Yesterday, the Finance, Bonding and Revenue Committee heard testimony on a bill that would create a uniform solar capacity tax, in lieu of personal property taxes, to simplify commercial solar developers’ bidding processes and guarantee stable tax revenue to rural towns most likely to house larger developments.
“All would agree there are serious taxation inconsistencies with today’s framework that contribute to a lack of uniformity over the personal property tax treatment of larger commercial solar installations,” testified Mike Trahan, Executive Director of the CT Solar Storage Association. “Multiple layers of state solar policy changes over the past decade have hampered development of larger commercial solar electric systems so vital to meeting Connecticut’s zero-carbon electricity supply goals.”
As it stands currently, HB 7266 calls for a base tax on all solar projects that develop more than two megawatts of electricity. The base tax would be $12,000, multiplied by the number of megawatts of capacity for each system. Beginning in 2027, the base tax of $12,000 would be raised by 2% every year. The revenue raised by such taxes would be paid directly to the municipality, or municipalities, in which the project is located.
This parallel tax structure would replace personal property taxes on solar developments, but would not replace the real property tax paid by developers, or taxes paid on the land used to house the developments.
The bill stipulates that collection of such a tax would be treated the same as property taxes, meaning developers who fail to pay taxes could ultimately have liens placed on their developments. Delinquent tax payments would have a 1.5% monthly interest rate. Disgruntled developers would have the right to appeal their tax bills via Superior Court, and municipalities would have leeway to negotiate with developers the stabilization of tax rate and determination of tax collection schedules.
Since 2018, the legislature has attempted to craft and pass a bill that would create a statewide uniform solar tax, while addressing the concerns of all involved stakeholders, but has yet to successfully do so. Trahan recounted the history of solar legislation that culminated in the current adverse tax landscape in his testimony.
Trahan explained that the legislature’s creation of Non-Residential Renewable Energy Solutions (NRES) and Shared Clean Energy Facility (SCEF) programs in 2018, without making changes to PA 13-61, a 2013 bill that introduced property tax exemptions for commercial projects that only generated enough energy for their own sites’ operation, led to confusion regarding how commercial projects should be taxed.
“In an oversight, property tax treatment of commercial solar systems laid out in 2013’s PA 13-61 were not updated to incorporate the newly adopted NRES/SCEF tariffs,” wrote Trahan. “The ensuing ambiguity placed an undue burden on both industry participants and municipal tax authorities to determine appropriate taxation.”
In 2022, a bill was passed which made further tweaks to the state’s solar regulations, while mandating that the Office of Policy and Management (OPM) conduct a study on ways the state could remove tax inefficiencies related to commercial solar. In January 2023, OPM submitted its findings, which were used as the basis to draft another bill looking to alleviate the state’s tax issues. While the bill passed the House floor, it did not get called to vote in the Senate.
Another bill was drafted in 2024 in an attempt to put the issue to bed, but ultimately was revised before passage, calling for another study to be taken by OPM, this time with the assistance of the Department of Energy and Environmental Protection (DEEP). This study was submitted to the legislature in January, the findings of which were referenced by OPM Secretary Jeffrey Beckham in his own written testimony.
“The working group indicated that, in the transition from the previous solar programs to the current programs, the existing exemptions became unclear due to changes to metering and exceeding on-site load,” wrote Beckham. “This uncertainty created conflict for municipalities and industry, which could stymie efforts towards energy generation, resiliency, and greenhouse gas reduction goals.”
Beckham went on to suggest that HB 7266 include exemptions for developments that are simultaneously high-use and high-generation, such as AI data centers, so long as all electricity produced remains on-site. Beckham also requested further exemptions for developments located on state land and state facilities, as well as roof-tops, canopies, brownfields and landfills.
While the need for a uniform solar capacity tax was recognized yesterday by both municipalities and developers alike, the bill garnered criticism from developers and other stakeholders regarding some of its specifics, mainly the retroactive applicability of the tax on already extant projects and the provision for a yearly 2% raise to the base tax rate. Beckham himself noted that the $12,000 base tax was “50% higher than the rate that passed the House in 2023,” and that this higher base tax, as well as the provision for a yearly 2% raise, could worsen the state’s high-electric costs.
“Connecticut residents and employers are already struggling with high electricity bills,” wrote Beckham. “We strongly recommend a lower rate without an escalator to reduce impact to ratepayers.”
Joby Moss, Director of Business Development at Verogy, a West Hartford-based solar developer, said that retroactive application of the tax on finished projects, as well as those currently under construction, could prove ruinous to their fiscal viability.
“Any project owners would have their expenses increased quite dramatically, and therefore savings meaningfully reduced,” said Moss. “Many projects that did not originally consider this tax, because it was not simply not in existence, would be subject to default and foreclosure.”
Moss also opposed the 2% annual raise in base tax, a sentiment echoed by other developers who testified on the bill. Several developers pointed out the diminishing returns on solar devlopments as the panels age and require increased maintenance. Municipal officials, however, viewed the yearly tax rate raise as essential to providing towns with the necessary revenue to offset inflation, as well as to mirror the property tax system it would replace, as property assessments typically rise annually.
“We support the provision of an escalator clause to ensure that, as time goes on, that this is not a flat property tax exemption that again leaves town scrambling to figure out how to pay for critical services,” said Betsy Gara, Executive Director of the CT Council of Small Towns (COST).
Gara noted that property tax is the primary source of revenue for the state’s municipalities, and cited recent changes to the state’s motor vehicle assessments and property tax exemptions for veterans as having a negative impact on municipal bottom lines.
“I am nervous, however, listening to the testimony and reading the testimony from the solar developers as to what they think would be a fair, uniform capacity tax, because, again, we need to be mindful of the impact on our local property tax revenues,” said Gara.
The Committee’s House Chair, Rep. Maria Horn (D-Salisbury), asked Gara for her thoughts on the retroactive applicability of the tax, as well as whether or not she understood developers’ concerns regarding the depreciation of solar panels over time.
“We do support efforts to ensure that the tax stabilization agreements that may have been negotiated prior to this being enacted would remain in place,” said Gara. “Certainly other personal property may be subject to depreciation schedules, so that, again, is something that we can certainly discuss. Our whole bottom line is making sure that this would not end up undermining the property tax revenues that towns rely on.”
In spite of Gara’s openness to dialogue, the Committee only has until April 24 to iron out any discrepancies, reach stakeholder compromises, and vote favorably to pass the bill out of committee. If it does, the bill must then be passed by both chambers of the house before it is signed into law.
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