New York judge declares the state’s renewable tax law unconstitutional

 

The Albany judge ruled state law governing property tax assessments for renewable energy projects violates New York’s constitution.

By Marie J. French | 03/05/2025 02:46 PM EST

ALBANY, New York — A court ruling invalidating the state’s property tax assessment calculation for renewable energy could upend wind and solar development in New York. According to a decision issued Monday by Judge Joshua Farrell in Albany Supreme Court, state lawmakers failed to provide enough direction to Gov. Kathy Hochul’s tax agency on how to value wind and solar for tax assessment purposes under the 2023 state budget. Local governments first challenged the state methodology for assessing the value of wind and solar projects in 2022. In the latest case decided earlier this week, they argued they were losing out on tax revenue because the Department of Taxation and Finance didn’t include income from tax credits and state renewable contracts in their model. “This is not a minor inconsistency or minor disagreement,” Farrell wrote in his decision. “The difference is a magnitude of 340 percent.” Why it matters: A statewide taxing method for new renewables has long been a priority for renewable developers, and the Legislature has been supportive. Without a statewide methodology for assessing projects, renewables advocates said local governments could use their taxing authority to block projects. Variation across jurisdictions also raises uncertainty for developers about development costs. In his decision Wednesday, the judge declared that the law governing the statewide model developed by the tax department was unconstitutional because lawmakers delegated too much of their tax authority. If upheld, the decision would have notable impacts on developers. “It introduces a significant amount of uncertainty that will certainly raise the costs of developing renewable energy across New York state,” said Dan Spitzer, a Hodgson Russ partner and head of the law firm’s renewable energy practice. Details: An appeal by the state is likely. The decision would be stayed — so the model would remain in place — on appeal. Monday’s court ruling rests largely on the tax and finance department’s decision not to include renewable energy credits or federal investment tax credits in the evaluation of renewable energy project revenue. The judge found it was too important of a decision to be left to the agency’s discretion. “The Legislature's failure to provide for what property should and should not be taxed and its failure to provide sufficient direction, standards and safeguards on the imposition of taxes on solar and wind energy facilities has created confusion and disarray with respect to how [renewable energy credits] and [investment tax credits] should be treated,” the judge wrote. The lawsuit was brought by town supervisors in Schoharie County. The towns were represented by Dylan Harris, a partner with the firm Whiteman Osterman and Hanna. Harris said towns have been fighting on this issue for four years. “It's a big moment where they’ve been willing to fight the good fight if you will,” Harris said. “It’s kind of vindicating for them.” The Legislature first passed the law establishing the statewide methodology to value new renewable projects in 2021. They amended it in 2023 as part of the budget after the towns scored a court victory on a procedural basis. What’s next: Lawmakers had to fix the state’s property tax law for renewables in 2023 due to another court ruling, so there could be a legislative solution this session. The model is expected to remain in place if the state appeals, as is likely.