Alternative Energy System Property Tax Exclusion (Residential)

Michigan assessors may not treat a qualifying alternative energy system on residential real property as an increase in the property's true cash value until the property is sold. Public Acts 116 and 117 of 2019 added the provision to MCL 211.27(2) — commonly known as the Mathieu Gast Act, which lists improvements an assessor must disregard as normal repair, replacement and maintenance — and to MCL 211.34d. The Michigan State Tax Commission explains the rules in Bulletin 6 of 2020.

This is non-consideration until sale, not a permanent exemption. While the owner keeps the property, the system's value is left out of the assessment. Once the property is sold, the assessor may examine the value of the system and may add it to true cash value on the following year's assessment roll.

What qualifies. Installing, replacing or repairing an alternative energy system, regardless of who owns the system, with a generating capacity of no more than 150 kilowatts, where the system's annual energy output does not exceed the annual consumption measured by the utility-provided electric meter it is connected to. The work must not be part of a structural addition or completion. "Alternative energy system" takes its definition from the Michigan Next Energy Authority Act, 2002 PA 593 (MCL 207.822), so although the stated intent of the acts was to keep residential solar panels out of assessments, the provision also reaches fuel cell, solar-thermal, wind, combined heat and power, microturbine, miniturbine, Stirling cycle, battery cell, clean fuel, electricity storage, biomass and thermoelectric systems.

No application is required. The State Tax Commission reminds assessors that they must give non-consideration treatment to known qualifying changes to residential real property whether or not the taxpayer has filed Form 865.

Commercial and industrial systems are covered by a different provision, the alternative energy personal property tax exemption under MCL 211.9i. Note that Public Act 118 of 2019, which amended that commercial and industrial exemption, is sometimes cited as the source of this residential rule; the residential provision comes from Public Acts 116 and 117 of 2019.