COUNTY OF ALBEMARLE
Property tax incentives for solar energy and recycling equipment
Information on the procedures and expected costs of exempting solar energy and recycling equipment from property tax
Tucker, White, Davis, Herrick, Wiggans, Woodzell
LEGAL REVIEW: Yes
August 3, 2005
ACTION: INFORMATION: X
The Board of Supervisors has asked County staff to review the issue of property tax incentives for solar energy and recycling equipment. Virginia Code § 58.1-3661 permits localities to exempt or partially exempt certified solar energy equipment, facilities, or devices and certified recycling equipment, facilities, or devices from local taxation. The following report discusses the issue and the potential impact on Albemarle County, both financially and administratively, if the Board were to approve such an exemption. The report also reviews the experiences of other jurisdictions that have implemented the exemption.
Goal 4.2. Fund County Services in a fair, efficient manner and provide needed public facilities and infrastructure.
Virginia Code § 58.1-3661 defines certified solar energy equipment, facilities, or devices as “any property, including real or personal property, equipment, facilities, or devices, certified by the local certifying authority to be designed and used primarily for the purpose of providing for the collection and use of incident solar energy for water heating, space heating or cooling or other application which would otherwise require a conventional source of energy such as petroleum products, natural gas, or electricity.” Certified recycling equipment, facilities, or devices are defined as “machinery and equipment which is certified by the Department of Waste Management as integral to the recycling process and for use primarily for the purpose of abating or preventing pollution of the atmosphere or waters of the Commonwealth, and used in manufacturing facilities or plant units which manufacture, process, compound, or produce for sale recyclable items of tangible personal property at fixed locations in the Commonwealth.” In order to qualify for tax exemption, equipment must meet these criteria defined in the Virginia Code.
Based on staff interpretation of the Virginia Code, property would continue to be assessed at fair market value. The County Assessor would then deduct the certified value of qualifying solar equipment, facilities, or devices on the property. Under Virginia Code § 58.1-3661(E), that value is presumed to be “not less than the normal cost of purchasing and installing” the equipment. That value would be deducted from the property’s overall fair market value, and the owner taxed on the resulting reduced property value. The exemption would apply to both new and existing equipment. The process would be the same for recycling equipment, with the exception that Department of Waste Management, instead of the County Assessor, would certify the value of the recycling equipment. Any exemption for solar or recycling equipment would be effective for the next succeeding tax year after the application, and would have to be for a term of not less than five years, as required by state law
· Loudoun County – Loudoun has approved the exemption and has one or two qualifying homes. Administratively, Loudoun adds the cost, as certified by the Chief Building Inspector, of the qualifying equipment to the value of the property, and then exempts that same cost, resulting in no net addition or reduction for the property owner. As previously noted, this use of the cost approach differs from Albemarle County’s use of the sales approach in residential assessments.
· City of Alexandria – Alexandria has approved the exemption and reports having handled only a couple of exemptions several years ago.
· Arlington County – Arlington has approved the exemption and reports having not exempted any solar energy equipment in the past twenty years.
· City of Roanoke – Roanoke has approved the exemption. It reports that no one has requested it yet but expects about 30 properties to be requesting this exemption soon.
· City of Charlottesville – Charlottesville does have an ordinance, but no participants.
Several jurisdictions, including the City of Virginia Beach, City of Newport News, City of Manassas, Goochland County, Henrico County, Chesterfield County, and the City of Petersburg, report not offering this exemption.
Approximately 20 parcels in the County are presently marked as having solar heat. However, with no tax incentives currently in place, a significant number of parcels may have unreported solar equipment. The true number of taxpayers owning this equipment or seeking this exemption really cannot be known unless and until such an exemption is offered. Without a complete count of eligible owners, staff cannot determine the exact impact on the County, in terms of either foregone revenue or staff resources needed to administer the program. Assuming that there were only 20 parcels with qualifying equipment and if the equipment on each parcel cost $10,000, exempting all such equipment would reduce property tax revenues by $1,480 per year.
Staff is presenting this report to the Board for informational purposes only. If the Board wishes to implement this program, state law requires that it be authorized by local ordinance.
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