Can a Virginia locality limit or refuse the property tax exemption for solar power systems?

Plain-English summary

The Loudoun County Commissioner of the Revenue asked the Virginia AG to clarify how three different statutes interact when a locality assesses property tied to solar energy. Attorney General Jason S. Miyares answered five linked questions, and the takeaway is uniform: when the General Assembly directly granted a solar exemption, the locality cannot refuse it, shorten it, or carve it down.

For § 58.1-3660 (which classifies certified pollution control equipment, including qualifying solar photovoltaic systems, as exempt property), localities must honor the exemption to the extent the statute provides, with no power to limit its duration. For § 58.1-3661(A) (small-scale solar facilities of 25 kW or less installed under § 15.2-2288.7), the exemption is mandatory and indefinite. For § 58.1-2606.1 (solar PV projects 5 MW or less), the generating equipment is taxable, but only at a rate not exceeding the locality's real estate rate, and only against the diminishing assessed value the statute prescribes (80% in years 1-5, 70% in years 6-10, 60% thereafter). The term "generating equipment" in § 58.1-2606.1(A) is not limited to public service corporations, despite the chapter title; it applies regardless of who owns the equipment. And the small-rooftop exemption in § 58.1-3661(A) overrides § 58.1-2606.1, so a 25 kW residential rooftop array does not get pulled into the generating-equipment tax.

The opinion is a strong reaffirmation that the Dillon Rule cuts both ways: localities cannot expand their taxing power, but they also cannot shrink statutorily mandated exemptions to recover revenue.

What this means for you

If you are a commissioner of revenue or county assessor

You cannot adopt or apply a local rule that refuses the solar exemptions in § 58.1-3660 or § 58.1-3661(A), and you cannot impose a sunset on them. Where a project qualifies under § 58.1-3660(C) or (D), the exemption is part of the constitutional-classification regime under Article X, § 6(d) and runs as long as the property meets the statutory criteria. The judgment you do retain is the factual one: deciding whether a particular installation falls within a qualifying subclassification. That fact-finding is yours under longstanding AG practice (1984-85 Op., 1987-88 Op., 1993 Op., 2002 Op.).

For projects governed by § 58.1-2606.1 (5 MW or less), set the local tax rate by ordinance, but it cannot exceed the real-estate rate. Apply the partial exemption schedule (80%, 70%, 60%) verbatim. If your jurisdiction has adopted a revenue share ordinance under § 58.1-2606.1(B), the project is fully exempt instead.

If you are a solar developer or project owner

The opinion solidifies the predictability of Virginia's tax treatment for utility-scale and distributed solar. For projects 5 MW or less approved on or after July 1, 2022, plan around the § 58.1-2606.1 schedule: a tax up to the local real-estate rate, applied to a declining percentage of assessed value, unless the locality has chosen the revenue-share path. For projects approved before July 1, 2022, the older § 58.1-3660 framework continues to govern.

For residential and small commercial installations under 25 kW that meet § 15.2-2288.7's height, setback, and historic-district rules, the exemption is wholesale and a locality cannot reach the generating equipment through § 58.1-2606.1.

If you own a residential or agricultural rooftop solar array

A rooftop or ground-mounted solar facility installed to serve your home or farm, with a nameplate capacity of 25 kW or less, sitting in compliance with local height, setback, and historic-district rules, is fully exempt from state and local taxation under § 58.1-3661(A). A locality cannot tax the panels, the inverters, or the rest of the generating equipment. If you receive an assessment notice that includes the solar array, raise this opinion and § 58.1-3661(A) with your commissioner of revenue.

If you are drafting or reviewing a local solar ordinance

Distinguish between a tax rate (which you can set up to the real-estate rate cap), a revenue share ordinance (which makes a 5 MW or less project fully exempt under § 58.1-2606.1(B)), and an attempt to limit a state-mandated exemption (which is invalid). The General Assembly intentionally chose the "directly exempt" rather than "allow . . . to exempt" formulation in Va. Const. art. X, § 6(d), and the AG reads that choice as removing local discretion.

