Amended in Assembly July 15, 2015

Amended in Assembly March 16, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 585

Introduced by Assembly Member Melendez

February 24, 2015

An act to add and repeal Section 17053.37 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 585, as amended, Melendez. Outdoor Water Efficiency Act of 2015: personal income tax credits: outdoor water efficiency.

The Personal Income Tax Law allows various credits against the taxes imposed by that law.

This bill, for taxable years beginning on or after January 1, begin delete 2015, end delete begin insert 2016, end insert and before January 1, 2021, begin delete or an earlier specified date, end delete would allow a credit equal to 25% of the amount paid or incurred by a qualified taxpayer for water-efficiency begin delete improvements made to outdoor landscapes end delete begin insert improvements, as defined, end insert on qualified real property in this state, not to exceed $2,500 per taxable year, as specified. begin insert The bill would limit the cumulative amount of the credit to $2,500 for each qualified real property for all taxable years. The bill would require a qualified taxpayer to obtain and retain a certification of the water-efficiency improvements from the appropriate regional or local water agency after completion of the improvements and to provide a copy of this certification to the Franchise Tax Board upon request. end insert

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) The 2014 water year, ending on September 30, was the third
driest based on the 119-year long statewide precipitation record.

(b) Temperatures in the first nine months of 2014 were begin delete record
breaking-4.1 end delete begin insert a record end insert begin insert -breaking 4.1 end insert degrees above the 20th century
average across the state.

(c) Responding to these unprecedented dry and hot conditions,
the United States Drought Monitor classified more than 80 percent
of California in an “extreme” drought condition, with 58 percent
of California in an “exceptional” drought, the highest condition.

(d) On January 17, 2014, the Governor called upon retail water
providers throughout California to reduce residential per capita
water use by 20 percent as compared to 2013 levels.

(e) Outdoor water use accounts for the highest percentage of
regional water use.

(f) Landscape design, installation, maintenance, and
management can and should be water efficient. The use of
water-efficient landscapes contributes to the state’s efforts to
increase the reliability of its water supplies.

(g) Municipalities and local water agencies are tasked with
enforcing water conservation ordinances to eliminate water waste
and restrict outdoor water use.

(h) It is the intent of the Legislature to provide an income tax
credit for the purchase of outdoor water use efficiency
improvements during the exceptional drought that California is
facing.

SEC. 2.  

Section 17053.37 is added to the Revenue and Taxation
Code, to read:

17053.37.  

(a) For each taxable year beginning on or after
January 1, begin delete 2015, end delete begin insert 2016, end insert and before January 1, 2021, there shall be
allowed as a credit against the “net tax,” as defined in Section
17039, an amount equal to 25 percent of the amount paid or
incurred during the taxable year by a qualified taxpayer for
water-efficiency improvements for outdoor landscapes on qualified
real property in this begin delete state, not end delete begin insert state. end insert

begin insert (b) end insert begin insert   end insert begin insert The credit shall not end insert exceed two thousand five hundred dollars
($2,500) per taxable begin delete year. end delete begin insert year for each qualified real property.
For each qualified real property, the credit allowed under this
section shall not cumulatively exceed two thousand five hundred
dollars ($2,500) for all taxable years. end insert

begin delete

(b)

end delete

begin insert (c) end insert  For the purposes of this section, the following definitions
shall apply:

begin delete

(1) “Multifamily residential real property” means any real
property that is improved with, or consisting of, a building
containing more than one unit that is intended for human habitation,
or any mixed residential-commercial buildings or portions thereof
that are intended for human habitation. Multifamily residential
real property includes residential hotels but does not include hotels
and motels that are not residential hotels.

end delete begin delete

(2)

end delete

begin insert (1) end insert  “Qualified real property” means begin delete either multifamily
residential real property or single-family real property. end delete begin insert a principal
residence of the qualified taxpayer, within the meaning of Section
121 of the Internal Revenue Code, relating to exclusion of gain
from sale of principal residence, in this state. end insert

begin delete

(3)

end delete

begin insert (2) end insert  “Qualified taxpayer” means the owner of any qualified real
property.

begin delete

(4) “Single-family residential real property” means any real
property that is improved with, or consisting of, a building
containing not more than one unit that is intended for human
habitation.

end delete begin delete

(5) “Water efficiency

end delete

begin insert (3) end insert begin insert   end insert begin insert (A) end insert begin insert   end insert begin insert “Water-efficiency end insert improvements” means expenditures
begin insert voluntarily end insert paid or incurred by the qualified taxpayer begin delete to meet the
requirements of end delete begin insert that are certified by the appropriate regional or
local water agency as water-efficient improvements compatible
with end insert any of the following:

begin delete

(A)

end delete

begin insert (i) end insert  A local water-efficient landscape ordinance begin insert of a regional or
local water agency end insert adopted or in effect begin delete pursuant to subdivision
(c) of Section 65595 of the Government Code. end delete begin insert at the time the
improvements are made. end insert

begin delete

(B) A local landscape regulation or restriction on the use of
water adopted pursuant to Section 353 or Section 375 of the Water
Code.

end delete begin insert

(ii) The state water-efficient landscape statutes adopted or in
effect at the time the improvements are made.

end insert begin delete

(C)

end delete

begin insert (iii) end insert  A water-efficient landscape program that is developed and
implemented by a regional or local water agency for the specific
purpose of reducing water use.

begin insert

(B) “Water-efficiency improvements” do not include
improvements performed to bring landscaping into mandatory
compliance with a local water-efficient landscape ordinance or
state law.

end insert begin insert

(d) A qualified taxpayer shall:

end insert begin insert

(A) Obtain certification of the water-efficiency improvements
from the appropriate regional or local water agency specified in
paragraph (3) of subdivision (c) after completion of those
improvements.

end insert begin insert

(B) Retain a copy of the certification specified in subparagraph
(A) and, upon request, provide a copy of that certification to the
Franchise Tax Board.

end insert begin insert

(e) This credit shall be in lieu of any other credit or deduction
that the qualified taxpayer may otherwise claim pursuant to this
part with respect to the amounts paid or incurred for
water-efficiency improvements for outdoor landscapes on qualified
real property in this state.

end insert begin insert

(f) In the case where the credit allowed under this section
exceeds the “net tax,” as defined by Section 17039, for a taxable
year, the excess credit may be carried over to reduce the “net tax”
in the following taxable year, and succeeding three taxable years,
if necessary, until the credit has been exhausted.

end insert begin delete

(c)

end delete

begin insert (g) end insert  Section 41 does not apply to the credit allowed by this
section.

begin delete

(d)  This section shall remain in effect until December 1, 2021,
unless the drought state of emergency declared by the Governor
on January 17, 2014, is terminated before that date, in accordance
with Section 8629 of the Government Code. In that event, this
section shall remain in effect only until midnight on the first day
of the first calendar quarter commencing more than 60 days after
the date of the termination of the state of emergency, or until
December 1, 2021, whichever is earlier, and credits shall be
allowed only for that portion of the taxable year before the date
this section becomes inoperative.

end delete begin delete

(e) This section is repealed on December 1, 2021.

end delete begin insert

(h) This section shall remain in effect until December 1, 2021,
and as of that date is repealed.

end insert

SEC. 3.  

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.