March 17, 2020
New York State’s Real Property Tax Law (RPTL) Section 487 is a vital piece of legislation for renewable energy systems in the state. This property tax exemption encourages the development and deployment of renewable energy systems across the state, both in terms of small residential systems and large-scale projects, by making these projects more financially viable. How does it work for local governments and municipalities?
What is RPTL Section 487?
New York State’s RPTL Section 487 is a fifteen-year property tax exemption for properties with solar energy and other renewable energy systems. The law is applicable only to the value which a solar/renewable energy system adds to the overall value of a property. It is not an exemption from all property tax for properties with a renewable energy installation.
The law applies to all municipalities in New York by default. Unless a local government takes specific action in the form of a local law, ordinance, or resolution, the exemption is in effect in that municipality. However, even if a local government does not opt out, it can still benefit financially via payment-in-lieu-of-taxes (PILOT) agreements—which we will discuss shortly.
How does solar impact the local economy in New York?
The statistics show that solar is one of the fastest-growing industries in the country—and New York in particular is really seeing the benefits of a thriving solar sector. It’s not just that the industry itself is experiencing growth, but that this growth is benefiting the economy through the creation of living-wage jobs. Some of the impressive figures include:
New York solar installations grew a staggering 575% from 2012 to 2015.
In the same time period, the United States as a whole saw a 146% increase.
In 2015, New York State ranked 7th for cumulative installed solar capacity.
As of 2015, 600 solar companies employed 8,250 people across NY—approximately 1,000 new jobs and a 13.3% increase on 2014’s job growth.
Why would a jurisdiction choose to opt out?
As noted above, all local governments offer this property tax exemption by default unless they specifically opt out. Of course, many local governments may decide to opt out in order to generate additional tax revenue. In particular, large-scale solar projects, which are becoming increasingly popular, could be seen as a source of considerable tax revenue for local governments. Of course, it’s not as simple as this, because developers are less likely to build their projects in areas where they cannot avail of RPTL Section 487. If a solar project is liable for full taxation, then this could impact the financial viability of the project and force developers to look elsewhere—especially if other nearby NY municipalities are offering the property tax exemption.
Can jurisdictions opt out for large-scale solar projects only?
No, it is not possible for local governments to opt out on a conditional basis. Jurisdictions may not offer the tax exemption for small systems while simultaneously taxing large-scale solar projects. A jurisdiction is permitted to either opt out fully—or not at all.
Can jurisdictions collect revenue from solar projects without opting out?
Yes, this is possible thanks to the payment-in-lieu-of-taxes (PILOT) agreements we briefly mentioned earlier. A PILOT agreement is something of a compromise—reducing the tax burden/rate uncertainty for system owners/developers/property owners while still allowing municipalities to avail of some of the foregone tax revenue. PILOTs are annual payments, generally proportional to the size of the renewable energy system, which cannot exceed the amount of taxes that would be owed in the absence of the exemption. PILOTs are a useful way for local governments to generate additional tax revenue without making solar costs prohibitive for homeowners/businesses.
If a municipality has opted out, can it then opt back in?
Yes, just as a municipality is free to opt out of RPTL Section 487, it may opt back in. In order to do so, the local government simply repeals the local law/resolution/ordinance that saw it opt out in the first place.
Is New York the only state with a property tax exemption for solar?
No, in fact thirty-three other states currently offer exemptions for renewable energy projects. It’s a widely-recognized fact across the United States that property tax exemptions result in a significant boost to solar deployment which, in turn, boosts the local economy. Of the thirty-three states noted above, twenty-two mandate property tax exemptions for 100% of the value of solar energy installations over 10 or more years. This includes states such as:
California
Massachusetts
New Jersey
South Dakota
Kansas
Montana
For more information about RPTL Section 487, and the status of your individual municipality with regards to the law, send an email to info@training.ny-sun.ny.gov.
If you want to find out more about New York solar, contact YSG Solar today. YSG has been working in the solar sector for over a decade, developing renewable energy projects of all sizes, including small rooftop solar installations and large commercial/industrial projects. Send us an email, or call at 212.389.9215 to get started, or learn more about solar.
By Shane Croghan
Sources:
https://www.nysenate.gov/legislation/laws/RPT/487
https://www.nyserda.ny.gov/-/media/NYSun/files/Real-Property-Tax-Law-487.pdf