MOONEY, WRI GHT

& MOORE, PLLC

MESA, AZ
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MOONEY, WRIGHT & MOORE, PLLC
Paul J. Mooney (No. 006708)
Jim L. Wright (No. 010531)
Mesa Financial Plaza, Suite 16000
1201 South Alma School Road
Mesa, Arizona 85210-1189
Telephone: (480) 615-7500
Email: pmooney@azstatetaxlaw.com
Attorneys for Plaintiff, SolarCity Corporation

ROSE LAW GROUP, PC
Court S. Rich (No. 021290)
Kelley Gorry (No. 024402)
Logan V. Elia (No. 025009)
7144 E. Stetson Drive, Suite 300
Scottsdale, Arizona 85251
Telephone: (480) 505-3936
Email: csrich@roselawgroup.com
Attorneys for Plaintiff, Sunrun, Inc.


SUPERIOR COURT OF THE STATE OF ARIZONA
IN THE ARIZONA TAX COURT

SOLARCITY CORPORATION, a Delaware
corporation; SUNRUN, INC., a Delaware
corporation,

Plaintiffs,
vs.
ARIZONA DEPARTMENT OF REVENUE, an
agency of the State of Arizona,
Defendant.
No. TX ____________________

VERIFIED COMPLAINT

(Declaratory Judgment)


Assigned to: Hon. Christopher Whitten


Pursuant to A.R.S. 12-1831, et seq., plaintiffs allege:

MOONEY, WRI GHT
& MOORE, PLLC
MESA, AZ
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THE PARTIES
I.
Plaintiff, SolarCity Corporation, is a Delaware corporation that does business in the
State of Arizona, and plaintiff, Sunrun, Inc., is a Delaware corporation that also does
business in the State of Arizona. Plaintiffs, SolarCity and Sunrun (collectively
Plaintiffs), own and lease solar energy equipment to individual customers who own
residential and commercial real property in the State of Arizona, for use on such property.
The solar energy equipment that Plaintiffs lease is designed for the production of solar
energy primarily for on-site consumption within the meaning of A.R.S. 42-11054(C)(2).
II.
Defendant, Arizona Department of Revenue (ADOR), is an agency of the State of
Arizona. ADOR administers and enforces Title 42 of the Arizona Revised Statutes. It
prepares and maintains manuals and other necessary guidelines, reflecting standard
methods and techniques to perpetuate a current inventory of taxable property and the
valuation of that property in a fair and uniform manner. ADOR prescribes guidelines for
applying standard appraisal methods and techniques that are used by ADOR and county
assessors in determining how to value, classify and tax both real and personal property in
the State of Arizona. Pursuant to limited delegations of authority in Title 42, Chapter 14,
A.R.S., ADOR is only authorized to determine the values for certain types of property.
GENERAL ALLEGATIONS
III.
Plaintiffs own solar energy devices as defined in A.R.S. 44-1761, and grid-tied
photovoltaic systems and other devices or systems designed for the production of solar
energy systems designed for the production of solar energy primarily for on-site
consumption, hereinafter referred to as the Subject Property.

