 Counties• 925,714 MWh• $1,107,830 Tax

• 32 Counties• 1,178,507 MWh• $1,414,209 Tax


• No more than 1 MW nameplate capacity

• Must have at least 5 subscribers

• Subscribers receive a credit on their electricity bill in proportion to the size of subscription

Community Solar GardensCommunity solar gardens are centrally‐located solar systems that provide electricity to participating subscribers.


Who are the subscribers?Retail customers of the public utility located in the same county, or neighboring county, as the garden; who own one or more subscriptions of a community solar garden.

What is a subscription?A contract between a subscriber and the owner of a solar garden.

Community Solar Gardens


Subscription Usage Electric Bill

1,000 W

1,000 W

1,000 W

1,000 W

1,000 W

900 Wh

1,100 Wh

1,200 Wh

1,000 Wh

800 Wh

Credited for 100 Wh

Billed for 100 Wh

Billed for 200 Wh

No Credit or Bill Due

Credited for 200 Wh

Community Solar Garden

Subscribers

How does a community solar garden work?


Are community solar gardens subject to the solar energy production tax?

Community Solar Gardens

Additional Information

Identification of New Projects

Wind & Solar Project Identification Form

Identification of New Projects

Resources used to identify new solar and wind projects

• U.S. Energy Information Administration

• Minnesota Department of Commerce

• Public Utilities Commission

• Minnesota Department of Labor and Industry

• Company Resources

• Developers websites

• Local news articles

Wind and Solar Energy Property IDs

• Personal property ID

• Real property owner may be different from the Solar or Wind Energy Generating System owner

• Unpaid taxes are treated as personal property

• Property ID characteristics

• Owner, mailing address, city/township, and location address

• Timing for new property IDs

• By the end of the calendar year (ideally)

Property ID Creation

Classification of Real Property

• SEGS that are subject to the Energy Production Tax are classified as Commercial (3a)

• SEGS that are not subject to the Energy Production Tax are classified without regard to the system

Classification of real property associated with a solar energy generating system


• SEGS that are subject to the Energy Production Tax, the real property is classified as Commercial (3a)

• SEGS that are not subject to the Energy Production Tax, the real property is classified without regard to the system.

Classification of real property associated with a solar energy generating system


• Personal and Real (except land) property of a WECS that pays the production tax is exempt from property tax.

• Land is valued in the same manner as similar land that has not been improved with a wind energy conversion system.

• Land is classified based on the most probable use of the property if it were not improved by a wind energy conversion system.

Classification of real property associated with a wind energy conversion system

Thank you!

Holly Soderbeck

State Assessed Property [email protected]

Documents

Solar and Wind Energy Production Taxes · 2019. 6. 19. · Solar Energy Production Tax For purposes of filing solar energy production taxes, the nameplate capacity of multiple systems