As solar projects continue to expand across the Sunshine State, developers should be aware of all cost-saving opportunities available. Currently, Florida law provides significant state and local tax exemptions to solar farmers.
Each exemption applies to a broad list of devices and equipment used as part of a solar energy system. However, these exemptions also include nuances and specific requirements that should be understood before businesses and individuals embark on a new solar facility in order to optimize the state and local tax savings. Use our resources to seek written confirmation of the state and local tax incentives available.
Sales and Use Tax Exemption
The sales and use tax provides the state’s largest source of general revenue. Beginning in 1997, a solar energy system and its components became fully exempt from the state sales and use tax. Eligible systems must convert sunlight into energy for use as a power source for another system. The broad list of exempt components includes solar collectors, photovoltaic power conditioning equipment, pumps, controllers, piping, insulation and mounting brackets.
To take advantage of the exemption, the purchaser must certify that the equipment and hardware purchased or leased will be used exclusively in a solar energy system. Additionally, the cost of the components must be separated from any costs of the project unrelated to the solar energy system.
For a full list of exempt components and a suggested exemption form, see the Florida Department of Revenue Taxpayer Information Publication 05A01-05, dated June 1, 2005.
Property Tax Exemptions
Florida’s Constitution authorizes local governments to levy ad valorem taxes on real property and tangible personal property. In 2008, voters approved an amendment to the constitution permitting the Legislature to effectively exempt the increased value created when a solar or renewable energy source device is installed on residential real property. This permanent, 100 percent residential exemption was codified by the Legislature for renewable energy source devices installed on or after Jan. 1, 2013.
In 2016, more than 72 percent of Florida voters approved an additional amendment to the constitution to create a similar exemption for nonresidential real property and tangible personal property, but only for 20 years. The Legislature implemented this amendment by prohibiting the consideration of 80 percent of the just value of property attributable to a renewable energy source device in determining the assessed value of any nonresidential real property.
The legislation also created an exemption equal to 80 percent of the value of a renewable energy source device from the tangible personal property tax. These exemptions were limited to 80 percent of the value of the renewable energy devices, because the legislative sponsors wanted local governments to receive some financial benefit from solar projects in an effort to incentivize them to actively seek new solar projects for their communities.
The nonresidential exemptions generally applied to renewable energy devices installed after Jan. 1, 2018. The legislation grandfathered in a few specific projects installed prior to that date, and it excluded certain projects installed after that date in fiscally constrained counties. Most importantly, this nonresidential exemption has a limited duration. Solar developers need to understand the nonresidential exemptions will expire Dec. 31, 2037, unless another constitutional amendment is reapproved by at least 60 percent of voters.
Similar to the sales and use tax exemption, the property tax exemptions for residential and nonresidential properties apply to components such as solar energy collectors, photovoltaic modules, inverters, pumps, fans, pipes, ducts, wiring, structural supports, refrigerant handling systems and other components used as integral parts of renewable energy systems.
However, the term does not include any equipment or structure that would be required in the absence of the renewable energy source device or any device located on the distribution or transmission side of the point of interconnection where a renewable energy source device is interconnected to an electric utility’s distribution grid or transmission lines.