BILL ANALYSIS Ó SB 355 Page 1 Date of Hearing: August 6, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 355 (Beall) - As Amended: August 4, 2014 Policy Committee: Revenue & Taxation Vote: 7-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill extends the Natural Heritage Preservation (NHP) tax credit program from June 30, 2015 to June 30, 2020, and extends the period of time for which a donor of a land contribution made on or after January 1, 2015 may carry forward any unused credit to reduce future personal income or corporation tax from 8 to 15 years. FISCAL EFFECT 1)Minor and absorbable administration costs to the Wildlife Conservation Board (WCB) and Franchise Tax Board (FTB). 2)Estimated GF revenue decreases of $450,000, $1.3 million, and $2.8 million in FY 2014-15, FY 2015-16, and FY 2016-17, respectively, reimbursed from the NHP Tax Credit Reimbursement Account (see Comment 2 below). The reimbursement results in increased utilization of bond funds or private donations to offset any current GF revenue decrease, however the use of bond funds will result in marginal increased debt service costs and reduced interest revenue. COMMENTS 1) Purpose. According to the author, no property owners have utilized the NHP tax credit program since 2006, in part because most land owners do not have sufficient state tax liability to make the tax credit attractive. The author asserts this bill would give donors an additional seven years to carry forward the tax credit, helping ensure a greater amount of the total credit is available to incentivize SB 355 Page 2 donations. 2) Natural Heritage Preservation Tax Credit Program. According to the author, the NHP tax credit program has protected 8,006 acres of land since its inception in 2000. Under the program, the state acquires the donated land at 55% of fair market value. Total donations under the program to date represent a net savings to the state of approximately $40 million compared to acquisition at full fair market value. Upon approval from the WCB, a donor may contribute property that meets the qualifying criteria to a state agency, local government, or designated nonprofit organization. The donor receives a nonrefundable tax credit equal to 55% of the fair market value of the contribution, any unused portion of which currently may be carried forward for up to eight years. The value of any decrease in revenue to the General Fund resulting from the issuance of an NHP tax credit is reimbursed by the WCB or local agency through the NHP Tax Credit Reimbursement Account. Current law authorizes the WCB to direct bond funds from any of the following for reimbursement of NHP credits: the California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 (Proposition 40); the Water Security, Clean Drinking Water, Coastal and Beach Protection Act of 2002 (Proposition 50); and the Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 (Proposition 84), among other sources. The WCB must reimburse the General Fund within 60 days of the FTB's notification to WCB that a taxpayer has claimed an NHP tax credit. 3) Modest Change. This bill does not change the core provisions of the NHP tax credit program, but instead allows donors to carry forward any unused tax credits issued under the program for an additional seven years, potentially leading to greater utilization of the incentive and encouraging land owners to donate additional properties. As mentioned above, no property owners have contributed land under the program since 2006. WCB indicates it is currently in contact with three land owners who are considering a contribution under the program, and the revenue estimates above reflect the potential donation of those projects. It remains unclear, however, whether the additional tax credit SB 355 Page 3 carry forward period will make those potential contributions more attractive. Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081