PHOENIX — Two solar companies are asking an Arizona court to overturn state tax officials’ decision that property taxes must be paid on leased rooftop panels that produce electricity.
SolarCity Corp. and Sunrun Inc. filed a lawsuit Monday challenging the state Department of Revenue’s 2013 decision that leased panels don’t qualify for property-tax exemptions that apply to panels that are owned by homeowners and businesses and used primarily for on-site consumption.
The department’s decision said the homeowners’ leased panels are subject to taxes like renewable-energy generation equipment owned by utilities because the leasing companies, not the property owners, own the panels but don’t use the electricity.
Solar power plants are not exempt from property taxes.
If upheld, the department’s decision would subject homeowners with leased panels to property taxes because the leases have provisions passing any taxes to the homeowners.
Based on the department’s figures, a $34,000 solar-panel array leased by a homeowner would cost approximately $150 in property taxes in the first year, decreasing annually year as the system depreciates.
The leasing companies’ lawsuit said the department is incorrectly treating them as electricity generators and sellers, not leasing companies. The lawsuit also alleges that treating the same solar panel equipment differently based on whether it is owned or leased violates rules requiring equality in tax assessment.
Department spokesman Sean Laux said Tuesday he hadn’t yet read the lawsuit and could not immediate comment on it.
The department recently began sending tax valuation notices to SolarCity, Sunrun and other companies involved in solar leases.
Industry-backed legislation to reverse the department’s decision was proposed but did not pass during the Arizona Legislature’s 2013 regular session.
The companies filed their lawsuit in Arizona Tax Court, which is part of Maricopa County Superior Court.