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MESA, AZ
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IV.
Plaintiffs lease the Subject Property to consumers, most of whom are homeowners,
as well as some businesses, hereinafter referred to as Consumers. Plaintiffs place the
Subject Property on rooftops, or otherwise locate it on the Consumers properties.
V.
The Subject Property is designed to generate electricity primarily for on-site
consumption, and to meet the power needs of the Consumers properties where it is
placed. The electricity generated by this equipment is not transmitted to the grid for
resale, and specific rules adopted by the Arizona Corporation Commission which
regulates companies that produce and sell electricity directly to consumers expressly
prohibit Plaintiffs from doing so.
VI.
Plaintiffs leases with the Consumers who use the Subject Property to generate
electricity for on-site consumption are based solely on their use of the solar energy
equipment, and Plaintiffs do not sell electricity to the Consumers.
VII.
The Arizona Legislature has made it clear that the Subject Property, when used
primarily for on-site consumption of the electricity generated by such property, is
considered to have no value and to add no value to the property on which it is installed,
and thus it should not be separately assessed for property tax purposes. Specifically,
A.R.S. 42-11054(C)(2) provides: Solar energy devices, as defined in section 44-1761,
grid-tied photovoltaic systems and any other device or system designed for the production
of solar energy primarily for on-site consumption are considered to have no value and to
add no value to the property on which such device or system is installed.
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VIII.
On or about April 14, 2013, ADOR, through its Property Tax Division and
Centrally Valued Properties Unit, issued a memorandum (the ADOR Memo), a copy of
which is attached hereto as Exhibit A. The ADOR Memo addresses the property taxation
of solar energy equipment in Arizona, including the Subject Property. Notwithstanding
the plain language of A.R.S. 42-11054(C)(2), the ADOR Memo takes the position that
solar energy equipment such as the Subject Property must be reported to ADOR, and that
it is taxable under A.R.S. 42-14155 if the equipment is owned by a solar company and
installed on another persons property, even if the solar energy equipment is designed and
placed to produce electricity primarily for on-site consumption. The ADOR Memo also
asserts that such solar energy devices are subject to taxation under A.R.S. 42-14155 as
renewable energy equipment and that it should be reported by the owner(s) to ADOR
and valued for property tax purposes at 20% of its depreciated cost under that statute.
IX.
The ADOR Memo includes the following examples illustrating its position:
1. A homeowner buys solar panels, installs them on his home and
consumes the power produced from those panels. The panels and the
ancillary equipment are locally assessed and are considered to have no
value and add no value to the home.
2. A homeowner leases solar panels from a solar company and pays the
solar company for the energy produced through, for example, a power
purchase agreement or a solar services agreement. The solar company must
report the property to the Department to be centrally assessed.
3. A company owns and installs an array of solar panels to provide
power to a waste water treatment plant. The waste water treatment plant
pays for the power under a power purchase agreement. The company that
owns the panels and sells the power is centrally assessed.
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X.
In a letter dated June 5, 2014, ADORs Director reiterated the legal position that is
set forth in the ADOR Memo that the Subject Property is subject to assessment by ADOR.
XI.
On or about June 13, 2014, ADOR mailed Notices of Value to Plaintiffs,
purporting to determine full cash values pursuant to A.R.S. 42-14155 for the Subject
Property. Copies of the Notices sent to Plaintiffs are attached hereto as Exhibit B. The
full cash values set forth in Exhibit B will result in an assessment of property taxes against
Plaintiffs for tax year 2015. Upon information and belief, similar Notice of Value
forms were mailed to other companies who are engaged in the same business activity.
XII.
Plaintiffs are not in the business of generating, transmitting or distributing
electricity to customers within the meaning of A.R.S. 42-14151, so they are not subject
to valuation or taxation under A.R.S. 42-14155, as asserted in the ADOR Memo.
Therefore, ADOR has no legal basis to value or assess the Subject Property as it has.
XIII.
Plaintiffs are in the business of leasing equipment designed for the production of
solar energy primarily for on-site consumption, as set forth in A.R.S. 42-11054(C)(2).
The Legislature determined that such property is considered to have no value and to add
no value to the property on which it is installed. As such, ADOR has no legal authority
to try to value and assess the Subject Property as it has asserted in the ADOR Memo.
XIV.
The ADOR Memo and ADORs Notices of Value referenced above have created
significant uncertainty for Plaintiffs in the conduct of their businesses in Arizona, as well
as potential tax liabilities for Plaintiffs and/or the Consumers, as well as others who have
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leased solar energy equipment from Plaintiffs or from other companies engaged in leasing
such property, pursuant to the express terms of the leases for such equipment.
XV.
Upon information and belief, based on the Notices of Value ADOR has sent to
Plaintiffs and to other similarly-situated lessors of solar energy equipment, the counties
throughout Arizona in which such leased solar energy equipment is located will levy and
collect property taxes from Plaintiffs and other similarly-situated owners/lessors of solar
energy equipment, based on ADORs Notices of Value, resulting in property tax bills
totaling millions of dollars for each tax year during which such leases are in effect.
Plaintiffs solar equipment leases typically last from 15 to 20 years or more.
XVI.
Pursuant to the express terms of Plaintiffs leases of the solar energy equipment
that comprise the Subject Property, if ADOR values and assesses the Subject Property in
