LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION April 13, 2013 TO: Honorable Tommy Williams, Chair, Senate Committee on Finance FROM: Ursula Parks, Director, Legislative Budget Board IN RE:SB1278 by Watson (Relating to the appraisal for ad valorem tax purposes of solar energy property.), As Introduced The bill's requirement that the chief appraiser calculate the depreciated value of the solar energy property by using a useful life that does not exceed five years would create a cost to the state through the operation of the school finance formulas. This bill would amend Chapter 23, Tax Code, to require a chief appraiser to use the cost method of appraisal to determine the market value of solar energy property. The bill would require the chief appraiser to: 1) use cost data obtained from generally accepted sources; 2) make any appropriate adjustment for physical, functional, or economic obsolescence; and 3) calculate the depreciated value of the property by using a useful life that does not exceed five years. The bill would define "solar energy property" and would specify that the term includes commercial storage devices, power conditioning equipment, transfer equipment, and necessary parts for these items. The bill's requirement that the chief appraiser calculate the depreciated value of the property by using a useful life that does not exceed five years would create a cost to local taxing units and to the state through the operation of the school finance formulas. The generally accepted cost appraisal method requires an appraiser to match a depreciation table's life to the expected useful life of the kind of property being appraised. Useful life is the period for which the property is expected to perform its function. To the extent that the useful life of solar equipment exceeds five years, the appraised value of the solar equipment under the bill would be below the market value which would, in effect, result in a partial exemption for such property (or in a complete exemption 5 years after purchase). For example, a review indicates that the useful life of solar panels is from 20 to 40 years and that manufacturers' warranties for solar panels are normally for 20 years or more. Insufficient information is available on varieties or amounts of solar equipment with useful lives exceeding 5 years, so the actual value loss to the bill's proposed 5 year depreciation limit cannot be calculated. Consequently, the fiscal loss cannot be estimated. Note: For solar energy property with a useful life of more than 5 years, and that is more than 5 years old, the bill would create a de facto total exemption. The bill would take effect on January 1, 2014. Local Government Impact The bill's requirement that the chief appraiser calculate the depreciated value of the solar energy property by using a useful life that does not exceed five years would create a cost to local taxing units. Source Agencies:304 Comptroller of Public Accounts LBB Staff: UP, KK, SD, SJS
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
April 13, 2013
TO: Honorable Tommy Williams, Chair, Senate Committee on Finance FROM: Ursula Parks, Director, Legislative Budget Board IN RE:SB1278 by Watson (Relating to the appraisal for ad valorem tax purposes of solar energy property.), As Introduced
TO: Honorable Tommy Williams, Chair, Senate Committee on Finance
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: SB1278 by Watson (Relating to the appraisal for ad valorem tax purposes of solar energy property.), As Introduced
Honorable Tommy Williams, Chair, Senate Committee on Finance
Honorable Tommy Williams, Chair, Senate Committee on Finance
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
SB1278 by Watson (Relating to the appraisal for ad valorem tax purposes of solar energy property.), As Introduced
SB1278 by Watson (Relating to the appraisal for ad valorem tax purposes of solar energy property.), As Introduced
The bill's requirement that the chief appraiser calculate the depreciated value of the solar energy property by using a useful life that does not exceed five years would create a cost to the state through the operation of the school finance formulas.
The bill's requirement that the chief appraiser calculate the depreciated value of the solar energy property by using a useful life that does not exceed five years would create a cost to the state through the operation of the school finance formulas.
This bill would amend Chapter 23, Tax Code, to require a chief appraiser to use the cost method of appraisal to determine the market value of solar energy property. The bill would require the chief appraiser to: 1) use cost data obtained from generally accepted sources; 2) make any appropriate adjustment for physical, functional, or economic obsolescence; and 3) calculate the depreciated value of the property by using a useful life that does not exceed five years. The bill would define "solar energy property" and would specify that the term includes commercial storage devices, power conditioning equipment, transfer equipment, and necessary parts for these items. The bill's requirement that the chief appraiser calculate the depreciated value of the property by using a useful life that does not exceed five years would create a cost to local taxing units and to the state through the operation of the school finance formulas. The generally accepted cost appraisal method requires an appraiser to match a depreciation table's life to the expected useful life of the kind of property being appraised. Useful life is the period for which the property is expected to perform its function. To the extent that the useful life of solar equipment exceeds five years, the appraised value of the solar equipment under the bill would be below the market value which would, in effect, result in a partial exemption for such property (or in a complete exemption 5 years after purchase). For example, a review indicates that the useful life of solar panels is from 20 to 40 years and that manufacturers' warranties for solar panels are normally for 20 years or more. Insufficient information is available on varieties or amounts of solar equipment with useful lives exceeding 5 years, so the actual value loss to the bill's proposed 5 year depreciation limit cannot be calculated. Consequently, the fiscal loss cannot be estimated. Note: For solar energy property with a useful life of more than 5 years, and that is more than 5 years old, the bill would create a de facto total exemption. The bill would take effect on January 1, 2014.
This bill would amend Chapter 23, Tax Code, to require a chief appraiser to use the cost method of appraisal to determine the market value of solar energy property. The bill would require the chief appraiser to:
1) use cost data obtained from generally accepted sources; 2) make any appropriate adjustment for physical, functional, or economic obsolescence; and 3) calculate the depreciated value of the property by using a useful life that does not exceed five years.
The bill would define "solar energy property" and would specify that the term includes commercial storage devices, power conditioning equipment, transfer equipment, and necessary parts for these items. The bill's requirement that the chief appraiser calculate the depreciated value of the property by using a useful life that does not exceed five years would create a cost to local taxing units and to the state through the operation of the school finance formulas. The generally accepted cost appraisal method requires an appraiser to match a depreciation table's life to the expected useful life of the kind of property being appraised. Useful life is the period for which the property is expected to perform its function. To the extent that the useful life of solar equipment exceeds five years, the appraised value of the solar equipment under the bill would be below the market value which would, in effect, result in a partial exemption for such property (or in a complete exemption 5 years after purchase). For example, a review indicates that the useful life of solar panels is from 20 to 40 years and that manufacturers' warranties for solar panels are normally for 20 years or more. Insufficient information is available on varieties or amounts of solar equipment with useful lives exceeding 5 years, so the actual value loss to the bill's proposed 5 year depreciation limit cannot be calculated. Consequently, the fiscal loss cannot be estimated. Note: For solar energy property with a useful life of more than 5 years, and that is more than 5 years old, the bill would create a de facto total exemption.
The bill would take effect on January 1, 2014.
Local Government Impact
The bill's requirement that the chief appraiser calculate the depreciated value of the solar energy property by using a useful life that does not exceed five years would create a cost to local taxing units.
The bill's requirement that the chief appraiser calculate the depreciated value of the solar energy property by using a useful life that does not exceed five years would create a cost to local taxing units.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, KK, SD, SJS
UP, KK, SD, SJS