ANN ARBOR, MI - Ann Arbor can continue taxing residential alternative energy systems after Gov. Rick Snyder vetoed a pair of bills that would have made the systems tax-exempt.

In a veto letter issued Dec. 28, Snyder raised technical concerns with House Bill 5143, which passed the House of Representatives 106-3 and passed the Senate 38-0. By default, Snyder also vetoed HB 5680, which was tie-barred to HB 5143. HB 5680 passed 105-4 in the House and 38-0 in the Senate.

HB 5143 called for applying the alternative energy personal property exemption to taxes levied on alternative energy systems after the bill’s effective date. Snyder said he could not sign the bill into law because it would have led to different treatment for alternative energy personal property installed before versus after the bill’s effective date.

Snyder said HB 5680 was “more straightforward and acceptable.” That bill would have amended the General Property Tax Act to specify that installing, replacing or repairing an alternative energy system would be considered normal maintenance when determining a property’s taxable value.

Renewable energy advocate Mark Clevey said he was stunned by the veto, and he would have liked to see Snyder voice concerns with the bills earlier in the legislative session so lawmakers could make revisions.

“There was no opposition,” said Clevey, an Ann Arbor resident who is vice president of the Great Lakes Renewable Energy Association. “It was a good idea, it was based on merit, and everybody came together and said, ‘This (taxation) is bad for everybody, so let’s get rid of this stupid law.’”

Ann Arbor has been at the center of Michigan’s debate about how residential solar energy systems should be taxed. The city is one of few municipalities that taxes solar systems as real property, rather than classifying them as the type of personal property that is typically tax exempt.

Clevey and his wife Nancy Fenton filed a tax dispute against the city in May 2017 that challenged the increase in the taxable value of their home after they installed a solar energy system in 2016.

The Ann Arbor assessor at the time said he was obligated by state law to tax solar systems because they were not specifically exempt.

Other municipalities have chosen not to tax residential alternative energy systems, and state agencies released conflicting recommendations on the issue earlier this year.

Michigan Tax Tribunal Judge Steven Lasher agreed with the Ann Arbor’s stance in a March ruling, saying residential solar energy systems are not common enough to be considered the type of “customary” personal property exempt from taxation.

Ann Arbor council passed a resolution in September stating its support of the bills introduced this legislative session that would have made alternative energy systems tax exempt.

Dave Friedrichs, managing member of Homeland Solar in Ann Arbor, was disappointed to see the bills derailed over a technicality after legislators had months to revise them.

“This is legislation that was badly needed,” Friedrichs said. “It was very positive to see such bipartisan support.”

Homeland Solar has installed residential, commercial and municipal solar energy systems across Southeast Michigan for 10 years. Friedrichs said the company has heard from Ann Arbor residents who decided not to install solar systems due to the taxation.

“It’s very disappointing to see that - for them, I would think, as well as for progress and energy change that’s afoot,” he said.