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Washington Governor Jay Inslee recently signed into law HB 1756 (hereafter the Act), which supports clean energy through tax changes that increase revenue to local governments, schools and impacted communities.¹ Beginning with tax levied for collection in calendar year 2025, the Act exempts from the state property tax levy all qualified personal property ² owned by an eligible taxpayer and used for the generation of renewable energy.³ (This exemption does not apply to local property tax levied on personal property.) In lieu of the state property tax levy, taxpayers granted a personal property tax exemption under the Act are subject to a production excise tax. The new law takes effect on July 23, 2023.

Eligible taxpayers that are not assessed as a public utility must apply for the exemption with the applicable county assessor. For taxpayers assessed as a public utility, the exemption application must be filed with the Washington Department of Revenue (DOR). In either case, applications are due by March 31 to claim the exemption for property taxes due and payable in the upcoming calendar year. The application must include an attestation that the taxpayer has registered with the DOR to pay the production excise tax and designate if the exemption is for 10 or 15 years. After the initial application, only an annual attestation is required to continue the exemption.

The production excise tax applies to the privilege of using qualified renewable energy generating systems as an electric power source in Washington. The production excise tax rates are:

• $80 per month per megawatt of nameplate capacity of alternating current for a qualified renewable energy generating system that uses solar energy to generate electricity and was granted a personal property tax exemption for 10 years
• $75 per month per megawatt of nameplate capacity of alternating current for a qualified renewable energy generating system that uses solar energy to generate electricity and was granted a personal property tax exemption for 15 years
• $150 per month per megawatt of nameplate capacity of alternating current for a qualified renewable energy generating system that uses wind energy to generate electricity and was granted a personal property tax exemption for 10 years
• $130 per month per megawatt of nameplate capacity of alternating current for a qualified renewable energy generating system that uses wind energy to generate electricity and was granted a personal property tax exemption for 15 years
• $19 per month per megawatt hour of renewable energy storage capacity that was granted a personal property tax exemption for 10 years
• $14 per month per megawatt hour of renewable energy storage capacity that was granted a personal property tax exemption of 15 years

Implications

The personal property tax exemption only applies to the state property tax levy, which represents approximately 30% of the average total county property tax levy rate. Taxpayers will continue to file personal property tax returns and county assessor’s will continue to assess property under Wash. Rev. Code Section 84.40.030 using the cost approach.

The new law replaces the state property tax levy rate with a production excise tax that varies based on technology (i.e., solar energy, wind energy and energy storage) and elected term (i.e., an exemption period of 10 or 15 years). The exemption provides a benefit to renewable energy projects in Washington, requiring some additional administrative effort to comply. 

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Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor

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ENDNOTES

¹ The law adds a new section to chapter 84.36 RCW; adds a new chapter to Title 82 RCW; and creates new sections.

² The term "qualified personal property" means personal property that is used exclusively for the generation or storage of renewable energy in a facility whose construction began on or after July 1, 2023.

³ The term "renewable energy" means energy produced by a solar or wind facility with nameplate capacity sufficient to generate at least 10 megawatts of nameplate capacity of alternating current power.