solar and wind energy production taxes · 2019. 6. 19. · solar energy production tax for purposes...
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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
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
Wind Energy Production Tax
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
Wind Energy Production Tax
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
Wind Energy Production Tax
Nuclear Facility Nameplate Capacity Example
90%
90% x 200 MW = 180 MWAvg. Capacity Factor x Nameplate Capacity = Average Output
Wind Energy Production Tax
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
Wind Energy Production Tax
Large‐scale system (> 12 MW):
Medium‐scale system (>2 ≤ 12):
Small‐scale system (≥ 2):
Tax Rate
$1.20 per megawatt hour
$0.36 per megawatt hour
$0.12 per megawatt hour
Wind Energy Production Tax
5,000 MWh x $0.36 = $1,800
Production Tax Calculation Example
Annual Production Tax Rate* Tax
* for a medium‐scale WECS
Wind Energy Production Tax
What is included on the production tax report?
• Company Information
• Number of towers
• Nameplate capacity (MW)
• Location information
• MWh production amounts
Wind Energy Production Tax
Owners are taxed at 60% of the nameplate capacity of the system
Late Filer/Non‐Filer Consequences
Wind Energy Production Tax
• 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
Wind Energy Production Tax
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
Wind Energy Production Tax
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
Wind Energy Production Tax
Billing and Tax CollectionCompanies pay the county treasurer as personal property taxes
County Responsibility
Wind Energy Production Tax
Tax Distribution
City20%
80%
City
County
County Responsibility
County
Wind Energy Production Tax
20%
80%
Report to the Department of Education
County Responsibility
Auditor reports to the Department of Education the amount of production tax revenue is allocated to school districts
Wind Energy Production Tax
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
Wind Energy Production Tax
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
Tax rate $0.12 per MWh
Annual Production x Tax Rate = Tax5,075 MWh x $0.12 = $609
Wind Energy Production Tax
Question 2: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
City of Duluth
1.5 MW
4,306 MWh
January 15
Wind Energy Production Tax
Question 2: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
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:
Wind Energy Production Tax
Question 3: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
Private corporation
201 MW
700,027 MWh
January 15
Wind Energy Production Tax
Question 3: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
Private corporation
201 MW
700,027 MWh
January 15
Tax rate $1.20 per MWh
Annual Production x Tax Rate = Tax700,027 MWh x $1.20 = $840,032.40
Wind Energy Production Tax
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?
Wind Energy Production Tax
Question 4: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
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.
Wind Energy Production Tax
Question 4: What is the tax liability?
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
Wind Energy Production Tax
Question 5: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
Electric Cooperative
4 MW (2 MW + 2 MW)
10,150 MWh (5,075MWh x 2)
January 15
Wind Energy Production Tax
Question 5: What is the tax liability?
WECS ownerNameplate capacityMegawatt hours produced for assessment yearFiled by
Electric Cooperative
4 MW
10,150 MWh
January 15
Tax rate $0.36 per MWh
Annual Production x Tax Rate = Tax10,150 MWh x $0.36 = $3,654
Wind Energy Production Tax
$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
Wind Energy Production Tax
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
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
Solar Energy Production Tax
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
Solar Energy Production Tax
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.
Solar Energy Production Tax
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
Solar Energy Production Tax
What is included on the production tax report?
• Company Information
• Nameplate capacity of the system
• Location information
• MWh production amounts
Solar Energy Production Tax
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
Solar Energy Production Tax
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
Solar Energy Production Tax
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
Solar Energy Production Tax
Billing and Tax Collection
Companies pay the county treasurer as personal property taxes
County Responsibility
80%
City
Solar Energy Production Tax
County Responsibility
Tax Distribution
20%
80%
City
County
Wind Energy Production Tax
Question 1: What is the tax liability?
SEGS ownerNameplate capacityMegawatt hours produced for assessment yearFiled byTax rate $1.20 per MWh
Private corporation
10 MW
17,066 MWh
January 15
Wind Energy Production Tax
Question 1: What is the tax liability?
SEGS ownerNameplate capacityMegawatt hours produced for assessment yearFiled byTax rate $1.20 per MWh
Private corporation
10 MW
17,066 MWh
January 15
Annual Production x Tax Rate = Tax17,066 MWh x $1.20 = $20,479
Wind Energy Production Tax
Question 2: What is the tax liability?
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.
SEGS ownerNameplate capacityMegawatt hours produced for assessment yearFiled byTax rate $1.20 per MWh
Private corporation
10 MW
17,066 MWh
Did not file
Wind Energy Production Tax
Question 2: What is the tax liability?
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
Annual Production x Tax Rate = Tax26,280 MWh x $1.20 = $31,536
Solar Energy Production Tax
$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
Solar Energy Production Tax
0
50,000
100,000
150,000
200,000
250,000
2018 Solar Energy Production, per County
Solar Energy Production Tax
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/
Solar Energy Production Tax
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
Solar Energy Growth in MN
• 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.
Solar Energy Growth in MN
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
Solar Energy Growth in MN
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?
Solar Energy Growth in MN
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
Classification of Real Property
• 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
Classification of Real Property
• 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