A. Tax Wind Electricity at Existing Utility Rates Traditional electrical generating facilities pay taxes on equipment as well as buildings and land. Local county assessors put value on the land and buildings. The current utility class tax rate is 4.6 percent. Table 2 provides the data needed to analyze the impact of this tax strategy. As we can see, the impact depends on the size of the wind facilities, the level of government spending, and the level of depreciation taken.
Depreciation can be an important issue.
The faster a power plant owner can depreciate or reduce the market value of the power plant for tax purposes, the lower is the tax benefit to the county. For most power plants this results in a depreciation for property-tax purposes of 3 percent per year. After the first 20 percent depreciation is taken, Minnesota allows a utility to further depreciate the plant by one half of any additional depreciation. For example, in year one depreciation would be 3 percent. In year two it would be 6 percent and in year three 9 percent and so forth.