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August 6, 2021

NYS Department of Tax and Finance's Proposed Solar and Wind Appraisal Model

On August 2, 2021, the NYS Department of Taxation and Finance (Tax Department) announced its proposed solar and wind appraisal model using a discounted cash flow (DCF) approach. This is the result of legislative amendments to the Real Property Tax Law that were passed as part of the 2022 NYS Executive Budget. These amendments mandated the Tax Department, in consultation with the New York State Energy Research and Development Authority (NYSERDA) and the New York State Assessors Association (NYSAA), to develop a standard appraisal methodology for solar and wind energy systems with a nameplate capacity equal to or greater than 1 MW.

The Tax Department’s preliminary DCF model is used with discount rates that are, according to the Tax Department, “based on the economic principle of weighted average cost of capital (WACC). The cost of capital is a forward-looking measure comprised of the time value of money and investor risk. It takes into account the expected rate of return that market participants require to attract funds to a particular investment. The cost of capital is synonymous with the discount rate that is typically used in renewable energy discounted cash flow analysis.”

The Tax Department’s preliminary model is posted here.

The proposed discount rates are separated into three distinct categories based on “investment risk associated with system type and size”:

  • Large-scale solar (5 MWs and larger, pretax): 7.16 percent
  • VDER solar (1–5 MWs, pretax): 8.00 percent
  • Wind (1 MW and larger, pretax): 9.66 percent

Local assessors are directed to use the model and discount rates on solar and wind energy systems in the 2022 assessment rolls. Municipalities will still have the flexibility to negotiate payment in lieu of taxes (PILOT) agreements.

Interested parties may provide comments on this methodology by October 1, 2021, by emailing them to renewables.model.comments@tax.ny.gov or by mailing them to:

NYS Tax Department—ORPTS
ATTN: Michael St. Germain
W A Harriman Campus
Albany, NY 12227-0801

Attorneys in Barclay Damon’s Project Development Practice Area will continue to monitor this and other developments affecting the renewable energy industry in New York State.

If you have any questions regarding the content of this alert, please contact Kevin McAuliffe, Project Development Practice Area co-chair, at kmcauliffe@barclaydamon.com; Jeff Davis, Telecommunications Practice Area chair and Project Development Practice Area co-chair, at jdavis@barclaydamon.com; Genevieve Trigg, special counsel, at gtrigg@barclaydamon.com; Angela Sicker, associate, at asicker@barclaydamon.com; or another member of the firm’s Project Development Practice Area.

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