A recent property tax decision from the Connecticut Appellate Court, McHenry Solar, LLC v. Town of Hampton, Conn. App. Ct., Dkt. No. AC 47636, 09/23/2025, may also have sales tax implications.

In McHenry, the taxpayer sought property tax exemption for modules, inverters, racking systems, controls, camera systems, weather monitoring systems, transformers, revenue meters, switchboards, wiring, and switch enclosures used to generate solar electricity.

The Connecticut Appellate Court affirmed the trial court’s denial of a solar energy plant’s property tax exemption application, holding that while Connecticut’s General Statutes § 12-81(76) provides a property tax exemption for machinery and equipment used for manufacturing, the generation of electricity is not included within the meaning of “manufacturing”.

The McHenry Court’s conclusion relied upon the 1992 United Illuminating Co. v. Groppo, 601 A.2d 1005 decision, which held that the generation of electricity is not “manufacturing” for purposes of the Connecticut Sales and Use Taxes Act. The McHenry Court noted that subsequent legislation aligning the definition of “manufacturing” for sales tax and property tax purposes did not specifically expand the definition of “manufacturing” to include the generation of electricity.

While McHenry was a property tax case, because the definition of “manufacturing” is the same for the sales tax exemption, businesses generating electricity will need to consider the extent to which this decision will impact them with respect to both property tax and sales tax.

Renewable energy businesses considering investments in projects located in Connecticut should familiarize themselves with this decision and the applicable property tax and sales tax laws to understand the potential impact on their desired return.