On December 10, 2020, the Massachusetts Office of the State Auditor Division of Local Mandates (“DLM”) issued The Impact of State-Owned Land PILOT and Solar Taxation Policies on Municipalities report.  DLM Report

In part, this report focuses on the taxation of solar power installations and the use of solar PILOT agreements between solar developers and municipalities.  The report made key findings and recommendations related to Solar Facility PILOT Agreements

DLM Findings

1. The Appellate Tax Boards’ (“ATB”) interpretation of the solar property exemption has created confusion among municipal governments. See these previous posts here and here, for an in-depth discussion of the ATB’s interpretations.
2. Solar facility PILOT agreements do not always reflect the full tax value of solar equipment.
3. State laws and guidelines governing the taxation of solar equipment are outdated and lack clarity
4. PILOT agreements have increased in importance as developers seek tax exemptions for facilities.
5. Uncertainty is contributing to a slowdown in development of solar facilities in the Commonwealth.

DLM Recommendations

Based on these findings, the report made three recommendations.

1. Clarify the solar property tax exemption through legislative action.
2. Clarify the tax status of solar facilities that may not be eligible to participate in PILOTS.
3. Establish additional guidelines to assist municipalities in creating & negotiating solar PILOTS.

These findings and recommendations should not come as a surprise to anyone following this issue closely.  Several cities and towns, together with the Massachusetts Municipal Association have sought to ‘reform’ solar property tax treatment over the past 10 years in a variety of different way.  These efforts include amending M.G.L. c. 59 § 5 forty-fifth, which was the subject of ATB’s interpretations that the report takes issue with.

As the report points out, two proposals introduced during the 2019-2020 legislation session would limit the number of nonresidential solar arrays that are tax-exempt.  It is likely that many municipalities support this change, as it would increase their tax revenue for certain solar projects.  It is far from clear, however, that this change would benefit the solar industry and reverse the slowdown in the number of new solar installations seen throughout the Commonwealth in 2019 as the report argues.