NC Senate Bill Would Slowly Eliminate Exclusion for Nonresidential Solar Energy Systems

If someone asked you to name the top states for solar power generation capacity, you would likely name California as one.  Would you guess that North Carolina is #2, and has been since 2015?  That's according to the Solar Energy Industries Association, which releases a capacity per state study each year.

A driving force in North Carolina's development of solar energy has been the property tax break for solar energy electricity generation.  A statute, NCGS 105-275(45), passed in 2008 excludes from property taxation 80% of the value of solar energy electric systems, which it defines as "all equipment used directly and exclusively for the conversion of solar energy to electricity." 

The northeastern corner of North Carolina has seen a number of large-scale solar farm developments, and county managers have started to question the exclusion.  Some North Carolina legislators are apparently listening.

Last year, we wrote about House Bill 171, which aimed to cut that exclusion from 80% to 60%.  That bill was referred to the Committee on Energy and Public Utilities, from which it has not emerged. 

The Senate is now getting in the game with Senate Bill 781.  This new bill, introduced in May 2018, is more nuanced. It would leave intact the 80% exclusion for systems put to residential use. However, it would more aggressively cut the exclusion for systems used for nonresidential use, reducing it by 20% each year until phasing it out entirely for taxable years beginning on or after July 1, 2021.  Additionally, the Bill would require that the revenue generated by the phase-out to be used for construction of and repairs and renovations to public school property and facilities.

Like House Bill 171, Senate Bill 781 is a long way from becoming law.  It has passed the first reading and has been referred to the Committee on Rules and Operations of the Senate.  We will continue to keep an eye on both bills.



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John A. Cocklereece, Jr.

John Cocklereece concentrates his practice on property tax appeals, business law, tax controversies, and estate planning and administration.
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