Active solar energy system projects must be completed by January 1, 2027, to be excluded from property taxation, according to a recent letter sent to county assessors from the California State Board of Equalization (BOE). (Letter No. 2024/031, August 26, 2024)

Legislation enacted in 2022 (SB 1340 (Stats. 2022, ch. 425)) extended the exclusion for active solar energy systems from the 2023-24 fiscal year to the 2025-26 fiscal year and changed the repeal date to January 1, 2027 (from January 1, 2025). The BOE acknowledged Cal. Rev. & Tax. Cd. Section 73 (Section 73) contained conflicting language around the new construction exclusion and provided clarifying guidance.

The updated guidance outlines the BOE's interpretation of Section 73, confirming the exclusion remains in effect until January 1, 2027, regardless of when construction commences. Under Section 73(i), if the construction is completed by January 1, 2027, the exclusion will apply to the entire facility until its ownership changes. If the facility is not completed by January 1, 2027, construction added from January 1, 2026, will not receive the exclusion.

For a qualified project completed in phases, the phases completed before January 1, 2027 remain excluded until a subsequent change in ownership or control. Any additional phases that have not commenced construction, or that are under construction but not yet complete, as of January 1, 2027 are assessable.

Implications

To ensure a substantial portion of an active solar energy system is not assessable new construction, a project must be completed by January 1, 2027.