Local Option- Renewable Energy Machinery and Tools Property Tax Exemption

HB 1297 enacted in March 2015 provides an option for the local governing body of any county, city, or town to impose a different property tax on renewable energy generating machinery and tools than other normal use machinery. The rate of property tax imposed must not exceed that is applicable to the general class of machinery and tools. 

Renewable energy means energy derived from sunlight, wind, falling water, biomass, sustainable or otherwise (definitions liberally constructed), energy from waste, landfill gas, municipal solid waste, wave motion, tides, or geothermal power and does not include energy derived from coal, oil, natural gas, or nuclear power. 

This rate of tax does not apply to machinery and tools used in generating renewable energy by qualifying co-generator or qualifying small power producer under Public Utility Regulatory Policies Act (PURPA), unless the rate of tax under this section would result in a lower property tax on such machinery and tools.*

* Under Chapter 26 (§ 58.1-2600 et seq.) of the Code of Virginia certain tangible personal property of public utilities is required to be taxed at the local real estate tax. Given that the local real estate tax rate generally is the lowest property tax rate imposed in many localities, HB 1297 avoids the situation in which a locality elects a lower machinery and tools tax rate, which exceeds the locality's real estate tax rate, and applies the new machinery and tools tax rate to tangible personal property ordinarily taxed at the locality's real estate tax rate under Chapter 26. This is why the bill specifies that the new machinery and tools tax rate on property used in producing or generating renewable energy does not apply to such property if the lower real estate tax rate is already being imposed.

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