1. ATB’s interpretation of the solar property exemption has created confusion among municipal gov'ts

The ATB’s decisions, particularly Forrestall Enterprises, Inc. v. Board of Assessors of the Town of Westborough in 2014, reversed the way Clause 45 was interpreted for years by municipal officials and the DOR.156 The ATB’s reading of this statutory exemption exposes a loophole that allows commercial solar facilities to avoid paying personal property taxes on their equipment.

Although the ATB decisions apply only to the towns involved in the abatement cases (Westborough, Swansea, Barre, Framingham, and West Bridgewater), the ATB’s interpretation of Clause 45 can be binding on all communities if affirmed in an appeal to the Massachusetts Appeals Court.157 As a result, developers now have leverage in negotiations with municipalities because the ATB has sided with solar developers. If a municipality rejects (or only partially grants) a developer’s request for an abatement, the developer can appeal to the ATB, which will most likely issue a decision granting a full abatement of property taxes.

A municipality may challenge the ATB’s decision in the Appeals Court, but the financial resources needed by the municipality to prosecute an appeal could exceed the annual tax revenue generated by the facility. For reference, the amount of property tax involved in the three ATB decisions from 2014 to 2017 totaled $120,698,158 while legal costs for just one of the decisions exceeded $100,000 for the developer and $50,000 for the municipality.159

2. Solar facility PILOT agreements do not always reflect the full tax value of solar equipment.

Electric generation facilities that participate in PILOT agreements with municipalities must contribute the “equivalent of the property tax obligation based on full and fair cash valuation.”160 In order to value solar equipment for the purposes of a PILOT agreement, however, assessors have to make projections of the equipment’s “full cash valuation” for each year of the PILOT agreement, factoring in depreciation. This process is much different from the one traditionally involved in taxing a generation facility, which would use up-to-date information each year.161  

As a result of the uncertainty generated by the ATB decisions, communities may discount some of the taxable value of solar equipment to reduce the annual PILOT contribution expected of a solar operator.162 Moreover, there is at least one current ATB appeal in which a developer is seeking a total exemption from taxes.163 Despite these situations, other solar firms and municipalities successfully conclude agreements.164 Additionally, although the use of a per-megawatt charge in PILOT agreements is quite common, there is significant variation in the charge among communities across the state.165

3. State laws and guidelines governing the taxation of solar equipment are outdated & lack clarity

Massachusetts law is not adequate to address the taxation of solar facilities in the 21st century. The state law allowing for municipalities and “generation facilities” to negotiate PILOT agreements was enacted in 1997.166 Legislators likely did not expect at that time that some of the entities using the law today would be solar developers that qualify as “generation facilities.”

Formal guidelines for the valuation and taxation of electric generating facilities were initially released by the DLS in September 1998 and were last updated in August 2017.167 Prior to the release of the updated guidelines, information about these PILOTs was distributed in City and Town newsletters by the DLS throughout the 2010s.168 The guidelines help identify generation facilities and methods to assess property taxes on these properties. The guidelines also include a “checklist” of requirements needed to negotiate a PILOT agreement and outlines the roles municipal officers have in the arrangement.169 Although the guidelines provide directions for a municipality to value solar facilities and arrange a PILOT contract, they lack clear examples of a standardized agreement or valuation process.

4. PILOT agreements have increased in importance as developers seek tax exemptions for facilities.

Even if solar developers might be exempt from paying taxes on solar installations, they may still be willing to negotiate PILOT agreements with municipalities on the understanding that they have some responsibility to share in the funding of municipal services. The agreements become more significant because they remain a method for municipalities to gain tax revenue that otherwise may be lost. The details of ownership and tax responsibility vary among properties, and some PILOT agreements have therefore focused only on personal property taxes as a result of the ATB decisions.

For the communities involved in the decisions, some of these PILOTs were negotiated as “settlement agreements.” For example, the town involved in the KTT (2016) case—Swansea—negotiated a PILOT payment schedule with the solar farm operator at the center of the case.170

5. Uncertainty is contributing to a slowdown in development of solar facilities in the Commonwealth.

Cities and towns welcomed the development of solar farms because communities appreciated the benefits of renewable energy and the possibility of additional tax revenues.171 Although Massachusetts has emerged as a leader in the development of solar installations, a variety of factors discussed below, including the uncertain tax status of solar installations, may result in a slower rate of solar development in the future.

For example, the town of Granby passed a solar moratorium in May 2019 due to concerns about future tax revenues from solar facilities.172 Select Board members argued that solar facilities could elect to be tax-exempt under existing loopholes in state law. The moratorium would give residents time to deliberate the issue with officials in public hearings.173

In another example, the town of Charlton currently has 25 solar farm projects that are either built or in the application process.174 In 2018, the town placed a temporary moratorium on solar farm projects, but in 2019 residents voted to change zoning regulations for large solar installations and to cap the number of solar installations at 30.175 The moratorium and limits on installations were done to address concerns from residents about the growing number of solar installations in the community.176 Other communities that passed similar solar moratoriums include Athol, Blandford, Haverhill, and Ware.177

Actions in these municipalities underscore the larger issue of declining overall solar development in the Commonwealth.178 In 2019, the number of new solar installations was only 50% of what had been installed the previous year, after a period of developers taking advantage of renewable energy incentives in the state.179 This decline can be attributed, in part, to concerns about land use. Municipal officials have become hesitant about allowing developers to clear agricultural or forest land to provide an energy benefit.180 Ideally, solar projects would be sited on vacant land (such as landfills and brownfields), but these types of parcels are becoming less available for this purpose.181 Solar farms that are already installed or under development could face other issues, such as an insufficient capacity for interconnectivity to the electric grid and limits on net metering.182

156 Forrestall Enterprises, Inc. v. Board of Assessors of the Town of Westborough, No.  ATB 2014-1025 (Appellate Tax Bd., Dec. 4, 2014) On file with DLM.

