Energy Equipment Property Tax Exemption

Arizona’s property tax exemption was established in June 2006 (H.B. 2429) and originally applied only to “solar energy devices and any other device or system designed for the production of solar energy for on-site consumption.” For property tax assessment purposes, these devices are considered to add no value to the property.

A “solar energy device” for the purpose of this incentive is defined as “a system or series of mechanisms designed primarily to provide heating, to provide cooling, to produce electrical power, to produce mechanical power, to provide solar daylighting or to provide any combination of the foregoing by means of collecting and transferring solar generated energy into such uses either by active or passive means. Such systems may also have the capability of storing such energy for future utilization. Passive systems shall clearly be designed as a solar energy device such as a trombe wall and not merely a part of a normal structure such as a window.”

H.B. 2332, signed in July of 2009, expanded the exemption to include other renewable energy technologies, as well as combined heat and power systems, and energy efficient building components. The bill defines renewable energy equipment as “equipment that is used to produce energy primarily for on-site consumption from renewable resources, including wind, forest thinnings, agricultural waste, biogas, biomass, geothermal, and low-impact hydropower.”

Energy efficient building components are defined as “high performance building components installed so that the buildings or building components meet or exceed the energy efficiencies prescribed by the United States Environmental Protection Agency Energy Star Program, or by a Leadership in Energy and Environmental Design green building rating standard developed by the U.S. Green Building Council, or an equivalent green building standard, or that are at least fifteen percent more efficient than the International Energy Conservation Code in effect at the time of building permit issuance.”

To qualify for the property tax exemption, the property owner must provide their county assessor with documentation affirming the actual purchase and installation, including costs, of the eligible equipment. This documentation must be submitted no less than six months before the notice of full cash value is issued for the initial valuation year.