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South Dakota vs New York ‘Wind Farm Tax’ Comparison

Posted on: May 12th, 2014
by David Ganje

South Dakota

New York

Property Tax Exemption &

Alternative Taxation Scheme

 

Facilities with less than 5MW

-$50,000 or 70% (whichever is greater) of assessed value of new property is exempt from real property tax

 

Facilities with more than 5MW

-Annual tax on est. capacity calculated at $3 per k/Wh

-Annual 2% tax payable on gross receipts

-Rebate eligibility

-50% of construction of transmission lines

-90% rebate of gross receipts paid for 5 years

-50% rebate of gross receipts paid for next 5 years

 

Translation

For facilities with less than 5MW of capacity

SD offers a property tax exemption of either $50,000 or 70%, whichever is greater, of the increased assessed value of the property as a result of the construction/installation of renewable energy production facilities.

 

Example

Value of property before installation of wind energy system: $10,000

Value of property after installation of wind energy system: $100,000

Increased value of the property: $90,000

Property Tax Exemption: $63,000

(70% of the increased value of the property)

 

For facilities with more than 5MW of capacity

SD offers an alternative taxation scheme in lieu of all taxes on real property which requires the generator to pay (1) an annual tax of the k/Wh capacity of the farm and (2) an annual tax on gross receipts of the wind farm. Following the payment of these taxes the company may be eligible for a rebate of up to 90% of the gross receipts for an initial 5 year time period and then a 50% rebate of the gross receipts paid for the next five years. No company may receive a rebate after this 10 year period. The SD Secretary also has the discretion to simply provide a tax credit to the developer as opposed to complying with the taxation scheme. This would be equivalent to the determined rebate eligibility calculated by the tax scheme as to avoid the complexity of the process, and cut down on the amount of transactions between the developer and the government.

 

Example

Company pays two sets of taxes:

(1)-annual tax on the k/Wh capacity of the farm

(2)-annual tax on all gross receipts

 

Rebate eligibility is only available for the second set of taxes paid – the annual tax on all gross receipts. 90% for the first five years of operation, and 50% for the next five years. (10 year maximum rebate eligibility)

 

For example:

 

Within the first 5 years of operation:

Total annual tax on gross receipts paid: $100,000

Total Rebate Eligibility: $90,000/year

 

The next consecutive 5 years of operation:

Total annual tax on gross receipts paid: $100,000

Total Rebate Eligibility: $50,000/year

 

*No rebate eligibility beyond 10 years

Property Tax Exemption

 

-Exemption on property containing solar or wind energy systems designed to generate energy*

-100% property tax exemption

-Localities may opt-out of offering exemption

-15 year exemption limitation

 

Translation

NY offers a 100% property tax exemption of the increased assessed value of the property as a result of the construction/installation of approved wind energy farms. There is a 15 year limitation on this exemption.

 

*Solar or wind energy system means an arrangement or combination of solar or wind energy equipment designed to provide heating, cooling, hot water, or mechanical, chemical, or electrical energy by the collection of solar or wind energy and its conversion, storage, protection and distribution. (NY CLS RPTL §487)

Reinvestment Payment Program

For Renewable Energy Sector  

 

Project Qualification Amounts

-New/expanded facilities: must exceed $20 million

-Equipment upgrades: must exceed $2 million

 

Eligible Reinvestment Payment

-Up to 100% of the 4% sales and use tax paid on the project by the project owner

 

Translation

Companies who either expand/build new facilities or invest in equipment upgrades can apply for a reinvestment payment of up to 100% of the sales and use tax they paid on the project. This is a one-time reinvestment payment based on the receipts of the project.

 

 

 

Renewable Portfolio Standard Program

 

Main Tier – Large Commercial Wind Farms

-Competitive bidding process

-NYSERDA publishes a RFP which any commercial generator can bid on and once all bids are collected and assessed, NYSERDA will award as many contracts as the RFP requires to fulfill the RFP

 

Customer Tier – Wind Turbine Incentive Program 

-Facilities with less than 2MW capacity

-Maximum $1 million/site/customer

-Standard incentives paid to eligible installers for annual energy output under a fixed payment structure

-First 10,000k/Wh paid at $3.50 per k/Wh

-Next 115,000k/Wh paid at $1 per k/Wh

-Above 125,000k/Wh paid at $0.30 per k/Wh

 

Translation

For commercial wind farm energy producers

NYSERDA offers a competitive bidding process which allows companies to bid on projects to fulfill State energy needs. Once NYSERDA collects all the bids for a specific project, they will award contracts to companies who satisfy their requirements, so long as funding is available to compensate each company.

 

Example

(1)-NYSERDA publishes requests for proposals (RFP’s), stating the need for 50MW of energy with a $5 million budget (budget is unknown to the companies)

(2)-Companies submit proposals/bids to NYSERDA containing how much energy they can produce and at what cost.

(3)-NYSERDA awards contracts to fulfill the 50MW with a maximum spending allowance of $5 million

 

For Example:

 

If five companies submit bids with the ability to produce 10MW of energy for $1million – each company will be awarded a contract from NYSERDA to satisfy their proposal. If one company submits a bid with the ability to produce 10MW of energy for $4million – that company would most likely receive the benefit of the entire contract.

 

For facilities with less than 2MW’s of capacity

NYSERDA provides a standard offer under which they will pay customer-generators a certain dollar amount for every k/Wh of energy produced from the installed system.

 

Example

Customer wishes to build a system which can produce 10,000k/Wh of energy. Customer finds an approved, eligible installer who installs equipment. NYSERDA offers standard payment of $3.50/kWh for the first 10,000k/Wh produced. Customer would be entitled to a benefit of $35,000. Under the program requirements this payment is paid to the installer, who in turn, must pass the incentive, in its entirety, to the customer-generator.

 

 

Corporate Tax Rate: NONE

 

Corporate Tax Rate: 7.1%

 

Personal Income Tax Rate: NONE

 

Personal Income Tax Rate: Scaled from 4%-8.82%

Sales & Use Tax Rates

 

Base: 4%

Maximum Local Rate: 4%

 

Sales & Use Tax Rates

 

Base: 4%

Maximum Local Rate: No maximum set