In 2021, New York State enacted RPTL §575-b, a law aimed at promoting clarity and predictability in the valuation of solar and wind energy systems for tax assessment purposes. The law directed that the valuation of these systems be determined using a discounted cash flow (DCF) approach, which estimates the present-day value of a property based on its projected net income and a discount rate. The DCF method is a form of income-based valuation that takes into account the risk associated with an investment.
The law also introduced a model appraisal formula, known as the “Model,” and discounted rates promulgated by the Department of Taxation and Finance (DTF). However, the law was challenged in court, and in 2024, the Albany County Supreme Court ruled that the DTF’s decision to exclude renewable energy certificates and investment tax credits from the DCF Model revenue calculation was arbitrary and capricious. As a result, the court declared RPTL § 575-b unconstitutional, citing an unconstitutional delegation of legislative power to tax to a state administrative agency.
The State appealed the decision, and the Appellate Division, Third Department, granted a stay, prohibiting enforcement of the decision until the appeal is finally resolved. This means that local assessors across the state are still required to use the DTF’s Model for valuing solar and wind facilities. In response to the court decision, the Senate and Assembly have passed a proposed amendment to RPTL 575-b, which would codify the Department’s decision to exclude renewable energy certificates and investment tax credits from the model’s definition of revenue.
The proposed amendment, A. 8332/S. 8012, would deem federal investment and production tax credits, as well as environmental values such as renewable energy credits, as intangible assets that are not included in the revenue streams used to calculate the valuation of solar and wind energy systems. The amendment is intended to incentivize clean energy by creating predictable and stable taxation for renewable energy projects. If signed into law by the Governor, the appeal would become moot, and RPTL § 575-b would remain the law of New York State, providing clarity and predictability for the valuation of solar and wind energy systems.