Are Solar Panels Considered Real Property Or Personal Property

But is that the reality.

Are solar panels considered real property or personal property.

In february the state tax commission issued a memo classifying solar panels as residential real property that would likely increase property taxes. Common ownership or financing structures include. Borrower owned panels leasing agreements. It has been the boe s informal policy to treat pv solar installations as real property and this position is formalized in the guidelines.

Images of 0 electric bills and less reliance on fickle public utility companies are often the first thing that comes to mind when considering the advantages of solar panels. The concept of using solar energy to power a rental property is an attractive one. Since then the michigan tax tribunal and state tax commission have issued varying opinions on whether solar should be considered real or personal property. The exclusion is not applicable to portable active solar energy systems since they are items of personal property.

Most states applying the three part test have found that solar panels wind turbines and related wind and solar equipment are tangible personal property not real property. On december 27 2017 the hearing referee entered her proposed opinion and judgment ruling in favor of the city of ann arbor that the solar panels were real property. Unfortunately the answer to that question is. 48 a 3 a i defines equipment that uses solar energy to generate electricity or to heat or cool a structure as energy property as long as it is not used to heat a swimming pool.

Solar energy systems may lack a statutory categorization as clear as that provided for wind energy but the stc analysis and the existing guidance regarding solar panels support a conclusion that solar energy systems would also be classified as industrial personal property. Solar energy systems are likely ineligible for the recent property tax exemption made available to eligible manufacturing property because eligible manufacturing personal property specifically excludes personal. The ownership and debt financing structures commonly found with solar panels are key to determining whether the panels are third party owned personal property of the homeowner or a fixture to the real estate. A typical active solar energy system is considered a fixture and thus real property if it meets the tests outlined above.

The proposed opinion relies almost exclusively on an application of the three part common law fixtures test. The result is that solar panels installed on residential rental property the taxpayer owns should be eligible for a solar tax credit under sec. The city argued that the installation of solar panels rendered them fixtures of the residence and thus properly classified as real property. In finalizing the proposed regulations the irs and treasury rejected those comments affirming the view that solar panels generally are active business assets that are not standing alone real property though the final regulations note that the mounts for the solar panels and exit wires may qualify as real property under the facts and circumstances test applicable to other inherently permanent structures.