Common questions

Q: Can a locality require an annual application or three-year recertification for the § 58.1-3660 solar exemption?
A: The opinion does not address recertification ordinances directly, but its logic is hostile to them. The AG cited Emmanuel Worship Ctr. v. City of Petersburg, 300 Va. 393 (2022), describing constitutionally prescribed exemptions as "automatic" absent an authorized ordinance. § 58.1-3660 contains no language authorizing localities to impose application or recertification burdens on qualifying projects.

Q: What happens if a project that qualified at year 1 stops qualifying later?
A: Whether the project still satisfies the statutory criteria is a factual determination for the commissioner of revenue. If a project loses its qualifying status (for example, fails to maintain its interconnection-request standing), the exemption no longer applies and the property becomes taxable in the ordinary way.

Q: Why does the chapter title not control the meaning of "generating equipment"?
A: Virginia courts have repeatedly held that a statute's placement in a particular chapter does not override its plain text. The AG cited Tyszcenko v. Donatelli, 53 Va. App. 209 (2008), and Washington v. Commonwealth, 46 Va. App. 276 (2005). § 58.1-2606.1's text says "generating equipment" without qualification. Read at face value, it covers all owners.

Q: How does the revenue share ordinance under § 58.1-2606.1(B) work?
A: It is the alternative to imposing the generating-equipment tax. If a locality adopts a revenue share ordinance covering solar PV projects of 5 MW or less, then for projects approved on or after July 1, 2022, the project is "100% of the assessed value" exempt under § 58.1-2606.1(B). The locality collects the negotiated revenue share instead of a property tax.

Q: Does this opinion change anything for projects approved before July 1, 2022?
A: No. The 2022 amendments contain a savings clause: § 58.1-2606.1(A) does not apply to projects approved before July 1, 2022. Those projects continue to be governed by the prior § 58.1-3660 framework, which can leave them fully exempt under § 58.1-3660(C)(iv) if they meet the interconnection-request criteria.

Q: What about pre-existing local ordinances that purported to limit the duration of a § 58.1-3660 exemption?
A: Those provisions appear preempted by this opinion's reading. Va. Code Ann. § 1-248 and Blanton v. Amelia Cnty., 261 Va. 55 (2001), confirm that local rules in conflict with state law are invalid. A locality with a sunset ordinance on its books should not enforce it against a qualifying project.

Background and statutory framework

The Virginia Constitution, in Article X, makes "all property" taxable unless an enumerated exemption applies, and authorizes the General Assembly to define solar energy as a separate subject of taxation under Article X, § 6(d). The legislature has used that authority three times in different statutes that the AG reads as a connected scheme.

§ 58.1-3660 is the original solar exemption framework, dating from when solar was treated as "certified pollution control equipment." It declares the exempt class, then subjects solar photovoltaic systems to a set of qualifying conditions in subsections C, D, and F (size, interconnection-request date, revenue-share status). For projects that fit, the exemption is direct and indefinite.

§ 58.1-3661 has two layers. Subsection B authorizes localities to adopt their own discretionary ordinance exempting "certified solar energy equipment, facilities, or devices," subject to the statute's prescriptions (including a five-year minimum term in subsection E). Subsection A is the mandatory layer: small-scale rooftop and ground-mounted solar facilities of 25 kW or less, installed pursuant to § 15.2-2288.7's residential-and-agricultural framework, are "wholly exempt." That subsection was added in 2022 (Va. Acts ch. 496) effective tax year 2023.

§ 58.1-2606.1 is the most recent layer. It addresses solar PV projects 5 MW or less, which had previously been swept into § 58.1-3660(C)(iv)'s exemption if they had a post-January 1, 2019 interconnection request. The 2022 amendment made the generating equipment of those 5 MW or less projects taxable but capped the rate at the local real-estate rate and reduced the assessed value over time (80%/70%/60%). The chapter title is "Taxation of Public Service Corporations," but the AG read the statute's reach broadly: it covers all generating equipment, regardless of owner.

The opinion threads these statutes together with several settled rules of construction. "Shall" is mandatory unless the legislature manifests a contrary intent (Andrews v. Shepard; Schmidt v. City of Richmond; Crawford v. Commonwealth). Tax exemptions are strictly construed (Va. Const. art. X, § 6(f)). Statutes addressing the same subject are read in pari materia (Alger v. Commonwealth). The placement of a provision within a particular chapter does not override its plain text (Tyszcenko v. Donatelli; Washington v. Commonwealth). And a statute that prescribes the method by which something must be done implies the exclusion of other methods (2001 Op. Va. Att'y Gen. 125).

