BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 355
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          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  








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            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  








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            carry forward period will make those potential contributions  
            more attractive.


           Analysis Prepared by  :    Joel Tashjian / APPR. / (916) 319-2081