Ohio Department of Taxation pursuing sustainable energy generation facilities

Five years ago, Ohio passed Senate Bill 232 which regulated and incented the development of sustainable energy generation. While much focus was placed on large-scale developments, such as wind farms that encompassed hundreds of acres, smaller projects, like those installed by businesses and school districts, generally sailed under the radar. Until recently.

In March 2015, the Ohio Department of Taxation began to send letters to owners and developers of these smaller projects. Under Ohio law, persons who own and operate wind, solar, biomass and other renewable energy facilities to generate electricity may find themselves subject to personal property tax on the equipment used to generate the energy and to the kilowatt hour tax on electricity that is sold to an end user. The letters ask the recipient for information that may lead to liability for either tax or both of them.

It is important for persons receiving the letters to respond in a timely fashion. In some cases, the person is merely purchasing power from another entity that owns and operates the facility. In this situation, the recipient of the letter may not be subject to either tax. However, if the recipient owns or leases the equipment making up the facility, or sells the electricity that it generates to others, he or she may be subject to taxation.