BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 355 (Beall) - Conservation: Tax Credits
Amended: May 7, 2013 Policy Vote: G&F 7-0, NR&W 8-1
Urgency: No Mandate: No
Hearing Date: May 20, 2013 Consultant: Robert Ingenito
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 355 would allow taxpayers to transfer their
Natural Heritage Preservation Tax Credit to an unrelated
taxpayer upon approval and certification by the Wildlife
Conservation Board (WCB).
Fiscal Impact: The Franchise Tax Board (FTB) estimates that this
measure would result in revenue losses (General Fund) of
$700,000 million in 2013-14, $3.4 million in 2014-15, and $4.5
million in 2015-16. FTB indicates that the bill would not
significantly impact its own costs. Costs to WCB are unknown,
but likely minor.
Background: The Legislature enacted the Natural Heritage
Preservation Tax Credit to compensate landowners who donate land
to the state for preservation purposes. To qualify for the
credit, landowners must apply to WCB for approval to donate a
parcel of property and for certification that the property meets
certain requirements. If WCB approves the contribution, the
landowner may claim a tax credit equal to 55 percent of the
property's fair market value, and carryover the credit for eight
years.
After its enactment in 2000, the Legislature suspended the
program for budgetary reasons, but also expanded and extended
the Credit program. The Legislature suspended the credit for
the 2002 and 2003 taxable years, and again for the 2004 and 2005
taxable years unless WCB reimbursed the General Fund for the
credit's costs. The Legislature then allowed bond funds to
reimburse the General Fund for the tax credit's costs. WCB
awarded $48.6 million in credits through 2006-07, but taxpayers
only claimed $23.4 million, for an average of $4 million per
year. In 2010, the Legislature again reauthorized the credit
until 2015, but hasn't yet awarded any credits.
SB 355 (Beall)
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Generally, the State doesn't permit taxpayers to buy and sell
credits against its taxes; however, the motion picture
production tax credit allows taxpayers that make independent
films to sell tax credits. The California Tax Credit Allocation
Committee allocates Low Income Housing Tax Credit to housing
developers, who then form partnership agreements with private
investors who provide capital contributions necessary to build a
housing project in exchange for tax credits.
Proposed Law: SB 355 would allow taxpayers approved for Natural
Heritage Preservation Tax Credits to transfer the entire tax
credit or parts of it to an unrelated taxpayer.
Taxpayers must indicate to WCB interest in transferring the
credit when applying. WCB must maintain a list of parties
interested in acquiring a credit, and shall collect all required
information necessary to transfer the credit. WCB shall match
projects with donors, but all parties must agree to a transfer.
WCB shall establish procedures as needed to facilitate
transfers, including escrow accounts, and shall supply the
Franchise Tax Board (FTB) with a certificate evidencing the
transfer.
Staff Comments: This program acts as an economic incentive that
allows property owners to donate land or conservation easements
to the state to preserve fish and wildlife habitat, recreational
lands, open space, and agricultural and cultural lands. The
advantage to the donor of participating in the NHPTC program
are: the 55 percent state tax credit that can be carried forward
to cover tax liabilities for up to eight years; a federal tax
credit for donating lands for these purposes; and the ability to
avoid paying federal capital gains taxes on the value of the
donated land. The program also allows a donee (state or local
agency) to acquire conservation lands at 55% of the fair market
value.
To the extent that taxpayers are transferring tax credits
because they lack sufficient tax liability to use them, the
State would lose money that it otherwise would have received.
SB 355 (Beall)
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