Conference Agenda

This paper studies how formula apportionment (FA) and firm characteristics shape the local business tax revenues that municipalities in Germany derive from wind turbines. Using turbine-level data, we compute the annual business tax base attributable to each wind turbine for 2000--2020 and estimate the share taxed in the turbine municipality with conditional two-way fixed-effects regressions. We decompose wind-power-related tax bases by operators' headquarters location and legal form, and we exploit two FA reforms in a difference-in-differences design. Under the standard payroll-based FA rule, the allocation of wind-power-related tax bases was driven by operators’ headquarters and thus favors operator municipalities over turbine municipalities. A wind-power-specific modification introduced in 2009 temporarily increased the on-site taxed share of the tax base attributable to turbines operated by off-site firms. A second reform in 2014 restricted eligibility to firms exclusively operating wind turbines and largely reversed these gains. On-site taxation is substantially higher when operators are headquartered locally and when they are organized as partnerships, consistent with heterogeneity in tax-planning opportunities. The results highlight that the fiscal benefits of capital-intensive, low-employment establishments hinge on both operator choices regarding headquarters location and legal form as well as apportionment design, with implications for renewables and other emerging infrastructures.