Want To Pay Tax On Your Leased Solar Panels? Arizona State Department Of Revenue Says That You Do

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Originally published on Planetsave.

arizona solar rooftopsThe residential solar energy war just continues to heat up more and more in the (already quite sunny and hot) state of Arizona. The State Department of Revenue there has done an about-face on PV tax policy, and is now saying that only solar panels owned outright are exempt from tax, leased panels are no longer eligible for tax exemption.

The move isn’t necessarily surprising, but it is a bit hard to understand from the department’s perspective. Unless of course the department is in bed with the state utility Arizona Public Service and working to undermine the cost benefits of adopting solar power in Arizona, as many observers have suggested.

As it stands currently, in Arizona, solar leasing contracts account for the majority of distributed solar generation, so removing the exemption for such leased panels would likely lead to increased leasing costs for consumers — something that those in the utilities industry would no doubt be happy to see occur.

The move, proposed by Arizona’s State Department of Revenue, would see a reinterpretation of the standing tax policy that says that solar equipment is exempt from property tax. Until now, this had applied to all types of rooftop solar panels, but, if that changes, then homeowners who lease may be facing a $152 increase to their annual property tax bill.

“Arizona is breaking new ground for being an extremely strange political environment,” noted Bryan Miller, president of The Alliance for Solar Choice (TASC). Miller also noted that it was humorous to see such a policy emerge in a state that was otherwise so strongly “anti-tax.”

I wonder… 🙂

If the new interpretation of the solar tax law ends up sticking, then it will come into effect at the beginning of October 2015.

Arizona has become something of a battleground between utility companies and solar system providers in recent months (and a battleground between Tesla and car dealerships as well, for that matter). Too bad, considering that the turmoil is definitely putting a dent in what would otherwise be a very healthy market.

Considering how sunny Arizona is, it’s a bit funny to see so much opposition to the use of this resource.

Image Credit: crume / Foter / CC BY

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James Ayre

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.

James Ayre has 4830 posts and counting. See all posts by James Ayre

14 thoughts on “Want To Pay Tax On Your Leased Solar Panels? Arizona State Department Of Revenue Says That You Do

  • Thanks for this article, James. It’s hard to imagine a part of the world where solar would work better than Arizona, and where we are handicapped by an in-the-bed-with-ALEC state government that doesn’t want to see it happen.

    We are going to elect a new governor this year and – perhaps more importantly – we have a chance to shift the current energy-regressive balance in the Corporation Commission back to a pro-solar stance. Tucson and Flagstaff generally vote the proper way. Phoenix, unfortunately, usually doesn’t . . . and they have the largest population base.

    • Even more mind boggling is how there is almost no solar in Texas, hmmmm wonder why that is.

    • Isn’t Phoenix 1 of hottest cities on the planet/US? If so, shouldn’t the people of Phoenix be pro solar? If so, shouldn’t they elect a pro solar governor? Especially now that solar is so cheap, this will be the first election where solar is at grid parity in Arizona, let’s atleast hope that most people are smart enough. If not for the sake of climate change/the environment, then for the sake of economic benefits, both for the people and the state in general.

      • True, LookingForward. But, as with most places, Phoenix voters don’t typically base their choices on a single campaign issue. Early adopters of solar PV have been largely motivated by a desire to embrace green technology and a concern for the environmental damage caused by fossil fuel supplying electricity to their homes. It could be argued that this is traditionally a liberal voting block.

        It’s only been relatively recently that we have seen the price of solar technology drop to such a point that so-called conservative economy hawks would flock to it. It might be cruel to characterize this latter group as thoroughly uncaring and selfish, concerned only with their stock options at the expense of the planet itself, but that might not be all that far off in some instances.

        We may be over the worst of it now. The so-called Tea Party era (2009-11) witnessed such political atrocities as Obama “birthers,” so thoroughly motivated against environmental initiatives (make that ANY initiative) of the chief executive that one Arizona state legislator even proposed setting up incentives for a factory to produce incandescent light bulbs, so Arizona residents could “escape the eco-tyranny of Washington” after the tungsten wire bulbs had been banned in the other 49 states. We still witness this sort of idiocy down here, but it’s now seems a little less prevalent.

        So, while it may be more than a few years off before Arizona becomes a “purple” or even a “blue” state (and this is predicted, simply because we will eventually have a more racially diverse and younger population here,) we may began to see, sooner than that, a large coalition of pro-solar voters who might not have much else in common with each other on a myriad of other unrelated issues.

  • What’s next? Trying to block out the sun like Mr. Burns?

  • This will only accelerate the trend towards loans versus leasing solar systems in Arizona. A trend already underway in the rest of the nation as well.

    In my mind this is a good thing, typically loans are a better deal for the homeowner. Long term if leases continued to dominate my concern would be a negative effect on the reputation of solar. I could see problems if enough people ran into resale issues or started paying more on their solar bill then they would from their utility for example.

    • Fair enough. But the Arizona decision discriminates against leasing in an absurd way. You could see a certain logic in the reverse approach: to tax owned panels because they are part of the property and exempt leased ones because they belong to a corporation, The tax is aimed directly at SolarCity, who will presumably sue and quite likely win. Meanwhile they lose business, which is the point.

    • I also think loans are better then leasing, because of the fact of ownership, I think it’s better for an economy if ownership is more divided among all people then among a few compagnies, but I don’t think I’m the only 1 in that way of thinking. This tax could benefit that scenario or will it just slow the solar market in general? I think that’s the big question around this tax, maybe it depends on how big the tax is?

      • I don’t think it will slow much- the legal precedent is there for this ruling. I’m not saying I agree with it but I don’t think this is intentionally anti solar. I also don’t think it’s too focused at any particular leasing company. Remember Solarcity will sell you a system as well.

        Anything that actually increases the financial benefit will help in Arizona with net metering retained with a fee that eats at the lease companies margins but doesn’t impact the purchase financials as much.

  • It’s not just solar. Arizona suffers a national image problem in regards to being overly-aggressive on border control issues (witness SB1070) and homophobia (the thankfully-defeated SB1062.) The republican-controlled state legislature is all too quick to loosen firearms laws while simultaneously cutting public education spending. Those of us who live here and don’t agree with this right wing xenophobia are appalled and, here again, it’s not a majority sentiment in most Arizona cities.

    Sadly, though, a majority of voters in the Phoenix area (the largest state population center by a long shot and larger than all others combined) regularly elect right-of-center state representatives and that’s why we seem perpetually stuck in the mud. Even the current governor, Jan Brewer (one of the last people one would declare liberal or progressive,) now spends much of her waning days in office vetoing some of the most inane legislation that is regularly advanced by members of her own party.

    There was a good article in the local paper the other day regarding all of this and the consensus among a group of Arizona State University economists was to – no joke – stay off Jon Stewart’s Daily Show! . . .


  • Do they intend to levy a property tax on temporary structures as well?

  • So how is it different if you lease your car? Can they try to tax that too? What if you rent furnature / appliances for your house? If a landowner allows natural gas / oil drilling on their property, is Arizona going to try to tax the drilling equipment or something? Why are they basically writing a bill of attainder against solar power?

  • That good news to tax solar panels that cause carbon loading.

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