As of January 4, 2012, Ontario has amended regulations under the Assessment Act to clarify the property tax treatment of solar, wind and biogas projects in the province. As detailed below, the tax treatment depends on the location of the project and the nature of the person who will be generating electricity, with special rules applying to wind turbine towers and farm biogas systems.
1) Rooftop projects
The assessment and tax classification of a property or building will not change as a result of the installation of a rooftop renewable facility.
2) Ground mounted projects
As detailed below, the changes distinguish between projects where the generation is conducted by:
- corporate power producers (i.e., entities that are in the business of developing, owning and operating projects); and
- persons other than corporate power producers (i.e., power generation is secondary to the primary use of the property).
In drawing the distinction, the emphasis appears to be on the nature of the person operating the facility, not of the person owning the land. The distinction may therefore be particularly relevant in situations where a corporate power producer is merely a tenant on land. Parties who are negotiating leases for ground mounted renewable projects should therefore continue to take care to allocate the risk of incremental property tax burdens.
a) Corporate power producers
All land, buildings and structures used for electricity generation are taxed at the industrial rate. Presumably, where a project occupies only part of a property, the assessment and classification of those parts of the property not used by the project will remain unchanged as a result of the project.
b) Persons other than corporate power producers
For ground-mounted projects not undertaken by corporate power producers, the tax treatment will depend on the size of the project:
- Small-size projects with a generation capacity up to 10 kW will not experience an increase in assessment or a change in tax classification.
- Medium-size projects with a generation capacity over 10 kW and up to 500 kW will be taxed based on the surrounding land use (e.g. residential, farm, multi-residential, commercial).
- Large-size projects with a generation capacity over 500 kW will be taxed based on the surrounding land use for the proportion of assessment up to 500 kW, and at the industrial rate for the proportion over 500 kW.
3) Wind turbine towers
Wind turbine towers will continue to be assessed at $40,000 per MW of installed capacity, unless they are rooftop mounted or the capacity of the installation is 10 kW or less.
4) Farm biogas projects
Anaerobic digestion facilities of any size that are located on a farm and are operated by the farmer will be taxed at the farm rate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.