On January 6, 2021, the Court of Appeals of New Mexico held that a power purchase agreement (PPA), entered into by a wholesale electricity generator to secure compensation in exchange for providing electricity, constituted intangible property that is not subject to property taxation and cannot be included in the value of the wholesaler’s electric plant for property tax purposes. The Court also held that, for purposes of valuing the plant, it was appropriate to use the cost of acquisition, rather than the cost of construction, to determine the tangible property cost of the plant.  The Court reasoned that, under the applicable statute, “tangible property costs should first be based on the cost of acquisition, and then on the cost of construction only if the cost of acquisition is not known or available.” Finally, the Court concluded that it was appropriate to consider the PPA in determining whether the wholesaler was entitled to deductions from the plant’s value due to obsolescence, and that the wholesaler was not entitled to deductions because the PPA mitigated obsolescence.

Lea Power Partners, LLC v. New Mexico Taxation & Revenue Dep’t, Dkt. No. A-A-CA-37707 (N.M. Ct. App. Jan. 6, 2021).