Situational Analysis: Solar Facility PILOTs (M.G.L. c. 59, § 38H(b))

An overview of the history and current state of solar facility PILOTs in Massachusetts.

The second PILOT program that this report will address involves solar facility PILOTs. Solar facilities use solar photovoltaic (PV) arrays, which electronically transform solar energy into electricity through mechanical hardware (semiconductors) to power homes and businesses.67 Solar installations vary in generating capacity, panel size, and supporting equipment. Traditionally, there would be personal property tax due on the value of the equipment for a commercial use, as well as real property tax on the underlying land. Under M.G.L. c. 59, § 38H(b), however, a municipality may enter into a PILOT agreement with an electric “generation company” or “wholesale generation company” to replace taxes on the value of the company’s generating facilities in the community.68 This statute covers PILOT agreements for conventional power plants as well as facilities using renewable energy, such as solar and wind power.69 Under this provision of state law, municipalities are supposed to receive the equivalent of full tax payments from these facilities through the PILOTs.70

Solar facility PILOTs provide a stable and predictable source of revenue to the municipalities and offer some measure of security to generation facilities by allowing them to anticipate future tax payments.71 They also allow municipalities to enjoy the benefits of welcoming renewable energy into their communities without the risk of losing tax revenues. Recent examples of solar installations in Massachusetts that have PILOT agreements with municipalities include projects in Rehoboth and Rochester, which are located on large plots of land such as former landfill sites.72

Figure 8Selected Solar Installations with PILOT Agreements

Community solar array in Rehoboth
Community Solar Array (Rehoboth, MA) (see footnote 73) Size: 1 Megawatt
Little Quittacas Solar Project (Rochester, MA)  Size: 4.5 Megawatt
Little Quittacas Solar Project (Rochester, MA) (see footnote 74) Size: 4.5 Megawatt

Table of Contents


Under Massachusetts law, “generation company” is defined as “a company engaged in the business of producing, manufacturing or generating electricity or related services or products, including but not limited to, renewable energy generation attributes for retail sale to the public.”75 Many of the state’s large-scale solar farms and facilities with a capacity of over 1 megawatt (MW) are operated by developers that fit the legal definition of “generation company.” (For reference, a 1 MW solar facility in Massachusetts, which produces 1,000 kilowatts [kW] of electricity, can power over 164 households).76

These large solar companies and developers, however, cannot participate in net metering or own net metering facilities, according to regulations promulgated by the Department of Public Utilities.77 Net metering allows owners of solar facilities to offset the cost of their electric bills by transferring any excess energy produced by their renewable energy facilities back to their electric companies for a credit.78 In decades past, it was not uncommon for residential installations to directly power hot water heaters. Today, the connection goes outside the home to the electric grid. Electric customers are therefore billed for the net difference between their electricity usage and what they produce (or receive net metering credits if their electrical production outpaces their usage). Net metering incentivizes consumers to build their own small solar facilities and also permits customers of community solar projects to sell electricity back to the grid.

Although net metering was initially established for small (under 30 kW) solar installations, an expansion of the program in 2009 allowed privately owned midsized solar farms (up to 2 MW) to participate.79 However, larger solar installations and generation facilities cannot take advantage of this program.

PILOT Agreement Components

Under a PILOT agreement, the generation company must make payments that are the “equivalent of the property tax obligation based on full and fair cash valuation.”80 According to the DOR’s Division of Local Services (DLS), the following are among the components necessary for a solar facility PILOT agreement:

  • a mechanism that represents taxes at full and fair cash valuation;
  • estimated projections by municipal assessors of the initial cash valuation and tax payments of the renewable energy system for each year of the PILOT agreement;81
  • a formula or fixed values to determine values of the solar facility over the life of the agreement;
  • a term limit for the PILOT agreement with the generation company;
  • approval of the agreement by the municipality’s legislative body or authorization of the chief executive officer to negotiate on the municipality’s behalf;
  • documentation of the agreement provided to the DOR’s Bureau of Local Assessment; and
  • recordkeeping and reporting of the agreement values.82

The PILOT agreement customarily provides that payments do not decrease as the value of the facility declines over time through depreciation. The PILOT can be structured with consistent payments to avoid larger payments at the start of the agreement. PILOT agreements can last for a “reasonable term,” but the DLS recommends they not last longer than the useful life of a solar installation (generally between 20 and 30 years for the average solar PV system).83

If the solar developer owns the land on which the solar equipment is placed, the equipment can be assessed as real property if it is to remain on the site for its useful life, or as personal property if the equipment will be replaced periodically.84 Some issues arise, however, when the owner of the land is not the solar developer that provides the equipment. If the solar equipment is treated as real estate, the landowner will be taxed for the increase in the property’s value caused by the presence of the equipment. If the equipment is treated as personal property, installations are assessed to the solar developer, not the landowner.85

Taxable Status of Solar Arrays (M.G.L. c. 59, § 5, cl. 45)

The provisions of M.G.L. c. 59, § 38H(b) are undercut by a property tax exemption provided under M.G.L. c. 59, § 5, cl. 45 for any

[s]olar or wind powered system or device which is being utilized as a primary or auxiliary power system for the purpose of heating or otherwise supplying the energy needs of property taxable under this chapter; provided, however, that the exemption under this clause shall be allowed only for a period of twenty years from the date of the installation of such system or device.86

The original intent of Clause 45, which was enacted in 1975 and revised in 1978,87 was to provide an exemption to owners of residential properties who wanted to use off-grid rooftop panels to supply electricity to their properties.