the manner it has indicated in its Notices of Value, the Consumers as lessees of the
Subject Property will be responsible to pay the resulting property taxes that are assessed
to Plaintiffs, based on ADORs flawed interpretation of the relevant statutes.
CLAIM FOR RELIEF DECLARATORY JUDGMENT
XVII.
Plaintiffs incorporate the allegations of all prior paragraphs as if fully set forth
herein.
XVIII.
Pursuant to A.R.S. 42-11054(C)(2), the Arizona Legislature has prescribed that
the Subject Property, which is comprised of leased solar energy devices designed for the
production of solar energy primarily for on-site consumption, are considered to have no
value and to add no value to the property on which such device or system is installed.
XIX.
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Pursuant to A.R.S. 42-14151(B), the Arizona Legislature has granted limited
authority to ADOR to value and assess certain property used to generate electricity that is
delivered to customers through a transmission and distribution system. This provision
governs the assessment of all electric generation property, pursuant to the specific
requirements of Sections 42-14154, 42-14155, or 42-14156, whichever one applies.
XX.
Plaintiffs do not own any property that is used to generate electricity that is
delivered to customers through a transmission and distribution system. Instead, Plaintiffs
own and lease solar energy devices that are placed on the Consumers property primarily
for on-site consumption of the power that is generated by the Subject Property.
XXI.
Pursuant to A.R.S. 42-11054(C)(2), the Subject Property is not subject to
valuation or assessment by ADOR under A.R.S. 42-14155, because it is used primarily
for on-site consumption and is not delivered via a transmission and distribution system.
XXII.
There is a genuine dispute and an actual controversy regarding the proper
interpretation of multiple statutes in Title 42 of the Arizona Revised Statutes that deal
with ADORs present claim of legal authority to value and assess the Subject Property
under the provisions of A.R.S. 42-14155, notwithstanding the Legislatures express
determination in Section 42-11054(C)(2), that such property is considered to have no
value and to add no value to the property on which such device or system is installed.
XXIII.
Although Plaintiffs believe that the meaning of Section 42-11054(C)(2) is clear and
unambiguous, to the extent the interpretation of that statute advocated by the ADOR
Memo asserts ambiguity in its meaning, the canons of statutory construction for tax
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statutes requires the Court to construe any such ambiguity liberally in favor of Plaintiffs as
the taxpayers herein, and strictly against ADOR.
XXIV.
Upon information and belief, the interpretation of A.R.S. 42-11054(C)(2) that is
advocated in the ADOR Memo that solar energy equipment is not taxable when it is
owned, but the identical equipment is taxable when it is leased would render that statute
unconstitutional under Article IX, 1 of the Arizona Constitution. Thus, Plaintiffs believe
ADORs interpretation of the statute is incorrect because it contravenes the presumption
that all laws are constitutional, and it is at odds with the canon of statutory construction
which requires all laws to be construed in a constitutional manner, if possible.
XXV.
Pursuant to A.R.S. 12-1831, et seq., Plaintiffs seek a declaration of their rights,
status and legal relations as they relate to ADORs interpretation of A.R.S. 42-
11054(C)(2), and its erroneous determinations of full cash values for the Subject Property
under A.R.S. 42-14155, which will result in assessments against Plaintiffs in 2015.
WHEREFORE, Plaintiffs request that this Court:
1. Grant them a declaratory judgment that, pursuant to A.R.S. 42-11054(C)(2),
the Subject Property is considered to have no value and to add no value to the
property on which it has been installed, because it consists of solar energy devices
that are designed to produce electricity primarily for on-site consumption and, as
such, it is not subject to valuation or assessment for Arizona property tax purposes
under current Arizona law;
2. Grant them a declaratory judgment that the Subject Property is not subject to
valuation or assessment by ADOR under the provisions of A.R.S. 42-14155;
3. Grant them a declaratory judgment that ADORs interpretation of Section 42-
11054(C)(2) as authorizing it to determine full cash values for solar energy equipment
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owned and leased by Plaintiffs and other similarly-situated lessors of property
designed to produce electricity primarily for on-site consumption, if upheld, would
result in assessments of such property in tax year 2015 that violate Article IX, Section
1 of the Arizona Constitution and other laws relating to the uniform valuation and
assessment of the Subject Property for Arizona property tax purposes;
4. Award them the attorneys' fees and any expert witness expenses they incur
in bringing and prosecuting this action, pursuant to A.R.S. 12-348, together with
their taxable costs, pursuant to A.R.S. 12-341; and
5. Grant such further relief as the Court deems proper.
DATED this 30
th
day of June, 2014.
MOONEY, WRIGHT & MOORE, PLLC

By
Paul J. Mooney
Jim L. Wright
Attorneys for Plaintiff, SolarCity Corporation
ROSE LAW GROUP, PC

By_______________________________
Court S. Rich
Kelley Gorry
Logan V. Elia
Attorneys for Plaintiff, Sunrun, Inc.
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VERIFICATION

My name is ________________. I am the _________________ of Plaintiff,
SOLARCITY CORPORATION. I declare under penalties of perjury and the laws of the
State of Arizona that the factual allegations in the foregoing complaint are true to the best
of my knowledge, information and belief.
SIGNED this ____ day of June, 2014.

______________________________
(Insert Name)

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VERIFICATION

My name is ________________. I am the _________________ of Plaintiff,
SUNRUN, INC. I declare under penalties of perjury and the laws of the State of Arizona
that the factual allegations in the foregoing complaint are true to the best of my
knowledge, information and belief.
SIGNED this ____ day of June, 2014.

______________________________
(Insert Name)