Does the Construction of a Solar Energy Development Affect a Property Owner’s Tax Burden?

Generally speaking, the addition or construction of improvements on real property will change the value of the property and the resulting property tax burden to the owner of said property. State lawmakers and regulators have sometimes modified this general rule to encourage specific types of development by offering tax discounts or incentives. Considering the environmental and economic favorability of renewable energy projects, Rhode Island lawmakers have recently enacted changes to the state tax law as it applies to renewable energy projects, helping ensure that such projects are treated favorably by the tax code. The Rhode Island Supreme Court recently addressed a claim by a property owner which alleged that the plaintiff was overtaxed on their energy development in contravention of the recently passed laws.

The plaintiff in the recently decided case is a landowner who leased 10 acres of his Lincoln, RI property to a solar energy company for the construction of a solar energy project. After the project was completed, the assessed value of the plaintiff’s property increased by nearly $400,000, and the plaintiff’s tax burden increased significantly as a result. The plaintiff appealed the increased valuation to the municipal tax assessor and board of appeals, claiming that solar energy projects were tax-exempt under state law. The municipal defendants denied the plaintiff’s appeals, and the plaintiff brought the case to the Superior Court. The superior court affirmed the lower boards’ denial of the plaintiff’s claim. The court found that while the tax laws exempted solar energy projects from municipal taxation, the exemption does not apply to the property taxes for the land that the development was constructed upon.

The plaintiff appealed the Superior court ruling to the Rhode Island Supreme Court, where the lower court’s reasoning was upheld. The high court found that the law relied on by the plaintiff unambiguously mandated that only the tangible assets that form a renewable energy development are exempt from taxes. The plaintiff then pointed to a 2022 law that reclassified some real property containing renewable energy development as tax-exempt, however, the court was unable to apply the newer law, as the plaintiff’s claims arose under the law existing in 2019.

Although the land containing renewable energy developments may be taxed differently now under the 2022 law, the plaintiff’s claim still failed because of the law in effect at the time. Rhode Island landowners considering developing or leasing land for a renewable energy project should seek out accurate and up-to-date information on tax credits and discounts that may apply to their projects before signing a lease or breaking ground on development. A knowledgeable Rhode Island Real estate attorney can advise property owners as to the possible tax burdens they may face once a project is complete.

Is Renewable Energy Development on Your Land a Good Decision?

If you are considering leasing or developing your property for a renewable energy project, tax exemptions and credits can be a significant factor in deciding if the development is a good investment. The experienced Rhode Island real estate attorneys at Bilodeau Capalbo, LLP understand how constantly evolving tax laws will affect our clients’ options and decisions. We stay up-to-date on all legal changes in the state, and we can help you ensure that your development project proceeds as expected. If you have questions about a Rhode Island easement issue, call us at 401-300-4055 for a free consultation.