Citations

• Va. Code Ann. § 58.1-3660 (solar PV exemption framework)
• Va. Code Ann. § 58.1-3661(A) (mandatory exemption for solar facilities ≤25 kW under § 15.2-2288.7)
• Va. Code Ann. § 58.1-3661(B), (E) (discretionary local exemption ordinance, five-year minimum term)
• Va. Code Ann. § 58.1-2606.1(A), (B), (C) (5 MW or less generating-equipment tax; revenue share alternative; carve-out for § 15.2-2288.7 facilities)
• Va. Code Ann. § 15.2-2288.7 (locality regulation of solar facilities on residential/agricultural property)
• Va. Const. art. X, § 1 (universal taxation default)
• Va. Const. art. X, § 6(d) (solar as separate subject of taxation)
• 2022 Va. Acts ch. 492; 2022 Va. Acts ch. 493; 2022 Va. Acts ch. 496 (amendments creating § 58.1-2606.1 and § 58.1-3661(A))
• Emmanuel Worship Ctr. v. City of Petersburg, 300 Va. 393 (2022) (constitutionally prescribed exemptions are automatic)
• Andrews v. Shepard, 201 Va. 412 (1959) ("shall" is mandatory)
• Lamar Co., LLC v. City of Richmond, 287 Va. 348 (2014) ("notwithstanding" means "in spite of")

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2024/23-009-Wertz-issued.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

COMMONWEALTH of VIRGINIA

Office of the Attorney General

Jason S. Miyares, Attorney General
202 North Ninth Street
Richmond, Virginia 23219
804-786-2071
Fax 804-786-1991
Virginia Relay Services 800-828-1120

August 14, 2024

The Honorable Robert S. Wertz, Jr.
Commissioner of the Revenue
County of Loudoun
Post Office Box 8000
Leesburg, Virginia 20177-9804

Dear Commissioner Wertz:

I am responding to your request for an official advisory Opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You present multiple questions regarding the local taxation of property associated with solar energy initiatives. Your inquiry arises out of your duty to make assessment determinations regarding such property. Your specific questions, which implicate several different provisions of the Code, are as follows:

1) Whether it is mandatory under § 58.1-3660 for a locality to provide a property tax exemption for solar photovoltaic systems, and whether a locality may limit the duration of such an exemption;

2) Whether it is mandatory under § 58.1-3661 for a locality to provide a property tax exemption for the types of small-scale solar facilities described in subsection A of that statute, and whether a locality may limit the duration of such an exemption;

3) Whether it is mandatory under § 58.1-2606.1 for a locality to impose a tax or gradually diminishing exemption on the generating equipment of solar photovoltaic projects with 5 megawatts or less in generating capacity;

4) Whether the term "generating equipment" in § 58.1-2606.1(A) refers only to generating equipment that is owned by public service corporations; and

5) Whether the tax on generating equipment set forth in § 58.1-2606.1(A) extends to the generating equipment of the types of small-scale solar facilities that otherwise are exempt from taxation under § 58.1-3661(A).

Response

It is my opinion that:

1) A locality is required under § 58.1-3660 to provide a property tax exemption for the qualifying solar photovoltaic systems enumerated in that statute, to the extent specified in the statute, and a locality has no discretion to limit the duration of such an exemption;

2) A locality is required under § 58.1-3661 to provide a property tax exemption for the types of small-scale solar facilities described in subsection A of that statute, and a locality may not limit the duration of such an exemption;

3) A locality is required generally under § 58.1-2606.1 to impose a tax and gradually diminishing exemption on the generating equipment of solar photovoltaic projects with 5 megawatts or less in generating capacity, as described in that statute;

4) The term "generating equipment" in § 58.1-2606.1(A) refers to all generating equipment otherwise within the ambit of the provision, regardless of ownership; and

5) The tax on generating equipment set forth in § 58.1-2606.1(A) does not extend to the generating equipment of the types of small-scale solar facilities that are exempt from taxation under § 58.1-3661(A).

