The ever-growing trend of supporting and promoting clean energy to combat the negative effects of climate change includes the State of New York promulgating a standard appraisal methodology for solar and wind energy systems with a nameplate capacity equal to or greater than one megawatt. The standard appraisal methodology, known as the discounted cash flow approach, was added to the New York State Real Property Tax Law by new Section 575-b in 2021 as part of the State budget. Until recently, however, implementation of Section 575-b has been on hold due to a lawsuit filed by a collection of individual towns from Schoharie County. Noncompliance with the procedural requirements of the State Administrative Procedures Act (“SAPA”) was the primary basis for the petitioners’ challenge to the assessment model. In response, Section 575-b was further amended by the Legislature in the 2023 State budget to clarify that the appraisal model is authorized without regard for the SAPA. The parties entered a Stipulation of Discontinuance in May and the Department of Taxation and Finance posted a notice that the standard appraisal model is now in effect.
The Department of Taxation and Finance, in consultation with the New York State Research and Development Authority (“NYSERDA”) and New York State Assessors Association (“NYSAA”), will annually update the appraisal model. It remains to be seen what the year-over-year impact of the standard appraisal model will be. Indeed, the Department of Taxation and Finance acknowledges that the renewable energy industry is evolving and changing, and the intent of the model is to reflect those annual changes. But it appears that the immediate effect is a reduced valuation for solar projects, and correspondingly, a reduction in the amount of taxes and Payments in Lieu of Taxes (“PILOT”) that can be collected.
Real Property Tax Law Section 487 automatically exempts solar and wind energy systems from taxation for a period of fifteen years unless the taxing jurisdiction, i.e., a county, local municipality, or school district, opts-out pursuant to RPTL Section 487(8), rendering the solar or wind energy system fully taxable. If a taxing jurisdiction has not opted-out, they can require a PILOT. However, RPTL Section 487(9) states that the PILOT payment cannot exceed the amount that would otherwise be payable if the green energy facility was fully taxable. Based on the foregoing, if the appraisal model continues to reduce the taxable value of solar projects, it will continue to support and incentivize the development of more facilities and help the State achieve the renewable energy benchmarks established by the Climate Leadership and Community Protection Act (CLCPA).
Cuddy & Feder’s attorneys are experienced in every stage of the renewable energy siting process, including land acquisition and leasing, SEQRA, Site Plan, Special Permit and Variance approval, as well as PILOT negotiations pursuant to the recently enacted standard appraisal model.
