Beaverhead County-supported solar bill becomes law

Casey S. Elliott
Wednesday, April 28, 2021


A house bill aimed at clearing up the taxing status of solar farms in Montana was signed into law April 16.

House Bill 346 was sponsored by House District 72 Rep. Tom Welch (R-Dillon), and originally sought by the Beaverhead County Commission. The commissioners had grappled with what taxing classification a pair of proposed solar farms fell under when the company sought a tax abatement.

“The biggest thing was, we added ‘solar panel systems,’” Beaverhead County Commissioner Mike McGinley said. “In Montana’s tax code, the word ‘solar,’ for electrical generation facilities – solar panels is never in there.”

Idaho-based Clenera is looking to build two 80-megawatt solar facilities near the NorthWestern Energy power station off Ten Mile Road. Clenera representatives asked for a tax abatement on the first of the two projects, arguing it should be taxed at a lower rate due to being classified a “qualifying small production facility” according to federal statute.

That classification is determined by the Federal Energy Regulatory Commission (FERC), McGinley said, which states a plant must be less than 80 megawatts in power generation. Montana’s code had listed a qualifying facility as less than 50 megawatts.

HB 346 clears up that mismatch, outlining a “qualifying facility” as whatever FERC sets. It also spells out where solar facilities fit in the tax code based on that determination.

“Qualifying facilities” are considered either Class 4 or Class 8 according to federal tax law; they are taxed at 4% and 8%, McGinley said. In Montana, power production facilities are tax classifications 13 or 14. Class 14 is for renewables (which does not list solar); Class 13 is for electrical generation facilities, which will now include solar. Class 13 property is taxed at 6%. HB 346 takes effect Oct. 1.

The commissioners approved a 75 percent tax abatement for the first Clenera plant at its Dec. 21, 2020 meeting. The abatement was approved under the assumption the facility was taxed at the 6% Class 13 rate. McGinley said Clenera may seek FERC’s “qualifying small production facility” designation, which would reduce the plant’s tax rate. If it does that, Clenera will need to reapply for a tax abatement from the county.

“I’m satisfied with this law because Clenera is trying to be a qualifying facility. If they are, then our tax abatement goes away, and they’ll need to reapply,” McGinley said. “This was a loophole that didn’t make a lot of sense. (HB 346) closes the loophole.”

By having clear tax codes for solar farms, McGinley said the commission now will know specifically how much the project would be taxed when they are asked to agree to a tax abatement.

The overall bill was an easy sell to lawmakers, Welch said, contributing to a unanimous vote in favor of the changes at every step of the process.

“It was a good bill to get the language clarified, and going forward, it will make life easier,” Welch said. “Solar is mentioned in places, but not the specific tax code type. It’s one of those things no one thought about, no one had mentioned or thought there was a problem – or thought there was a way to fix it,” Welch said.

Other tax, energy bills progress

Welch sponsored a second bill, HB 170, which adds a definition of “green hydrogen” into Montana’s code. Green hydrogen creates energy through a process that gathers sunlight and water and uses electricity to make hydrogen.

The addition is needed due to discussions about the potential creation of a green hydrogen plant in Butte, which would then need a pipeline installed to deliver the product. The pipeline would possibly be installed along Interstate 15, and generate tax revenue (property tax for the pipeline, and income tax from construction jobs) for the county.

“This is probably the biggest jobs bill we’ve seen in this session to date,” Welch said. “If they start construction, this bill lays the framework for a green hydrogen project in Butte... it’s potentially a $1 billion investment. It’s going to put people to work, it will create a new tax base. There’s a lot of exciting things about it.”

Welch said he sponsored HB 170 because the pipeline would run through his district, and the jobs created could interest his constituents.

“It may never happen. But if it does happen, it would be a boon to our area,” he said.

HB 170 passed both houses of the Montana Legislature, and is awaiting Gov. Greg Gianforte’s signature.

A companion bill, Senate Bill 392, would allow for using highway rights-of-way to run a pipeline. That bill passed 41-9 at the Senate and 100-0 in the House, it is now back in Senate hands.