Are Solar Panels Considered Real Property Or Personal Property

It has been the boe s informal policy to treat pv solar installations as real property and this position is formalized in the guidelines.

Are solar panels considered real property or personal property.

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. The result is that solar panels installed on residential rental property the taxpayer owns should be eligible for a solar tax credit under sec. 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. The proposed opinion relies almost exclusively on an application of the three part common law fixtures test.

48 assuming other requirements for the credit are met. The concept of using solar energy to power a rental property is an attractive one. 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. 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. Unfortunately the answer to that question is. 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. Generally when something of value is physically added to real property what is added is.

Common ownership or financing structures include. 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 exclusion is not applicable to portable active solar energy systems since they are items of personal 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.

In finalizing the proposed regulations the irs and treasury rejected those comments affirming the view that solar panels generally are active business assets that are not standing alone real property though the final regulations note that the mounts for the solar panels and exit wires may qualify as real property under the facts and circumstances test applicable to other inherently permanent structures. A typical active solar energy system is considered a fixture and thus real property if it meets the tests outlined above. 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. Borrower owned panels leasing agreements.