Wednesday, July 6, 2011
Cell Phone Towers and Solar Panels Considerations
Posted by Armanino Nonprofit Team
We are seeing more and more exempt organizations that are generating extra income by contracting with phone companies and energy providers in cell phone tower and solar facility lease arrangements to place equipment on their property. It’s important that any organization considering engaging in such contract(s) fully evaluate and understand the basis tax considerations before renting this space for either purpose.
Depending on the type of property the cell tower or solar panels equipment are affixed to could trigger unrelated business income (UBI). There are three general requirements that all must be met for income to be considered UBI: (1) business or trade income, (2) unrelated to the organization’s mission or programs, and (3) regularly carried on.
Items to consider before making a contract with a phone company or energy provider are:
Health Concerns – Some people are very fearful of possible adverse health effects from living in the vicinity of these antennas, and this is a hurdle faced when contemplating this revenue-generating arrangement.
Zoning Laws – The community must be one that allows cell phone towers. If the property is associated with a church, church property is often exempt from local zoning and land use laws and regulations pertaining to cell phone towers. Should this be the case, then the church land lease becomes more valuable.
Structural Integrity – If the equipment will be installed on the roof, will the structure of the building support such improvements?
Insurance – Will the insurance carrier extend coverage to such new structures or will the premiums dramatically increase?
Property Tax Exemption – Generally, religious institutions enjoy state and local property tax exemptions for all real property. Will the lease cause a portion of the property to lose this exemption?
Access/Easement – Public service companies and cell phone company personnel must have access to the meters and broadcast equipment for maintenance purposes. This may require the organization to grant access easements to the companies. Such access grants should be carefully considered and drafted with specificity.
Contractual Terms – Most contracts have specific language and many large carriers are unwilling to modify the terms.
Length of Agreement – Most agreements extend for a period of ten or more years.
We recommend you contact your tax advisor if you have any questions or circumstances where you are unsure about a UBI situation.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.