CLIENT
Our client is a California-based renewable power producer serving communities across North America, with over 5,000 megawatts of generation capacity in wind and solar farms.
CHALLENGE
In our continuous monitoring of macroeconomic trends among renewable energy producers, DMA analysts have observed that many wind farms today are at risk of over-assessment. While performing this research, our experts noticed that this producer had indeed been overpaying property tax on its turbines due to a valuation that did not match the current state of operations.
The wind farm in question was built over ten years ago, since which time we’ve observed a significant decline in construction costs of wind turbines. The assessment’s stated market value was similar to the cost of building new turbines in 2023—herein lied the challenge.
SOLUTION
DMA notified the company of the excessive tax and was hired to perform a formal assessment review. We collaborated with the client to thoroughly analyze their internal processes and identify a prudent path to a more appropriate assessed value. In acquainting ourselves with the wind farm’s assets, financial performance, and compliance history, our experts found the issue.
Our review found that the forecast provided to the assessor had been prepared using historical rather than forward-looking data. As such, the forecast was overly optimistic, leading the assessor to generate a valuation much higher than appropriate.
DMA worked with the client to prepare a deliberate property tax return consistent with changes in industry projections, which reflected the impact of recent trends on operations. Revising the forecast to more accurately reflect ongoing operations resulted in substantial single-year savings, with an expectation of ongoing savings.
RESULTS
Assessment Reduction
Single Year Tax Savings
Without filing a formal appeal, DMA’s property tax team was able to impact the taxing jurisdiction’s final valuation. The jurisdiction incorporated the recommendations and issued an assessed value, which was reduced by over $25M.
This substantial assessment reduction translated into an impactful $285,000 in single-year property tax savings for our client. With these tax savings expected to hold over years to come, our client can allocate resources more efficiently—whether directing funds toward technology upgrades, expanding its portfolio of green energy projects, or enhancing overall operational efficiency.
WHY DMA?
Renewable energy operations often require a unique approach and highly skilled valuation analysis to accurately assess and allocate value among the various tangible and intangible (taxable and non-taxable) components.
Our property tax team specializes in reviewing assessments for complex industrial property, including the most unique and challenging asset types in the market. This includes reviews for renewable energy properties and similarly complex operations that require in-depth analyses and alternative approaches to value.
The tax savings realized for this client highlights DMA’s commitment to rectifying over-assessments and empowering our renewable energy clients to continually thrive and innovate.
Tax Considerations for Renewable Energy Projects
Achieving the full profitability of renewable energy projects requires a strategic plan that aligns state and local taxes, incentives, and entitlements throughout a project’s lifecycle.
Download the Guide to Achieving Full Project Profitability