Applicable Law and Discussion

Your inquiry regards the taxation of property associated with solar energy. It is well settled that taxes can be levied and assessed only in accordance with law and that tax exemptions "shall be strictly construed." Your questions involve several related, yet distinct, provisions of Virginia law.

The Constitution of Virginia directs that "[a]ll property, except as hereinafter provided, shall be taxed." To implement this directive, the General Assembly is authorized to classify property into different types and to segregate it for local taxation. The Constitution then sets forth categories of property that "shall be exempt from taxation" and categories of property for which the General Assembly may provide an exemption. Pertinent to your inquiry, the Constitution provides that the General Assembly "may define as a separate subject of taxation any property, including real or personal property, equipment, facilities, or devices, used primarily for the purpose of abating or preventing pollution of the atmosphere or waters of the Commonwealth or for the purpose of transferring or storing solar energy." Upon such classification, the General Assembly is further authorized to "allow the governing body of any [locality] to exempt or partially exempt such property from taxation, or . . . directly exempt or partially exempt such property from taxation" by general law.

Pursuant to this authority, the General Assembly has enacted several statutes providing for the taxation, and exemption therefrom, of property affiliated with solar energy. Your request specifically seeks clarification on the application of Code §§ 58.1-3660, 58.1-3661, and 58.1-2606.1.

Familiar rules of statutory construction govern your inquiry. In construing the applicable statutes, the "primary objective" is "to ascertain and give effect to legislative intent[,]" which "must be gathered from the words used in the statute." Courts "assume that the General Assembly chose, with care, the words it used in enacting [a] statute[,]" and when the language of a statute is plain and unambiguous, the words will be given their clear effect. In addition, statutes addressing the same subject "should be read, construed and applied together so that the legislature's intention can be gathered from the whole of the enactments."

Local Discretion under § 58.1-3660

You ask whether § 58.1-3660 requires a locality to provide a property tax exemption for solar photovoltaic systems. Section 58.1-3660 declares "[c]ertified pollution control equipment and facilities" to be "a separate class of property" and expressly directs that such property "shall be exempt from state and local taxation[.]" Nevertheless, the statute further provides that, "[f]or solar photovoltaic (electric energy) systems, the exemption applies only to" certain enumerated qualifying projects. For some of these qualifying projects, the exemption is only partial, limited to a percentage of assessed value that decreases incrementally over time. Whether a project qualifies for exemption under the statute (in full or partially) depends on factors such as the project's generating capacity, the date on which an initial interconnection request form was filed, and/or whether the locality has adopted a revenue share ordinance.

Although the exemption for solar photovoltaic systems in § 58.1-3660 applies only to certain qualifying projects, and further is limited for some of these projects, the General Assembly clearly has provided that the exemption "shall" apply to the property it encompasses. The word "shall" in a statute typically is construed as mandatory absent any manifestation of contrary intent by the legislature. There is no indication in the language of § 58.1-3660 that the word "shall" is intended to be other than mandatory. Therefore, in my opinion a locality is required under § 58.1-3660 to recognize the exemption for qualifying solar photovoltaic projects, to the extent specified in the statute.

You also ask whether a locality may limit the duration of the exemption afforded qualifying solar photovoltaic projects under § 58.1-3660. There is no language in the statute that explicitly or implicitly permits a locality to limit the duration of the exemption for such projects. In interpreting statutes, it is not permissible to "add to the words of the statute" or interpret a statute "to mean what it does not state." Accordingly, in the absence of any language in § 58.1-3660 permitting a locality to limit the duration of the exemption for qualifying solar photovoltaic projects, it is my opinion that a locality is not permitted to do so. This conclusion applies regardless of whether the exemption applies in full to the project, or whether the exemption is limited in percentage.

Local Discretion under § 58.1-3661

You also inquire regarding the scope of a locality's discretion under § 58.1-3661 to extend a tax exemption to the types of small-scale solar facilities described in subsection A of that statute. You ask whether such an exemption is mandatory and whether a locality may limit its duration.

Section 58.1-3661(B) provides that "[c]ertified solar energy equipment, facilities, or devices . . . are hereby declared to be a separate class of property and shall constitute a classification for local taxation separate from other classifications of real or personal property" and authorizes localities, "by ordinance, [to] exempt or partially exempt such property" in accordance with law. The statute then directs, among other things, that, "if such ordinance is in effect," the "exemption shall be effective beginning in the next succeeding tax year and shall be permitted for a term of not less than five years."

