Are Solar Panels Considered Real Property Or Personal Property

The concept of using solar energy to power a rental property is an attractive one.

Are solar panels considered real property or personal property.

48 a 3 a i defines equipment that uses solar energy to generate electricity or to heat or cool a structure as energy property as long as it is not used to heat a swimming pool. Images of 0 electric bills and less reliance on fickle public utility companies are often the first thing that comes to mind when considering the advantages of solar panels. As real property pv systems generally were subject to assessment if they were newly constructed or a change in ownership occurred. The city argued that the installation of solar panels rendered them fixtures of the residence and thus properly classified as real property.

But is that the reality. Solar energy systems are likely ineligible for the recent property tax exemption made available to eligible manufacturing property because eligible manufacturing personal property specifically excludes personal. Generally when something of value is physically added to real property what is added is. Unfortunately the answer to that question is.

48 assuming other requirements for the credit are met. The proposed opinion relies almost exclusively on an application of the three part common law fixtures test. Most states applying the three part test have found that solar panels wind turbines and related wind and solar equipment are tangible personal property not real property. A typical active solar energy system is considered a fixture and thus real property if it meets the tests outlined above.

On december 27 2017 the hearing referee entered her proposed opinion and judgment ruling in favor of the city of ann arbor that the solar panels were real property. Since then the michigan tax tribunal and state tax commission have issued varying opinions on whether solar should be considered real or personal property. Solar energy systems may lack a statutory categorization as clear as that provided for wind energy but the stc analysis and the existing guidance regarding solar panels support a conclusion that solar energy systems would also be classified as industrial personal property. The result is that solar panels installed on residential rental property the taxpayer owns should be eligible for a solar tax credit under sec.

The exclusion is not applicable to portable active solar energy systems since they are items of personal property. Borrower owned panels leasing agreements. Common ownership or financing structures include. The ownership and debt financing structures commonly found with solar panels are key to determining whether the panels are third party owned personal property of the homeowner or a fixture to the real estate.