157. M.G.L. c. 58A, § 7

158. Forrestall Enterprises, Inc. v. Board of Assessors of the Town of Westborough, No.  ATB 2014-1025 (Appellate Tax Bd., Dec. 4, 2014) On file with DLM; KTT, LLC v. Board of Assessors of the Town of Swansea, No. ATB 2016-426 (Mass. Appellate Tax Bd., Oct. 13, 2016.) On file with DLM; Quabbin Solar, LLC v. Board of Assessors of the Town of Barre, No. ATB 2017-480 (Mass. Appellate Tax Bd., Nov. 2, 2017). On file with DLM.

159. Holtzman, M. (2017, October 12). 16-year PILOT agreement signed for Swansea solar farm. The Herald News. https://www.heraldnews.com/news/20171012/16-year-pilot-agreement-signed-for-swansea-solar-farm

160. M.G.L. c. 59, § 38H(b).

161. Massachusetts Department of Revenue, Division of Local Services. (1998, September). Informational guideline release (IGR) No. 98-403 – Valuation and taxation of electric generating property. On file with DLM; Massachusetts Department of Revenue, Division of Local Services. (2017, August). Informational guideline release (IGR) No. 17-26 – Valuation and taxation of electric generating facilities, at 5

162. Meeting with Concord Town Assessor, 5/5/20. On file with DLM; Meeting with Swansea Principal Assessor, 9/21/20. On file with DLM.

163. Meeting with Swansea Principal Assessor, 9/21/20, on file with DLM; email correspondence with Clerk of the Appellate Tax Board, 11/10/20, on file with DLM.

164. Meeting with Barre Town Administrator, 8/20/20. On file with DLM; Meeting with Barre Administrative Assessor, 8/27/20. On file with DLM.

165. NY-Sun PV Trainers Network, & Bacher, J. (n.d.) Planning and zoning for solar [PowerPoint slides]. https://www.nysba.org/WorkArea/DownloadAsset.aspx?id=61248

166. M.G.L. c. 59, § 38H(b).

167. Massachusetts Department of Revenue, Division of Local Services. (2017, August). Informational guideline release (IGR) No. 17-26 – Valuation and taxation of electric generating facilities.

168. Department of Revenue, Division of Local Services, City & Town (2012, March); Department of Revenue, Division of Local Services, City & Town (2014, August 7); Massachusetts Department of Revenue, Division of Local Services, City & Town (2017, June 1). On file with DLM.

169. Massachusetts Department of Revenue, Division of Local Services. (2017, August). Informational guideline release (IGR) No. 17-26 – Valuation and taxation of electric generating facilities, at 4-5.

170. Holtzman, M. (2017, October 12). 16-year PILOT agreement signed for Swansea solar farm. The Herald News. https://www.heraldnews.com/news/20171012/16-year-pilot-agreement-signed-for-swansea-solar-farm

171. Meeting with Charlton Town Administrator, 8/24/20. On file with DLM; Meeting with Barre Town Administrator, 8/20/20. On file with DLM.

172. Voghel, J. (2019, May 13). Granby voters approve moratorium on solar farms. Daily Hampshire Gazette. https://www.gazettenet.com/GranbyTM-hg050719-25384138

173. Id.

174. Note: as of August 2020. See also LaPlaca, D. (2019, June 13). Charlton town meeting voters close door to new solar farms. The Telegram & Gazette. https://www.telegram.com/news/20190612/charlton-town-meeting-voters-close-door-to-new-solar-farms; Meeting with Charlton Town Administrator, 8/24/20. On file with DLM.

175. Id.

176. Meeting with Charlton Town Administrator, 8/24/20. On file with DLM.

177. 15-month solar moratorium approved by Athol voters, 180-2. (2019, July 23). Athol Daily News. https://www.atholdailynews.com/AN-A1-WEDNESDAY-Athol-solar-moratorium-27207421; Blessing, K. (2019, March 19). Council rejects solar proposal, enacts moratorium. The Eagle-Tribune. https://www.eagletribune.com/news/haverhill/council-rejects-solar-proposal-enacts-moratorium/article_ecfd5a91-1f58-5f48-9612-de303210e0b2.html; Porter, A. (2020, February 12). Solar moratorium giving Blandford time to codify regulations. The Westfield News. https://www.thereminder.com/localnews/hilltowns/solar-moratorium-giving-blandford-time-to-codify-r/; Russell, J. (2019, March 11). Ware Town Meeting approves 14-month solar farm moratorium. The Republican. https://www.masslive.com/news/2019/03/ware-town-meeting-approves-14-month-solar-farm-moratorium.html

178. Meeting with Carol Oldham, 6/10/20. On file with DLM.

179. Id.; Morehouse, C. (2020, February 27). As Massachusetts solar installs plummet, stalled interconnections, land use questions are key hurdles. Utility Dive. https://www.utilitydive.com/news/as-massachusetts-solar-installs-plummet-stalled-interconnections-land-use/572925/

180.  Morehouse, C. (2020, February 27). As Massachusetts solar installs plummet, stalled interconnections, land use questions are key hurdles. Utility Dive.

181. Id.

182. Id.

Date published: December 10, 2020
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