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Hawaii - Wind Turbines are Not Real Property

by Scott Donald, Irvine, February 2020

 

The Hawaii Supreme Court has ruled wind turbines should be not considered real property for property tax purposes.

 

The case arises from a taxation dispute between Maui County and three wind power companies that lease land to operate their wind farms. At issue is whether the County had the authority to include the value of the wind turbines in the companies’ real property tax assessments.

 

Massive Tax Hikes

 

The addition of the wind turbines to the power companies’ real property had a dramatic impact. In 2013, one company’s total assessed, taxable value was $3,077,900 and after the assessor decided to treat turbines and other articles as realty by amending the property tax code, the assessment jumped to $76,911,700.

 

It was the same with the other two wind farm businesses. The value of one soared from $2,814,300 in 2013 to $71,854,800 in 2014. For the other, it skyrocketed from $1,042,500 to $82,596,300.

 

Real Property Defined

 

The Supreme Court decision upholds a Tax Appeal Court judgement that wind turbines did not qualify as real property under Maui County code. To be considered real property, the wind turbines had to qualify as improvements or fixtures, and the court said that the wind turbines were neither.

 

The Supreme Court opinion states that while counties have broad policy-making authority, “we cannot conclude in this case that this authority extends as far as the county claims.”

 

Wide-Range Implications

 

President of the Tax Foundation of Hawaii, Tom Yamachika applauded the Supreme Court’s ruling. He was quoted as saying that if counties were allowed to tax wind turbines as real property because they add value to the land, they could conceivably go to a factory and include the machinery as real property, or to a medical clinic and include an MRI machine.

 

“It could have completely changed the landscape,” Yamachika said. Since the State of Hawaii does not assess personal property, observers question if this was a way for officials to shift untaxable assets to taxable?

 

A Maui County spokesman said the county is reviewing the decision and has no further comment at this time. It’s unclear whether the county will have to reimburse the wind farms.