Layton Smith Sr. is an IRS Enrolled Agent and general partner at HofflerSmith Financial in Cherry Hill, New Jersey, with 27 years of tax practice. He has overseen thousands of solar and clean energy tax credits, rebates, and their implications for his clients.
Several states exclude rural cooperatives and city-owned utilities from their net metering laws, which is why so many homeowners discover the rules they read about do not apply to them. Minnesota does the opposite. Its law reaches every electric utility in the state, cooperatives and municipals included. That is among the broadest coverage in the country, and in May a bill that would end it for new co-op and municipal customers passed the Minnesota Senate.
Minnesota Covers Co-ops and City Utilities Too
Minnesota Statutes section 216B.164 obliges utilities to offer net metering to customers with systems under 40 kW, and it does not carve out the cooperatives and municipal utilities that most states leave to write their own terms. If you are served by a rural cooperative in Minnesota, you are covered by the same statute as an Xcel customer in Minneapolis.
Moving, or just comparing? The full national incentives picture shows what other states offer.
That is worth pausing on, because it is the single fact that makes Minnesota different. In Kansas the law defines “utility” as investor-owned only. In Iowa it names two companies. In Alaska most households are on a cooperative and therefore outside the rules entirely. A Minnesota co-op member has protections a Kansas co-op member simply does not.
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A Bill That Passed the Senate Would End That
Senate File 4504, the energy omnibus bill, would remove the net metering option for systems in cooperative and municipal territories that apply to interconnect after December 31, 2026, replacing it with a less generous avoided cost standard. It passed the Senate on May 12, 2026 by 35 votes to 32 and went to the House, where it was referred to the Energy Finance and Policy Committee the same day.
As of August 17, 2026 this is a bill, not a law. It has passed one chamber, has not passed the House and has not been signed. Anyone telling you Minnesota has already ended co-op net metering is describing something that has not happened; anyone telling you it cannot happen is ignoring a 35-32 Senate vote.
Three limits on the alarm are worth stating clearly. Existing systems in co-op and municipal territory would not be affected. Systems in investor-owned territory, meaning Xcel Energy and Minnesota Power among others, would not be affected either, whether existing or new. And the date in the bill is an application date, not a completion date.
Which produces an unusually specific piece of advice. If you are on a cooperative or a city utility and you were already planning to install, getting the interconnection application filed before the end of 2026 costs you nothing if the bill dies and protects you entirely if it passes. If you are on an investor-owned utility, this is not your fight and there is no reason to rush.
What Net Metering Actually Pays Here
Systems under 40 kW are reconciled monthly, and the customer may take the balance as a bill credit or as payment, at the average retail utility energy rate. Minnesota residential power runs around 15.14¢ per kilowatt-hour, so an exported kilowatt-hour and a consumed one are worth close to the same thing, which is exactly the symmetry that avoided cost pricing removes.
That symmetry is why seasonal thinking works in Minnesota and does not work in a state like Kansas. Long summer days produce a surplus that is genuinely worth something against a January bill, and a system sized to annual rather than daytime consumption is a reasonable design here. It is also precisely the thing at stake in the Senate bill.
The Incentives That Are Not Tax Credits
Each program, who qualifies, and where it stands:
Program | What it pays | Who qualifies | Status 2026 |
|---|---|---|---|
Sales tax exemption | 6.875% off the equipment invoice | All buyers | Active |
Property tax exclusion | System value excluded from assessment | All homeowners | Active |
Xcel Solar*Rewards | $0.03 per kWh for 10 years | Xcel customers only | First come, first served annual budget |
Net metering under 216B.164 | Monthly netting at the average retail energy rate | Systems under 40 kW at every utility, co-ops and munis included | Active, but see Senate File 4504 |
Federal 25D credit | $0 | Purchases completed after December 31, 2025 | Ended; 48E remains for third-party lease and PPA owners only |
Minnesota has no state income tax credit for residential solar, and the federal residential credit is $0 for purchased systems whose installation is completed after December 31, 2025. What the state does offer arrives in three other forms, none of which is a check and all of which are real.
- Sales tax exemption. Solar equipment is exempt from Minnesota sales tax, currently 6.875%, which comes off the invoice rather than off a future return.
- Property tax exemption. The value a system adds to the home is excluded from the assessment, so the array does not raise your property tax bill.
- Xcel Solar*Rewards, for Xcel customers only. A performance-based payment of $0.03 per kilowatt-hour generated, running for 10 years. It is first come, first served against an annual budget that does not carry over, so the application date matters more than the install date.
The sales tax exemption is the one most often left out of a quote comparison, because it reduces the price rather than appearing as a line item. When two proposals differ, check whether both are quoting the exempt figure.
