Florida House offers tax break to utilities for solar energy

New legislation would be a windfall for Florida Power & Light, which is seeking to build solar arrays. State economists estimate that the annual statewide impact could range from $899,000 to $1.8 million in reduced tax revenue.
Florida Power and Light has a large solar array in Sarasota.
Florida Power and Light has a large solar array in Sarasota.
Published Feb. 19, 2020

TALLAHASSEE — Quietly tucked into the House’s package of tax breaks is a measure that will let Florida Power & Light and other utilities save millions by delaying the date on which it starts paying taxes on dozens of solar energy plants under construction across the state.

The issue didn’t come up during the tax workshop last week, but House Speaker José Oliva asked for the budget impact of the proposal to be assessed by state economists in December.

On Monday, the provision was added to the bill and on Tuesday the House Ways and Means Committee approved the language.

The provision would require that for new construction by an electric utility, the tangible personal property tax would not be assessed on new construction until all permits or approvals “required for commercial operation” have been received and approved.

In at least 10 counties, Florida Power & Light is seeking to build solar arrays, and state economists estimate that the annual statewide impact could range from $899,000 to $1.8 million in reduced tax revenue.

The proposal is part of the House’s 102-page tax relief bill, which also features a reduction in the communications services tax, a cut in aviation fuel taxes, school supply and disaster preparedness sales tax holidays, changes to tax exemptions for nonprofit hospitals and a provision that allows for tourist development taxes to be used for septic-to-sewer projects.

The utility tax provision is a response to a dispute in Okeechobee County, where the property appraiser there issued a $1.2 million tax bill to Florida Power & Light for starting up a $1.8 billion combined-cycle power plant last year.

Okeechobee County Property Appraiser Mickey L. Bandi said the assessment was based on existing law that construction work is subject to ad valorem taxation when it is “substantially completed” and connected with a “preexisting, taxable, operational system or facility.”

Florida Power & Light hadn’t expected to pay the tax bill in 2019 and protested that the plant wasn’t officially online. It has since settled with Okeechobee County, and agreed to pay half the tangible personal property tax the appraiser demanded, Bandi said.

But it is now asking legislators to “clarify the law.”

“This is not about a tax break for (Florida Power & Light),’’ said Chris McGrath, the utility’s spokesperson. “It’s about applying the law consistently and equally so (Florida Power & Light) can adequately plan major projects and pay the appropriate amount of taxes.”

If approved, utilities won’t start paying taxes on new construction until all their permits are completed, not when it starts generating energy. The change is retroactive and would apply to any projects completed in 2020.

“We’re just trying to clarify that taxes can start once all the permits have already been in,’’ said Rep. Bryan Avila, a Miami Republican and chair of the House Ways and Means Committee. “I want to prevent a situation where you have one property appraiser interpreting the law in a completely separate way from what the general practice has always been.”

Based on an analysis by the economists in December, Florida Power & Light is the only utility with new construction underway until 2025, and all of it is solar. The company has announced plans to install 30 million solar panels by 2030.

The company has also contributed $5 million to political committees this election cycle.

Special tax treatment

Bandi of Okeechobee County, which has a tax based of only $93 million, said the change will cost his county money as Florida Power & Light solar arrays come online this year.

“We’re calling a different finish line for them versus everybody else,’’ he said, noting that there are three natural gas pipelines in Okeechobee County, and one of them is owned by Florida Power & Light.

“We could conceivably treat a different class of property differently, depending on who owns it,’’ he said. “Would a gas utility not be included in it? I’m in favor of treating everybody as fairly as we can, and not everybody likes taxes, but I don’t see this as treating everyone the same.”

McGrath, the utility’s spokesperson, said the legislation “would clarify that power plants are not subject to property tax until being placed into service and benefiting customers.”

The language, however, doesn’t say the electric plant has to be placed into service but instead allows utilities to wait until permits are complete. The bill reads: “for the purposes of tangible personal property constructed or installed by an electric utility, construction work in progress is not deemed substantially completed unless all permits or approvals required.”

Rep. Anna Eskamani, an Orlando Democrat, tried and failed to persuade the committee to remove the utility-specific tax break.

“Every county has a different process how to do this, so I understand a business’ desire to preempt and have a streamlined approach, but I do think it is a little heavy-handed and ask the state to step in,’’ she said.

Meanwhile, Florida’s investor-owned electric utilities have been expanding their production of solar, encouraged in part by the ability to recover the cost by charging customers for the construction through the rate base.

Florida Power & Light has taken advantage of the Florida Power Plant Siting Act, which streamlines the permitting process if a solar plant produces under 75 megawatts of energy, as well as a state law that gives the utilities the exclusive ability to sell energy to consumers. By contrast, some other states allow businesses and homeowners to sell energy from rooftop solar arrays to neighbors.