Taxes

Here we will touch on how taxes typically work for renewable/solar energy projects in Ohio.  The information presented here is from researching the various laws involved for such projects and conclusions drawn from this research.   If there are errors or additional information we will try to get the page updated ASAP.

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First, the land (all 1,700 acres) that has been leased to the project developer for the Carnation Solar project is all currently for agricultural use and from a tax perspective falls under the Current Agricultural Use Value (CAUV) tax assessment program.  So, the land is taxed at its current use, agriculture, which is well below its actual market value.

When land that was in the CAUV program is converted from agricultural use to another use the land owner is typically responsible for a charge equal to the tax savings on that land from the three years prior to conversion.  This can be a very substantial charge.

But, things are a bit different when it comes to CAUV land that is converted for installation of an energy facility.  In this case there is no charge levied for the past 3 years and any portion of a parcel etc. that isn't used by the energy facility but still used for Ag purposes is still at the CAUV value.  So, CAUV would apply to just that portion used for agriculture.  This can be found in Ohio Revised Code here.

Now what about taxation of the property that was converted for use as an energy facility?  Well, this is where Payment In Lieu Of Taxes (PILOT) comes in.  The part of the Ohio Revised Code that applies here is ORC 5727.75 ("Exemption on tangible personal property and real property of certain qualified energy projects").  Here the law allows the county commissioners to grant the developer an exemption on the "normal" taxes and pay at the PILOT value specified in the law.  

In the case of a solar project of 20 Megawatts or greater that number is $7,000 per Megawatt of nameplate capacity of the facility.  Additionally, the county commissioners may add on an additional service payment, but the total cannot exceed $9,000 per Megawatt of nameplate capacity.  Note, these numbers come from around the 2010 timeframe.

NOTE: it appears that PILOT payments begin after the facility is operational, it is unclear at this time what happens with taxes for the 1-2 years of construction and the period of testing and evaluation before becoming operational.

BUT there is a process for PILOT and we can make our voices heard:

The project developer submits an application to the county for approval of the PILOT program for their project.  Then a few things can happen:

1. The approval is "automatic" (assuming the application is valid) IF the county commissioners have already declared the county to be an "alternative energy zone."  As far as we know Fairfield county has not been declared an alternative energy zone.

2. The county commissioners may adopt a resolution approving the PILOT application.

3. The county commissioners may adopt a resolution rejecting the PILOT application.

4. The county commissioners take no action, effectively rejecting the PILOT application.

The commissioners should take input from the trustees, the community residents, etc. in their decision.

Why was this tax exemption done for these energy projects in the first place?  It was to entice/attract renewable energy to Ohio by making the tax structure for them favorable.

This taxation approach is beneficial to the developer/operator (that's why it was implemented in the first place) and doesn't require them to pay their "fair share" like the rest of us.  These projects are planned for at least 40 years, it is highly doubtful our taxes are going to remain the same over that time.

So, what if a project uses "agrivoltaics" which is dual use of the land where a solar project incorporates agriculture? 

• For the Eastern Cottontail project the developer (EDF) has stated they are committed to incorporating sheep grazing within the project area.

• CAUV applies to "Land devoted exclusively to agricultural use" (ORC 5713.30 provides the land definition)

• Since the land would NOT be devoted exclusively to agricultural use (as defined inORC 5713.30) CAUV should not apply

• Note: ORC 5713.30 section (A)(1)(b) does mention electric energy production when it comes to agricultural use BUT as shown below this requires the use of agricultural feedstock, etc. that would not apply for a solar facility.  This is meant for other types of energy production such as "biomass."   Below is the text from ORC 5713.30(A)(1)(b):

"(b) The tracts, lots, or parcels of land were devoted exclusively to biodiesel production, biomass energy production, electric or heat energy production, or biologically derived methane gas production if the land on which the production facility is located is contiguous to or part of a parcel of land under common ownership or leasehold that is otherwise devoted exclusively to agricultural use, provided that (i) at least fifty per cent of the feedstock used in the production is agricultural feedstock, (ii) at least twenty per cent of the agricultural feedstock used in the production is derived from parcels of land under common ownership or leasehold, and (iii) none of the feedstock used in the production consists of human waste. As used in this division, "agricultural feedstock" means manure and food waste, and "human waste" includes sludge as defined in section 6111.01 of the Revised Code." 

There is more to the story and how it began with Senate Bill 221, 232, amendments to 232, House Bill 6 (yes that controversial bill), etc.

Here are a few  other resources/links:

OSU Extension office Fact Sheet for much of this - note: this is from 2011 and some things have been changed/updated since them but it gives a decent intro to some of this - found here 

SB 232 Amendment - click here 

SB 221 - click here