Case Law Update: Kingfisher Wind, L.L.C. v. Wehmuller

In 2015 Kingfisher Wind, LLC (Kingfisher Wind) began construction of a wind farm that was split between Kingfisher and Canadian Counties in Oklahoma (the “Counties”). This case concerns the discrepancy in value placed on the property by the Kingfisher and Canadian County Tax Assessors, and Kingfisher Wind, as Kingfisher Wind valued their property at almost $300,000,000 less than the combined valuation of the Counties.

One of the main reasons for the large discrepancy in value was the use of Production Tax Credits (PTCs) in the property valuation process by the Counties’ Tax Assessors. PTCs are a federal tax equity financing concept used to encourage development of renewable energy or carbon neutral projects by giving a tax credit for each kilowatt hour of electricity generated over a period of time. The Counties and their Tax Assessors included Kingfisher Wind’s PTCs in their valuations because they believed PTCs were tangible personal property that brought an economic value integral to determining the full fair cash value of the property. Kingfisher Wind sought to have PTCs excluded from the value of the property because it believed PTCs were intangible personal property, and thus not subject to taxation.

The Supreme Court of Oklahoma acknowledged that PTCs have a direct impact on a property’s fair market value, but ultimately decided that PTCs are intangible personal property and exempt from taxation under the Oklahoma Constitution pursuant to an amendment excluding intangible personal property from taxation. The Oklahoma Legislature was quiet as to what intangible personal property was, but tangible personal property was defined as something that could be seen, weighed, measured, felt, touched or is perceptible to the senses and references rights in tangible, physical things. The Supreme Court took this definition of tangible personal property, reversed it, and concluded that intangible personal property encompasses property rights that are effectively materially non-existent. They added that intangible personal property such as stock certificates, bonds, notes and in this case PTCs, have little intrinsic value and can only be claimed or enforced by legal action.