Renewable energy projects are expanding nationwide as governments and industries respond to climate change and advancing technology. This growth is expected to continue for projects of all sizes, especially utility-scale developments that power thousands of homes via the electrical grid. Requiring large tracts of land, these projects are most often built in rural places and frequently on agricultural land.

Like other properties, these projects pay taxes to local government units, including towns, schools, libraries, and others. Energy property taxes are usually much higher than farmland taxes, though the size of the difference depends on state tax laws. Large-scale wind and solar projects are typically taxed in one of two ways: ad valorem (based on land and equipment value, taxed at local rates) or as a Payment in Lieu of Taxes or PILOT (often a flat rate tied to the project’s electricity production capacity).

State policymakers determine which tax system applies and how it is implemented, balancing the trade-offs between lower taxes to attract developers and higher taxes to benefit host communities. These policies—from the broad structures to the tiny details—shape the size and distribution of tax payments over a project’s 20- to 40-year lifespan. Sometimes units like counties and schools may be affected differently, and some local residents may benefit more than others. Policymakers must also plan for decommissioning to prevent “boom/ bust” revenue cycles that can occur when major taxpayers enter and exit. With many of these policies newly established, state and local officials are still learning their applications and impacts.

This research explores the renewable energy tax policy ramifications on local districts, such as townships, counties, schools, and fire departments. While the question initially appeared straightforward, the analysis revealed a complex landscape. Even in states with seemingly clear regulations, multiple variables influence how tax policies apply to renewable energy projects. Tax laws, often perceived as fixed, frequently involve negotiations and case-by-case considerations, making it challenging to generalize outcomes.

To provide guidance amid these complexities, a series of state-specific policy briefs were developed for Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Ohio, and Wisconsin. Some of these briefs include calculators to help stakeholders estimate potential tax impacts. These resources are designed to help communities understand the tax implications of renewable energy development while recognizing the variability and uncertainty inherent in tax policy interpretation and enforcement.

About the Policy Briefs

This state-specific series of policy briefs explores one key question: How do property taxes from large-scale wind and solar projects impact local government budgets? Renewable energy projects can boost rural economies and fund community priorities, but assessing their tax impacts is often difficult. The briefs aim to provide stakeholders with clear, detailed, and accurate information. This material is for informational purposes only and is not intended as legal advice.

About the Calculators

These Excel-based calculators serve as companions to the factsheets, aiming to provide users with location-specific information for estimating tax impacts. They employ the most granular publicly available data but include some simplifying assumptions. Therefore, they are intended for informational purposes only. The tax data used as input in the calculators is the latest available, with the specific year noted in the 'calculation steps' section of the companion brief.