BILL ANALYSIS Ó
AB 865
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Date of Hearing: May 27, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 865 (Nestande) - As Introduced: February 17, 2011
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends the "new construction" exclusion for active
solar energy systems to improvements constructed through the
2032-33 fiscal year. Specifically, this bill :
1)Provides for an automatic repeal of the exclusion on January
1, 2034.
2)Provides that, notwithstanding Revenue and Taxation Code
(R&TC) Section 2229, no appropriation is made by this bill and
the state shall not reimburse local agencies for property tax
revenues lost by them pursuant to this bill.
3)Takes effect immediately as a tax levy.
FISCAL EFFECT
The Board of Equalization estimates that this bill may reduce
property tax revenues (at the basic 1% property tax rate) by $1
million annually, beginning with fiscal year 2016-17. The
estimate also mentions that for any year in which a large-scale
solar power project is completed and qualifies for the new
construction exclusion, the revenue impact could be
substantially more for that particular year. This would result
in increased General Fund expenditures of about $400,000 to back
fill a portion of the lost property tax revenues that otherwise
would have gone to schools.
COMMENTS
1)Purpose . The author asserts California has historically been
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a leader in renewable energy development and that Investor
Owned Utilities (IOU) currently procure an average of 18% of
their energy needs through qualifying renewable energy sources
(some municipal owned utilities have a higher percentage). In
order to facilitate the development of renewable facilities,
it is important to extend this incentive to provide regulatory
certainty when renewable energy developers seek financing.
2)Support . The sponsor of this bill, SunPeak Solar LLC states
that by extending the property tax exclusion to January 1,
2034 will encourage development of solar renewable energy
projects in California. The sponsor contends that large
"solar developments require several years of planning,
permitting, development, financing, and construction, and that
many of these projects will not be ready prior to January 1,
2017, to qualify for this exclusion, which makes it even more
difficult to obtain financing for those projects.
3)Background . Existing law excludes the construction or
addition of an active solar energy system from the definition
of new construction, which means that a property owner could
install an active solar energy system on his/her property and
the installation would not trigger a reassessment of the
property. Furthermore, an active solar energy system
constructed as part of a new building is also excluded from
the definition of newly constructed.
The current sunset date of 2016 was originally chosen to
coincide with the sunset of the California Solar Initiative,
which is part of the California program with a $2.2 billion
budget and a goal of installing 1,940 MW by the end of 2016.
The existing sunset is not due to expire for another four
years, and the California Solar Initiative program will not be
re-evaluated until 2016.
4)Existing Tax Benefits for the Solar Power Industry . Both the
federal government and the State of California offer numerous
incentives for individuals to install solar energy systems,
including $2.2 billion of California Solar Initiative rebates,
net-metering (where ratepayers sell excess solar electricity
back into the grid and pay bills based on net energy usage),
accelerated depreciation for commercial purposes under federal
law, low-interest loans for solar panels on low-income
housing, the possibility of renewable energy credit sales, and
time-of-use electricity pricing.
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Furthermore, federal law allows a renewable electricity income
tax credit for the production of electricity from qualified
energy resources at qualified facilities, including solar
energy. In addition to the renewable electricity production
tax credit, a taxpayer is allowed to claim a federal tax
credit for the investment in certain property, including fuel
cell and solar property. Finally, new solar energy systems
and solar energy systems incorporated into a new building are
eligible for the exclusion from under California's property
tax laws.
5)Opposition . The California State Association of Counties and
the Regional Council of Rural Counties opposes the bill
because AB 865 fails to reimburse local agencies for the
revenue loss, thereby using county revenue to favor these
projects during times of such fiscal stress seems
ill-considered at best.
6)Relevant legislation . AB 15 x1 (Hill), introduced in the
current legislative session, would revise the definition of
"active solar energy system," and would declare legislative
intent to extend the current exclusion from property tax
reassessment to specified active solar energy systems. The
bill is pending in the Senate Governance and Finance
Committee.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081