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SolarCity Corp. and Sunrun Inc. are suing the Arizona Department of Revenue over a decision to tax leased solar equipment, an interpretation of existing law that would cost Sunrun's in-state customers more than $7.6 million in tax year 2015, according to documents filed in Arizona Superior Court.
Arizona law exempts from property tax collection solar panels that produce electricity "primarily for on-site consumption," while another statute states that panels not used for self-consumption are valued at 20% of the depreciated cost of the equipment. The state Department of Revenue in a 2013 memorandum drew a distinction between solar panels that homeowners buy themselves and those that are leased from companies including Sunrun and SolarCity.
"The production of power for on-site consumption is not the determinative factor for central...