Ohio General Assembly Modifies Tax Abatements for Renewable Projects

The primary property tax abatement used by renewable energy projects in Ohio is the Qualified Energy Project (QEP). Originally passed in 2010 (128-SB-232), the QEP program enables qualifying projects to receive an abatement of real and personal property taxes in exchange for payment-in-lieu-of-taxes (PILOT). Over the last decade, the construction and operation deadline of the QEP program were extended multiple times by the Ohio General Assembly.

On June 30, 2023, the Ohio General Assembly, as part of the state’s biennial budget bill HB 33, further extended the construction and operation deadlines of the QEP Program. The legislation was signed into law by Governor Mike DeWine on July 3, 2023. In addition to the extension, the new law makes a number of substantive revisions to the program.

A summary of the changes include:

• Extension of Facility Placed-In Service Deadlines: The legislation extends the deadline of the QEP program from January 1, 2026, to the later of either:

1. the tax year in which the federal government determines that the annual greenhouse gas emissions from the production of electricity are equal to or less than 25% of the annual emissions in 2022, in accordance with section 45Y of the Internal Revenue Code; or
2. tax year 2029.

• Definition of Work “Performed at the Project”: For the purpose of tracking hours to meet the program’s domicile workforce requirements, the legislation changes the calculation of "full-time equivalent employee" hours to include only employee hours devoted to site preparation and protection, construction and installation, and material unloading and distribution, as well as exclude management and purely logistical positions.
   
• Wage & Apprenticeship Requirements: The legislation adopts new wage requirements for QEP facilities. Specifically, QEP facilities will be subject to the wage requirements described in section 45(b)(7)(A) of the Internal Revenue Code and the apprentice requirements described in Section 45(b)(8)(A)(i) of the Internal Revenue Code, provided that:

1. the person applies for a QEP certificate after the effective date of HB 33 (October 1, 2023); and
2. the project is 20 MW or greater.

• Ohio-Domiciled Work-Force Ratio: Prior to the revisions adopted by HB 33, solar QEP facilities were required to maintain at least 80% of full-time equivalent employees for the construction and installation of the facility as Ohio-domiciled, with all other types of QEP facilities to maintain an Ohio-domiciled workforce of at least 50 %. HB 33,  makes a number of changes to the domiciled workforce requirements:

1. For existing projects that already applied for certification as a QEP as of the effective date of HB 33, the applicant may self-certify that the project will voluntarily be subject to the wage requirements described in section 45(b)(7)(A)of the Internal Revenue Code and apprenticeship requirements described in section 45(b)(8)(A)(i) of the Internal Revenue Code. By doing this, a solar project can reduce its required ratio of Ohio-domiciled workers from 80% to 70%.
2. For projects applying for certification as QEP after the effective date of HB 33 (October 1, 2023), solar projects must maintain a ratio of Ohio-domiciled workers of at least 70%, and at least 50% for all other types of QEP facilities.

HB 33, as originally presented to Governor DeWine, also proposed to expand the definition of “Ohio-domiciled” to include workers in other states within 50 miles of Ohio if they met certain qualifying criteria. However, Governor DeWine line-item vetoed this provision when signing HB 33. In vetoing this provision, Governor DeWine’s office stated: “This veto removes this provision because it is unfavorable to Ohio residents. A 50-mile radius could allow a resident of Pittsburgh, Ann Arbor, Fort Wayne, or even western New York to potentially count as an Ohio-domiciled resident, which does not support the intention to ensure that Ohioans are employed on these projects receiving a property tax exemption. Therefore, the veto of this item is in the public interest.”

Nonetheless, HB 33 represents the most significant set of changes to the Qualified Energy Project program since its original passage. The extension will provide further planning certainty for developers. The new wage and labor requirements are meant to align with certain provisions of the Inflation Reduction Act.

Please contact our team if you have further questions. For additional resources on renewable energy development in Ohio and surrounding states, please visit Bricker Graydon’s Solar Resource Center.