With respect to "[a]ny solar facility installed pursuant to subsections A or B of § 15.2-2288.7 with a nameplate rated electrical generating capacity measured in direct current kilowatts of not more than 25 kilowatts[,]" however, § 58.1-3661(A) more specifically establishes such a facility as a distinct tax classification and directs that "[s]uch facilities shall be wholly exempt from state and local taxation . . . ." Because the General Assembly has mandated directly that this type of solar facility "shall be" tax exempt, a locality is without power to disregard the exemption. Accordingly, the plain language of § 58.1-3661 makes clear that, while a locality generally has discretion to adopt an ordinance exempting certified solar energy facilities from taxation (subject to the statute's term prescriptions), a locality does not have any discretion with respect to exempting the facilities specifically identified in § 58.1-3661(A).

In addition, as with the exemptions established in § 58.1-3660, the exemption created by the General Assembly under § 58.1-3661(A) is indefinite. Section 58.1-3661 contains no language authorizing a locality to limit the duration of the exemption for the facilities identified in § 58.1-3661(A). In the absence of any such language, a locality has no discretion to limit how long the exemption for these facilities remains in effect.

Application of § 58.1-2606.1

Your next several questions relate to § 58.1-2606.1(A). The provision states that

[n]otwithstanding clause (iv) of subsection (C) of § 58.1-3660, generating equipment of solar photovoltaic projects five megawatts or less shall be taxable by a locality, at a rate determined by such locality, but shall not exceed the real estate rate applicable in that locality . . .

The provision then further establishes that

notwithstanding subsection F of § 58.1-3660, the exemption shall be as follows: 80 percent of the assessed value in the first five years after commencement of commercial operation, 70 percent of the assessed value in the second five years of service, and 60 percent of the assessed value for all remaining years in service.

Your first question with respect to this statute relates to the degree of discretion it affords local governments. You ask whether the statute renders the imposition of either a tax or gradually diminishing exemption mandatory.

The text of § 58.1-2606.1(A) makes clear that it is to be read in the context of § 58.1-3660. As discussed above, § 58.1-3660 generally exempts, in full, certified pollution control equipment and facilities from local taxation, but it also excludes from the exemption solar photovoltaic systems unless a project falls within one of five subclassifications. Nevertheless, § 58.1-3660(F) provides a partial exemption that is limited to projects that fall within either of two of those subclassifications; for qualifying projects, the partial exemption is reduced over time.

Section 58.1-2606.1(A) provides that "notwithstanding" an otherwise applicable provision of § 58.1-3660, the subject generating equipment "shall be taxable." The relevant clause of § 58.1-3660, clause (iv) of subsection (C), includes among the tax-exempt solar photovoltaic systems those "projects equaling five megawatts or less, as measured in alternating current (AC) generation capacity, for which an initial interconnection request form has been filed with an electric utility or a regional transmission organization on or after January 1, 2019[.]" Although the General Assembly thus has provided a tax exemption for such projects generally, pursuant to § 58.1-2606.1(A), "notwithstanding" this exemption, the generating equipment associated with the project "shall be taxable."

Consequently, absent another applicable exemption, such property must be taxed. The rate of taxation remains a matter of discretion for the local governing body, provided the rate does "not exceed the real estate rate applicable in that locality." Unlike exemptions mandated by the Constitution or an act of the General Assembly, the levying of local taxes and setting of tax rates are legislative functions that may be exercised only by the governing body of the local taxing jurisdiction; consequently, a duly adopted ordinance setting forth the applicable tax rate is required to put the tax into effect.

Although generating equipment governed by § 58.1-2606.1(A) remains taxable, its full value is not subjected to the applicable tax rate. Rather, in enacting the remainder of § 58.1-2606.1(A), the General Assembly extended the partial exemption afforded only two other projects under § 58.1-3660(F) to "generating equipment of solar photovoltaic projects five megawatts or less." Because the General Assembly opted to directly provide this limited exemption by general law rather than authorizing local governments to provide for any such exemption, I conclude that, other than setting an appropriate tax rate, localities have no discretion to tax or exempt this classification of property in any other manner.

