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MICHIGAN – Legal assistance to get the Michigan Tax Commission to change their arbitrary decision on the way wind turbines are depreciated and taxed is being sought by some counties.
At their 8:30 a.m., Tuesday meeting, Tuscola County Commissioners are expected to make a decision about joining other counties to get legal help to appeal to the tax commission “to establish a fair and logical method of assessing wind generators.”
Energy companies pay personal property tax on their wind development projects. The taxable value, rate of depreciation and the way the wind generators are taxed are set by the state’s tax commission.
Last October the commission changed all those standards, which means a substantial loss of revenue in Huron County, which has had wind farms for several years, and will mean less revenue for other counties that are in the process of developing wind-power projects.
Under the previous taxing schedule, turbines were taxed at 100 percent of their value the first year of operation. Then, were depreciated by 5 percent each year over a 15-year period, and then taxed at 30 percent thereafter.
With the new tax structure, as soon as a turbine is complete it loses about 27 percent of its taxable value the first year. Then, in five years, its taxable value goes to 30 percent.
The change means a substantial loss of revenue, especially for Huron County where the first wind farms in the state were built. The projected loss in that county from the change is about $260,000-$300,000. The new tax structure is also a “reduction of potential revenue” in the other four counties where wind farms are in the process of being developed.
“Those with wind farms say they feel the state is doing a ‘bait and switch’ scam,” said Tuscola County Controller Mike Hoagland.
The original tax rate on the turbines made them financially attractive to municipalities as a way to offset state revenue sharing reductions and declining land values; but now when wind development is getting underway, the state makes changes that will substantially reduce revenue.
Areas where farms are developed means revenue for the county, the township and school districts.
Overall, hundreds of thousands of revenue dollars are at stake because of the tax commission’s decision. Because of that, the five counties in the state with wind development projects are proposing sharing costs of legal assistance. Under the proposal the counties of Gratiot, Huron, Mason, Sanilac and Tuscola would each pay at least $1,000 to start the legal process.
In Tuscola County, commissioners are expected to act on a consent agenda resolution to pay up to $3,000 if necessary for legal assistance.
Besides supporting legal assistance in dealing with the tax commission, Huron and Tuscola County commissioners are supporting House Bills 5278 and 5279 introduced by 84th District Rep. Kurt Damrow (R – Port Austin) which proposes alternative ways to tax wind and other alternative energy developments.
“Although the bills still reduce the tax from the original formula, at least it would create a uniform tax method if approved,” explained Hoagland about the bills.
The bills propose creating a special category for wind, solar power and biomass power generating systems called the “Alternative Commercial Energy Systems (ACES). The bills propose creating a flat fee for each energy system based on the rate of megawatts generated. Also, the bills would set a county-wide revenue tax rate of 40 percent with 20 percent going to the county, and 40 percent to the township with 20 percent going to schools.
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