BILL NUMBER: SBX2 75	CHAPTERED
	BILL TEXT

	CHAPTER  5
	FILED WITH SECRETARY OF STATE  OCTOBER 1, 2001
	APPROVED BY GOVERNOR  SEPTEMBER 28, 2001
	PASSED THE SENATE  SEPTEMBER 14, 2001
	PASSED THE ASSEMBLY  SEPTEMBER 14, 2001
	AMENDED IN ASSEMBLY  SEPTEMBER 5, 2001
	AMENDED IN SENATE  AUGUST 27, 2001
	AMENDED IN SENATE  AUGUST 21, 2001
	AMENDED IN SENATE  JULY 3, 2001
	AMENDED IN SENATE  JUNE 20, 2001

INTRODUCED BY   Senator Ortiz

                        MAY 17, 2001

   An act to amend Section 17073 of, and to add Section 17208.1 to,
the Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 75, Ortiz.  Income taxes:  deduction:  interest.
   The Personal Income Tax Law allows various deductions in computing
income that is subject to taxation.
   This bill would allow as a deduction the amount of interest paid
or incurred by a taxpayer on any loan or other indebtedness incurred
in acquiring and installing any energy efficient product or
equipment, as defined, installed or applied to a qualified residence
located in this state.
   This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 17073 of the Revenue and Taxation Code is
amended to read:
   17073.  (a) Section 63 of the Internal Revenue Code, relating to
taxable income defined, shall apply, except as otherwise provided.
   (b) The deduction allowed by Section 17208.1, relating to interest
on loans or financed indebtedness obtained from a publicly owned
utility for the purchase and installation of energy efficient
products or equipment, shall not be treated as a miscellaneous
itemized deduction under Section 67(a) of the Internal Revenue Code,
relating to the 2-percent floor on miscellaneous deductions.
   (c) For individuals who do not itemize deductions, the standard
deduction computed in accordance with Section 17073.5 shall be
allowed as a deduction in computing taxable income.
  SEC. 2.  Section 17208.1 is added to the Revenue and Taxation Code,
to read:
   17208.1.  (a) There shall be allowed as a deduction the amount of
interest paid or incurred by a taxpayer during the taxable year on
any loan or financed indebtedness obtained from a publicly owned
utility company for the purpose of acquiring and installing any
energy efficient product or equipment to a qualified residence
located in this state.
   (b) For purposes of this section:
   (1) "Energy efficient product or equipment" means any product or
equipment certified by a publicly owned utility company that will
improve the energy efficiency, as defined by paragraph (2) of
subdivision (a) of Section 399.4 of the Public Utilities Code, of a
qualified residence on which the product or equipment is installed or
applied.
   (2) "Energy efficient product or equipment" shall include, but not
be limited to, heating, ventilation, air-conditioning, lighting,
solar, advanced metering of energy usage, windows, insulation, zone
heating products, and weatherization systems.
   (3) "Zone heating products" mean gas room heaters certified by the
California Energy Commission or wood fueled stoves certified by the
federal Environmental Protection Agency.
   (4) "Publicly owned utility company" has the same meaning as set
forth in subdivision (d) of Section 9604 of the Public Utilities
Code.
   (5) "Qualified residence" has the same meaning as set forth in
Section 163(h)(4)(A) of the Internal Revenue Code.
   (6) "Publicly owned utility company loan or financial indebtedness"
means any amount borrowed from a publicly owned utility company to
finance the acquisition and installation of energy efficient products
and equipment installed or applied to a qualified residence located
in this state.
   (c) Any interest amount that is allowed as a deduction pursuant to
this section (and the application of Section 17072) may not
otherwise be allowed as a deduction for purposes of this part.
   (d) The publicly owned utility company shall issue a federal
income tax Form 1098, or similar form, for the purpose of notifying
the taxpayer of his or her eligibility for the deduction allowed by
this section.
   (e) The deduction allowed by this section shall be in lieu of any
credit allowed by this part for interest paid or incurred by the
taxpayer in connection with the purchase of energy efficient
equipment.
   (f) The Legislature finds and declares that many taxpayers may be
unaware that they may deduct interest paid or incurred pursuant to
this section.  The Legislature further finds that it is important to
inform taxpayers of this deduction.  Therefore, it is the intent of
the Legislature to encourage all publicly owned utility companies to
inform their customers in writing that they may deduct interest paid
or incurred pursuant to this section.  It is the further intent of
the Legislature to encourage all publicly owned utility companies
that are unable to offer customer financing to acquire or install
energy efficient products and equipment to inform their customers in
writing that interest on a home equity or home improvement loan used
to purchase energy efficient products and equipment may also be tax
deductible.
   (g) It is the intent of the Legislature to inquire with the
Internal Revenue Service as to whether the loan program administered
by the Sacramento Municipal Utility District qualifies for an
interest deduction in compliance with the Internal Revenue Code and
the regulations thereunder.
  SEC. 3.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.