By Joe Molina
The Supreme Court of Oklahoma has affirmed a district and trial court ruling that production tax credits (PTCs) are not taxable as intangible personal property subject to ad valorem taxation. An assessing firm in Oklahoma relied primarily on a cost approach to value for wind farms without adequately addressing obsolescence or the impact of the PTC as a government-induced financing mechanism that made wind farm construction feasible via tax credits in exchange for each kilowatt hour of energy generated. Beginning in 2020, the firm began using an income approach that included cash flow benefits related to the PTC.
The court opined: “We have no doubt that PTCs have a direct impact on a property’s fair market value, and that ad valorem tax assessments must be based on fair market value. PTCs, however, are not a tangible physical thing like real estate. Instead, they are incorporeal property in that they have limited intrinsic value, and ultimately can only be claimed or enforced by a legal action, much like goodwill, even if they are intrinsically tied to a business or real property.”
In its conclusion, the Supreme Court cited: “PTCs are intangible personal property exempt from ad valorem taxation—even if they have both tangible and intangible aspects. In the end we feel this is the right decision. Cash Grants, PTCs and ITCs are clear subsidies created by governments to stimulate investment in green energy and their impact should be reflected in their assessments.”
Ryan’s renewable energy experts assist our clients with navigating the valuation intricacies created by credits and incentives throughout the U.S. If you have any questions or wish to discuss how we can help manage and minimize your property tax burdens, please contact us.
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