You next ask whether "generating equipment," as used in § 58.1-2606.1(A), is limited to generating equipment owned by public service corporations. Your question arises from the statute's codification within Chapter 26 of Title 58.1, which is entitled "Taxation of Public Service Corporations."

It is well established that "[a] provision's placement in a particular [portion of the Code] does not substitute for a statute's operative text." As Virginia courts have observed, "a statute's placement in a particular part of the Code may generally not be considered when the language of the statute is clear and unambiguous." Accordingly, the title of the chapter in which a statute is codified does not override the statute's plain meaning.

Here, the language of § 58.1-2606.1(A) is clear and unambiguous. Nothing in this language limits the scope of the term "generating equipment" to generating equipment owned by public service corporations. Had the General Assembly intended to limit the scope of the term, it knew how to do so, as evidenced by the language of surrounding statutes that refer to "the property of public service corporations" assessed under the chapter. Moreover, on a broader level, the chapter deals not only with the taxation of the property of "public service corporations," but also the taxation of property of "other persons" assessed under the chapter, which necessarily encompasses persons owning generating equipment subject to the tax who are not public service corporations. Therefore, in the absence of any qualifying language in § 58.1-2606.1, it is my opinion that the term "generating equipment" in § 58.1-2606.1(A) is not limited to generating equipment owned by public service corporations, but instead refers to all "generating equipment" otherwise described in the provision, regardless of ownership.

Lastly, you ask whether the property that is taxable under § 58.1-2606.1(A) includes generating equipment of small-scale solar facilities, i.e., those with a generating capacity of not more than 25 kilowatts, that otherwise are exempt from taxation under § 58.1-3661(A).

As noted above, § 58.1-3661(A) provides that solar facilities with a nameplate rated electrical generating capacity of 25 kilowatts or less, as measured in direct current kilowatts, are "wholly exempt" from local taxation when they are "installed pursuant to subsections A or B of § 15.2-2288.7." Subsections A and B of § 15.2-2288.7, in turn, relate generally to certain solar facilities installed on the roofs of residential dwellings to serve the energy needs of residential or agricultural properties on which they are located.

Therefore, under § 58.1-3661(A), if a solar facility (1) has a nameplate rated electrical generating capacity measured in direct current kilowatts of not more than 25 kilowatts, and (2) is installed to serve the energy needs of a property in accordance with the conditions of § 15.2-2288.7(A) or (B), it is exempt from state and location taxation. It follows that the generating equipment of such facilities also is made exempt under this provision.

There is nothing in § 58.1-2606.1 that disturbs this exemption. To the contrary, § 58.1-2606.1(C) specifically provides that "nothing herein shall be construed to authorize local taxation pursuant to this section . . . of generating . . . equipment of solar photovoltaic projects that serve the electricity needs of that property upon which such solar facilities are located, as is provided in § 15.2-2288.7." Accordingly, generating equipment used in small-scale solar photovoltaic facilities made exempt pursuant to § 58.1-3661(A) is not subject to taxation under § 58.1-2606.1(A).

Conclusion

Accordingly, it is my opinion that:

1) A locality is required under § 58.1-3660 to provide a property tax exemption for the qualifying solar photovoltaic systems enumerated in that statute, to the extent specified in the statute, and a locality has no discretion to limit the duration of such an exemption;

2) A locality is required under § 58.1-3661 to provide a property tax exemption for the types of small-scale solar facilities described in subsection A of that statute, and a locality may not limit the duration of such an exemption;

3) A locality is required generally under § 58.1-2606.1 to impose a tax and gradually diminishing exemption on the generating equipment of solar photovoltaic projects with 5 megawatts or less in generating capacity, as described in that statute;

4) The term "generating equipment" in § 58.1-2606.1(A) refers to all generating equipment otherwise within the ambit of the provision, regardless of ownership; and

5) The tax on generating equipment set forth in § 58.1-2606.1(A) does not extend to the generating equipment of the types of small-scale solar facilities that are exempt from taxation under § 58.1-3661(A).

With kindest regards, I am,

Very truly yours,

Jason S. Miyares
Attorney General