California Partially Exempts Farm Solar Energy Systems

Wednesday, November 12th, 2014

Solar energy panels.

The California State Board of Equalization ("Board") recently released a publication discussing an exemption for solar power equipment used to power farm equipment and machinery.

California partially exempts purchases of farm equipment and machinery. These items must be used primarily in qualified agricultural activities. Some solar power equipment may qualify for this partial exemption. There are two requirements. First, a qualified person must purchase the solar equipment. A qualified purchaser is someone engaged in agricultural business, such as a farmer, rancher, or orchard owner. Second, at least half of the electricity generated must be used in the production and harvesting of agricultural products.

To see if the solar power equipment is partially exempt, a purchaser will look at how much electricity the solar equipment generates compared to how much electricity is consumed by equipment and machinery used to produce and harvest agricultural products. If the electricity consumed by the equipment is equal to or greater than half of the electricity generated, the solar power equipment is partially exempt. This comparison must be done once per year. The Board recommends that taxpayers carefully document this use. Documentation should include data from the meters on the farm equipment and machinery.

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