Detailed California Development
Senate Bill 267, which was recently signed into law in California, clarifies that developers of solar energy projects do not lose their property tax exclusion when a change in ownership occurs as a result of a partnership flip transaction. The bill’s analysis provides insight on the workings of a partnership flip transaction:
Prior to enactment of Senate Bill 267, new construction solar energy projects were excluded from property tax until a “change in ownership” occurred. What was not clear in the law was whether a partnership flip would be considered a “change in ownership.” Senate Bill 267 clarifies that a partnership flip transaction is excluded from the definition of a “change in ownership” that would normally trigger a reassessment of property taxes. Specifically, the bill states that “in the case of a legal entity that owns an active solar energy system pursuant to a partnership flip transaction, neither an initial transfer of a capital and profits interest in the legal entity, nor any subsequent change in the allocation of the capital and profits of the legal entity among the members, shall be deemed to constitute a transfer of control of, or of a majority interest in, the legal entity.” The exclusion does not apply to more than one partnership flip transaction with respect to any portion of an active solar energy system. The bill takes effect immediately, and as noted above, applies only to partnership flips involving solar property. For more information on Senate Bill 267 and its effect on partnership flip transactions, please contact Josh Hennessy.
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