Statewide legislation introduced this month hopes to resolve a years-long dispute between power providers and local governments over the taxable value of wind turbines and how much revenue is directed to local taxing units.
House Bill 5326 — introduced on Sept. 22 and sponsored by state Rep. Pat Outman, R-Six Lakes — mirrors a Senate bill from April that would create a uniform tax depreciation schedule for wind turbines.
Since Michigan’s wind energy build-out started roughly a decade ago, utilities and other power producers have regularly disputed the taxable value of wind turbines with local governments, appealing to the Michigan Tax Tribunal for what the companies believe are more accurate values.
The proposed legislation would define the true cash value of a wind turbine as the “sum of its original (historical) installed cost multiplied by the applicable multiplier, plus the value of any applicable easements, rights-of-way, and leasehold interests prorated per megawatt for each wind turbine, but not less than $29,067 per megawatt.”
The legislation proposes a 5-percent multiplier annually after the first year a turbine is in operation. The value of the turbine would decrease 5 percent for 15 years before remaining at 30 percent of its original value.
Huron County Economic Development Corp. Executive Carl Osentoski said the legislation is crucial because power providers have made a “series of assumptions and promises made to pay taxes” over the life of a wind project. Those taxes support local taxing units such as governments, school districts and libraries.
“Then as it unfolded over the course of time, there were multiple tax appeals,” said Osentoski, who is a member of the Michigan Renewable Energy Collaborative (MREC), a group of local governments challenging utility tax appeals.
“It’s important because a lot of local units, school districts and organizations that have millages have been planning on a regular amount of income based on taxes in wind developments,” Ostentoski told MiBiz. “That has not occurred. They’ve been forced to escrow up to 30 percent based on tax appeals because they don’t want to pay out of their general funds. It’s important to get the issue settled.”
According to MREC, utilities and developers have filed more than 1,100 tax appeal cases with the Michigan Tax Tribunal since 2012.
The Michigan Townships Association also supports the legislation, saying it would “equitably resolve how to assess wind energy systems in Michigan.”
“Local governments have faced appeals by developers and owners of wind energy systems seeking valuations less than promised when the systems were built,” said MTA Director of Government Relations Judith Allen. “MTA supports the tax uniformity and predictability the legislation would provide for both local governments and wind developers.
Utilities seek ‘fair and appropriate’ values
The Michigan Tax Tribunal in June ruled in favor of Detroit-based DTE Energy, which had challenged the taxable value of turbines in two Huron County townships. Osentoski said the decision is being appealed to the state Court of Appeals. However, local officials have raised concerns about what the ruling could mean for local governments in the future.
DTE Energy Spokesperson Cynthia Hecht noted that state law requires properties to be assessed annually based on its value.
“As a public utility we have a duty to our customers to pay the correct amount of tax and have consistently applied the value tables adopted by the Michigan State Tax Commission,” Hecht said in an email. “In the years under issue our property was assessed at a value higher than the STC tables. We are aware this situation is understood differently by some communities, and we look forward to collectively working with all interested stakeholders to resolve this matter.”
Consumers Energy is reviewing the legislation and “will follow it closely,” said Spokesperson Katelyn Carey, who also noted that the June Tax Tribunal ruling upheld the State Tax Commission’s valuation table from 2013.
Carey added that the legislation “seeks to introduce an alternative valuation table rejected by both the State Tax Commission and the Tax Tribunal,” and the utility is “open to discussing a settlement” with local governments that’s similar to one previously reached involving a Mason County wind project.
“Consumers Energy supports a fair and appropriate property tax on Michigan wind energy systems (that) will help keep energy costs competitive and create energy jobs in Michigan, and, at the same time, ensure that we pay the right amount of property taxes to support the communities in which we invest,” Carey said.