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Going Green Should Not Increase You Tax Obligations

Tax Appeals attorney, Timothy P. Duggan, and Green Building attorney, Vincent J. Mangini, co-authored the below post:

Imagine the situation where a conscientious property owner decides to install solar panels in an effort to reduce his or her energy costs and help the environment.  Then, imagine further, that once the work is completed, the local tax assessor increases the property’s tax assessment arguing that solar panels are an improvement to the property, which causes the property’s fair market value to appreciate.  The resulting taxes from this higher assessment could end up off-setting all or most of the energy savings generated by the solar panels, thereby discouraging property owners from making investment in green building technologies and processes.  Clearly, this is not an acceptable outcome for the property owner or the general public and, apparently, our state government agrees.  In June, 2008, the New Jersey State Legislature overwhelmingly passed a bill, which Governor Jon Corzine recently signed into law on October 1, 2008 (P.L. 2008, ch. 90; codified at N.J.S.A. 54:4-3-113a, et seq.), that provides a tax exemption for the increase in value to real property attributable to the installation of renewable energy systems - and the new law does not just benefit homeowners.
   

Under the new law, a “renewable energy system” is “[a]ny equipment that is part of, or added to, a residential, commercial, industrial, or mixed use building as an accessory use, and that produces renewable energy onsite to provide all or a portion of the electrical, heating, cooling, or general energy needs of that building.”  The term “renewable energy” is defined broadly to include, among other things, “(1) electric energy produced from solar technologies, photovoltaic technologies, wind energy, fuel cells, geothermal technologies, wave or tidal action, . . .; and (2) energy produced from solar thermal or geothermal technologies.”
   

In order to obtain a renewable energy systems exemption, a property owner must make a written application for certification to the local enforcing agency (i.e. building inspector) under oath and once the application is received, the local enforcing agency must review it for compliance with all legal requirements.  If a property owner is denied the certification and wants to appeal, an appeal may be filed with the local construction board of appeals.  In the event a property owner’s work is certified, but the local tax assessor imposes an unreasonable tax assessment on the property, the aggrieved property owner may file an appeal with the county tax board or State Tax Court in accordance with the court rules.
   

It also be noted that the exemption from taxation for the renewable energy system shall not become effective until the tax year following the year in which certification has been granted.
   

In conclusion, the aforesaid enactment is a good law.  It will prevent property owners, who “go green,” from being penalized by local taxing authorities with higher real property taxes.  However, property owners seeking to take advantage of this new benefit should familiarize themselves with the entirety of the new law and all applicable forms and regulations, as may be adopted by state agencies. The procedures to obtaining the certification must be followed in order to take advantage of the exemption.

Full post as published by New Jersey Law Blog on November 19, 2008 (boomark / email).