You Likely Will Not Qualify If
- You want a system over 40 kW. That is the ceiling in section 216B.164 for these terms.
- You are expecting a Minnesota state solar tax credit. There is not one. The state works through exemptions and a utility program instead.
- You are counting on the 30% federal credit. Section 25D is $0 for purchased systems whose installation is completed after December 31, 2025 under Public Law 119-21.
- You are not an Xcel customer but were quoted Solar*Rewards. It is an Xcel Energy program and does not exist on other utilities.
- You are on a co-op or city utility and plan to apply in 2027 or later. If Senate File 4504 becomes law in its current form, applications after December 31, 2026 would move to avoided cost rather than net metering.
How to Read the Next Twelve Months
Minnesota is the rare case where the right move depends entirely on who bills you, and where the reason is a live legislative fight rather than a tariff. Xcel and Minnesota Power customers can take their time; nothing in front of the legislature changes their terms. Cooperative and municipal customers are looking at a date at the end of this year that may turn out to mean nothing, or may turn out to be the line between two quite different arrangements.
The asymmetry is what makes the decision easy: filing early is cheap insurance against an outcome nobody can predict. Our Minnesota cost guide covers pricing and the Minnesota installer list covers who does the work.
Minnesota Solar FAQs
Yes, and with unusually wide coverage. Minnesota Statutes section 216B.164 requires every electric utility in the state, including rural cooperatives and municipal utilities, to offer it for systems under 40 kW. Balances are reconciled monthly at the average retail utility energy rate, and the customer may take a bill credit or payment. Minnesota residential power runs around 15.14¢ per kilowatt-hour.
Not yet, and it is not law. Senate File 4504 would remove net metering for systems in cooperative and municipal territories applying to interconnect after December 31, 2026, replacing it with avoided cost. It passed the Senate 35 to 32 on May 12, 2026 and was referred to the House Energy Finance and Policy Committee the same day. As of August 17, 2026 it has not passed the House and has not been signed.
No. Existing systems in cooperative and municipal territory would keep their terms, and systems in investor-owned territory such as Xcel Energy and Minnesota Power are outside the proposal entirely, whether existing or new. The date in the bill is an application date, which is why filing an interconnection application before the end of 2026 is worth considering if you are on a co-op or city utility.
No. Minnesota offers a sales tax exemption on solar equipment, currently worth 6.875% off the invoice, and a property tax exemption so the system’s added value is excluded from your assessment. Neither is an income tax credit. Xcel Energy customers can also apply for Solar*Rewards, a performance payment of $0.03 per kilowatt-hour for 10 years.
It is an Xcel Energy program, so it is unavailable on any other utility. Xcel pays $0.03 per kilowatt-hour your system generates for 10 years. Funding is first come, first served against an annual budget that does not carry over to the following year, which means the date your application lands matters more than the date your panels go up.
If you are on a co-op, the application date is the thing to move on. Enter your ZIP code to see what Minnesota installers are quoting.
File before the date if you are on a co-op
References & Research Sources
EcoGen America reviewed Minnesota Statutes 216B.164 and 272.02, the live status record for Senate File 4504, Xcel Solar*Rewards program terms, federal energy data, and IRS guidance for this page. Legislative status is stated as of August 20, 2026 and will change. Sources accessed between June 10 and August 20, 2026.
- Minnesota Legislature. Minnesota Statutes section 216B.164. The net metering obligation on every electric utility including cooperatives and municipals, the 40 kW ceiling, monthly reconciliation, and the customer’s choice of bill credit or payment at the average retail utility energy rate. Accessed August 20, 2026.
- Minnesota Legislature. Status record for Senate File 4504. Introduced March 17, 2026; Senate passage 35 to 32 on May 12, 2026; referred to the House Energy Finance and Policy Committee the same day, with no House passage and no signature as of August 20, 2026. Accessed August 20, 2026.
- Minnesota Legislature. Minnesota Statutes 272.02 and the sales tax exemption provisions. The property tax exclusion and the sales tax exemption on solar energy equipment. Accessed August 20, 2026.
- Xcel Energy. Solar*Rewards program terms. The $0.03 per kilowatt-hour payment over 10 years and its first come, first served annual budget. Accessed August 20, 2026.
- U.S. Energy Information Administration (EIA). Electric Power Monthly. The Minnesota statewide average residential price. Accessed August 20, 2026.
- Internal Revenue Service (IRS). One, Big, Beautiful Bill Provisions. Guidance on the Public Law 119-21 termination of the Section 25D residential credit for systems whose installation is completed after December 31, 2025. Accessed August 20, 2026.
