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Solarcity Corp. v. Arizona Department of Revenue

Supreme Court of Arizona

March 16, 2018

Solarcity Corporation, et al., Plaintiffs/Appellants,
v.
Arizona Department of Revenue, Defendant/Appellee. Solarcity Corporation, et al., Plaintiffs/Appellees,
v.
Arizona Department of Revenue, Defendant/Appellant.

         Appeal from the Superior Court in Maricopa County The Honorable Christopher T. Whitten, Judge No. TX2014-000129.

         Opinion of the Court of Appeals, Division One 242 Ariz. 395 (App. 2017) VACATED

          Mark Brnovich, Arizona Attorney General, Dominic E. Draye, Solicitor General, Kenneth J. Love, Jerry A. Fries (argued), Macaen F. Mahoney, Assistant Attorneys General, Phoenix, Attorneys for Arizona Department of Revenue.

          Paul J. Mooney (argued), Bart S. Wilhoit, Mooney, Wright & Moore, PLLC, Mesa; Mark S. Davies, Rachel G. Shalev, Orrick, Herrington & Sutcliffe, LLP, Washington DC; Paul D. Meyer, Orrick, Herrington & Sutcliffe, San Francisco, CA, Pro Hac Vice Attorneys for Solarcity Corporation; Court S. Rich, Logan V. Elia, Rose Law Group, PC, Scottsdale, Attorneys for Sunrun, Inc.

          Roberta S. Livesay, Joshua W. Carden, Helm, Livesay, Worthington, LTD, Tempe, Attorneys for Amicus Curiae Arizona Association of Counties.

          Jason Pistiner, Singer Pistiner, P.C., Scottsdale; Michael S. Dicke, Casey O'Neill and Nair Diana Chang, Fenwick & West LLP, San Francisco, CA, Pro Hac Vice Attorneys for Amicus Curiae Arizona Solar Energy Industries Association.

          Douglas S. John, Frazer Ryan Goldberg & Arnold, LLP, Phoenix, Attorneys for Amicus Curiae NRG Energy, Inc.

          Maureen Beyers, Beyers Farrell PLLC, Phoenix, Attorneys for Amicus Curiae Jewish Community Campus, LLC.

          JUSTICE TIMMER authored the opinion of the Court, in which CHIEF JUSTICE BALES, VICE CHIEF JUSTICE BRUTINEL, and JUSTICES PELANDER, BOLICK, GOULD, and LOPEZ joined.

          OPINION

          TIMMER, JUSTICE.

         ¶1 With exceptions, all property in Arizona is "subject to taxation to be ascertained as provided by law." Ariz. Const. art. 9, § 2(13); A.R.S. § 42-11002.[1] Property is valued for tax purposes either "centrally" by the Arizona Department of Revenue ("ADOR") or "locally" by county assessors. See A.R.S. §§ 42-13002 to -13501; 42-14001 to -14503. Valuation is based on the "full cash value" of the property as directed by statute. Id. § 42-11001(6). Unless a statute prescribes otherwise, full cash value corresponds to market value, determined by applying standard appraisal methods and techniques set by ADOR. Id. §§ 42-11001(6), -11054(A)(1).

         ¶2 The issues here are whether ADOR or county assessors are authorized to value solar panels owned by SolarCity Corporation and Sunrun, Inc. (collectively, "Taxpayers") and leased to residential and commercial property owners; what valuation methodology applies; and, assuming a zero-value provision in § 42-11054(C)(2) applies, whether it violates the Arizona Constitution's Exemptions Clause or Uniformity Clause. See Ariz. Const. art. 9, §§ 1-2. We hold that ADOR is not authorized to value the leased solar panels. We remand to the tax court to decide the remaining issues.

         BACKGROUND

         ¶3 Taxpayers lease solar panels to homeowners and commercial property owners. The panels are installed on or around a building (e.g., on a rooftop) to capture solar energy, convert it to electricity in a self-contained "inverter, " and use it to power the property. Although the panels operate "behind the . . . meter" - meaning they operate independently of a utility company's power grid - they transfer any excess energy to the utility company through the grid for others' use. The utility company ...


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