Clause 45, however, has generated a great deal of controversy in the current age of solar farms. Between 2014 and 2017, the ATB rendered decisions on cases from the towns of Westborough, Swansea, and Barre and interpreted the clause as exempting both residential and commercial solar arrays from property taxes.88 The ATB held in each of these decisions that a solar operator cannot be taxed if its solar facility is supplying power to a property that pays taxes, regardless of whether the energy generated is used on the property where the facility is located or on another property.89

The ATB’s interpretation of Clause 45 in these cases has also allowed solar developers that participate in net metering and supply electricity to other properties through the electrical grid to be eligible for the solar exemption.90 In 2020, the ATB also rendered decisions on cases from the towns of Framingham and West Bridgewater and held, based on the language of Clause 45, that a solar facility that supplies net metering credits for nontaxable properties such as municipal buildings is taxable.91

The ATB decisions have increased the importance of PILOT agreements as a method to guarantee a steady source of revenue to communities from solar installations.92 Municipalities can negotiate a PILOT agreement with a solar developer, regardless of whether the installation qualifies for the exemption. Although some developers recognize the need to pay their fair share of taxes, others have sought to avoid or minimize property taxes on their solar installations. This effort has led to difficult interactions between municipal officials and solar developers in recent years, such as the following:

  • disputes over assessments of equipment;
  • solar developers requesting tax abatements on equipment;
  • moratoriums on solar installations after multiple agreements with developers; and
  • a reluctance in some municipalities to participate in PILOT agreements.93

Case Study: Solar Facility PILOTs in New York

New York provides a different model for dealing with the taxation of solar facilities. New York has a 15-year real property tax exemption (NY RPTL § 487) for renewable energy systems.94 An exemption is granted for the “value that a solar electric system adds to the overall value of the property.”95 Unlike those in Massachusetts, municipalities in New York have the choice to opt out of the exemption for renewable energy projects in their communities. If a city or town does not opt out, it may participate in PILOT agreements with solar developers overseeing projects larger than 1 MW.96

In order to help New York communities that are having trouble assessing solar facilities or developing PILOT agreements, the New York State Energy Research and Development Authority established a Solar PILOT Toolkit for local governments.97 The toolkit includes a template for a “Model Solar PILOT Law,” which would allow a municipality to establish the legal authority for a jurisdiction-wide agreement process with developers. There is also a “Model Solar PILOT Agreement” for communities that would rather negotiate terms and conditions on a project-by-project basis, as well as a calculator that helps municipalities calculate PILOT rates with solar developers.

67. Solar Energy Industries Association. (2020). Photovoltaics.

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

69. M.G.L. c. 59, § 38H(b); Massachusetts Department of Revenue, Division of Local Services. (2017, August). Informational guideline release (IGR) No. 17-26 – Valuation and taxation of electric generating facilities.

70. Id.; Meeting with Concord Town Assessor, 5/6/20. On file with DLM.

71. Meeting with Concord Town Assessor, 5/6/20. On file with DLM.

72. BlueWave. (2020). Rochester, MA.; Larocque, M. (2014, August 14). New solar array in Rehoboth unveiled. The Enterprise.

73. Larocque, M. (2014, August 14). New solar array in Rehoboth unveiled.  

74. BlueWave. (2020). Rochester, MA.

75. M.G.L. c.164, § 1

76. Billman, G. (2018, February 26). Massachusetts reaches 2,000 MW of solar installations. Massachusetts Clean Energy Center.

77. Massachusetts Department of Public Utilities, Electric Power Division. (2020). Net metering eligibility.; 220 CMR 18.06.

78. Massachusetts Department of Public Utilities, Electric Power Division. (2020). Net metering guide.

79. Id.; Massachusetts Department of Public Utilities, Electric Power Division. (2020). Net metering laws and regulations.

80. M.G.L. c. 59 § 38H(b).

81. Some PILOT agreements on file with DLM have provisions that result in small increases in payments each year. See also Massachusetts Department of Revenue, Division of Local Services, City & Town (2017, June 1), at 7.

82, Department of Revenue, Division of Local Services, City & Town (2017, June 1), at 6-8.

83, Id. at 7; Solar Energy Industries Association. (2020). Recycling & end-of-life considerations for photovoltaics.

84. Barnes, J., Laurent, C., Uppal, J., Barnes, C., and Heinemann, A. (2013, July). Property taxes and solar PV systems: Policies, practices, and issues, at 29-31. Report prepared by U.S. Department of Energy, North Carolina Solar Center, and Meister Consultants Group.; Massachusetts Department of Revenue, Division of Local Services, City & Town (2012, March), at 3-4. On file with DLM.

85. Department of Revenue, Division of Local Services. City & Town (2017, June 1), at 6.

86. M.G.L. c. 59, § 5, Cl. 45; see also KTT, LLC v. Board of Assessors of Swansea, Mass. Appellate Tax Bd., No. ATB 2016-426, slip op. (Oct. 13, 2016) On file with DLM.

87. St. 1975, c. 734; St. 1978, c. 388.

88. 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.

89. Id.

90. Further details on recent ATB decisions can be seen in Appendix C.

91. See PelleVerde Capital, LLC v. Board of Assessors of the Town of West Bridgewater (Mass. Appellate Tax Bd., May 29, 2020). On file with DLM; United Salvage Corp. of America v. Board of Assessors of the City of Framingham (Mass. Appellate Tax Bd., May 29, 2020). On file with DLM.

92. 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.

93. See Findings and Recommendations section for more information.

94. NY Real Property Tax Law § 487.

95. New York State Energy Research and Development Authority. (2016, August). Understanding New York State’s Real Property Tax Law § 487 [Fact sheet].

96. New York State Energy Research and Development Authority. (2020, June). New York solar guidebook for local governments.

97. Id.

Date published: December 10, 2020

Help Us Improve  with your feedback

Please do not include personal or contact information.