Amended in Assembly May 21, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 603

Introduced by Assembly Member Salas

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(Coauthors: Assembly Members Chu and Lackey)

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(Coauthors: Senators Galgiani and Vidak)

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February 24, 2015

An act to add begin insert and repeal end insert Sections 17053.98 and 23698 begin delete to end delete begin insert of end insert the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 603, as amended, Salas. Income taxes: begin delete turf removal tax credit. end delete begin insert Every Drop Counts Tax Credit. end insert

The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those begin delete laws, including a credit for an increase in qualified full-time employees of a qualified employer. end delete begin insert laws. end insert

This begin delete bill would, end delete begin insert bill, end insert under both laws, for taxable years beginning on and after January 1, begin delete 2015, end delete begin insert 2016, and before January 1, 2021, or an earlier date in the event of a specified occurrence, would end insert allow a credit to a taxpayer participating in a lawn replacement begin insert rebate end insert program, as defined, in an amount equal to begin delete $2 per square foot of end delete begin insert 25% of the costs paid or incurred by the taxpayer to replace end insert conventional lawn begin delete removed from end delete begin insert on end insert the begin insert qualified end insert taxpayer’s begin delete property. end delete begin insert property during that taxable year, not to exceed $1,500, as specified. end insert The bill would make findings and declarations in this regard.

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) California has been experiencing more frequent and severe
droughts and is currently enduring its worst drought in 200 years.

(b) It is estimated that landscaping accounts for 60 percent of
all water consumed by residential customers. California lawns
cover more than 300,000 acres and consume more than 1.5 million
acre-feet of water per year.

(c) Californians have already begun to minimize lawn watering
by replacing conventional lawns with water-saving and
drought-resistant plants or artificial grass. These landscaping
alternatives are dependable tools for water conservation.

(d) In light of severe drought, California has an interest in
encouraging consumers to decrease water usage. Establishing a
state tax credit for the removal and replacement of conventional
grass landscapes will incentivize water conservation.

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(e) This measure shall be known, and may be cited, as the Every
Drop Counts Tax Credit.

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SEC. 2.  

Section 17053.98 is added to the Revenue and Taxation
Code, to read:

17053.98.  

(a)  begin insert (1) end insert begin insert   end insert For each taxable year beginning on or after
January 1, begin delete 2015, end delete begin insert 2016, and before January 1, 2021, end insert there shall be
allowed a credit against the “net tax,” as defined by Section 17039,
to a qualified taxpayer in an amount equal to begin delete two dollars ($2) per
square foot of end delete begin insert 25 percent of the qualified costs paid or incurred
by the qualified taxpayer to replace end insert conventional lawn begin delete removed
from end delete begin insert on end insert the qualified taxpayer’s begin delete property. end delete begin insert property during the
taxable year. The amount of credit allowed for a taxable year shall
not exceed one thousand five hundred dollars ($1,500). end insert

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(2) Notwithstanding paragraph (1), if this section is repealed
pursuant to paragraph (2) of subdivision (h), the credit shall be
allowed only for the taxable year that began on or before the date
upon which the state of emergency is terminated.

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(b) For the purposes of this section, the following definitions
shall apply:

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(1) “Conventional lawn” means living, maintained grass turf,
or as otherwise defined by the lawn replacement rebate program.

end insert begin delete

(1)

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begin insert (2) end insert   “Lawn replacement begin insert rebate end insert program” means a begin delete local water
agency end delete program that offers incentives to customers encouraging
the replacement of conventional lawns with artificial lawns,
drought-resistant plants, or other water-efficient landscaping.

begin insert

(3) “Local water agency” means a public entity, as that term
is defined in Section 514 of the Water Code, that provides water
service, as that term is defined in Section 515 of the Water Code,
and offers a lawn replacement rebate program.

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(2)

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begin insert (4) end insert  “Qualified taxpayer” means a person participating in a lawn
replacement begin insert rebate end insert program offered by a local water agency.

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(5) “Qualified costs” means the amount identified as costs
eligible for a rebate pursuant to a lawn replacement rebate
program in excess of the amount of the rebate actually received
from the local water agency.

end insert begin insert

(6) “State of emergency” means the state of emergency
proclaimed by the Governor on January 17, 2014, relating to
drought conditions.

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(c) A credit shall only be allowed under this section as follows:

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(1) The credit shall not be allowed for the removal of
conventional lawn from a property for which a qualified taxpayer
has been allowed the credit for a prior taxable year.

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(2) The credit shall be allowed only for that amount that exceeds
the amount of rebate paid to the qualified taxpayer by a local water
agency for the replacement of conventional lawn with artificial
lawn, drought-resistant plants, or other water-efficient
landscaping.

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(d) In the case where the credit allowed by this section exceeds
the “net tax,” the excess may be carried over to reduce the “net
tax” in the following year, and the succeeding four years, if
necessary, until the credit is exhausted.

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(e) Any deduction otherwise allowed under this section for any
amount paid or incurred by a taxpayer upon which the credit is
based, shall be reduced by the amount of the credit allowed under
this section.

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(f) (1) To the extent that a rebate is received in a taxable year
subsequent to the taxable year for which the credit under this
section was allowed, the excess credit amount shall be recaptured
in the taxable year in which the rebate was received. For the
purposes of this paragraph, the excess credit amount equals the
difference between the amount of credit allowed and the amount
of credit that would have been allowed if the rebate had been
received in the taxable year in which the credit was allowed. The
excess credit amount shall be added to the tax otherwise owed by
the qualified taxpayer for the taxable year in which the rebate was
received.

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(2) Any recapture pursuant to this subdivision, in whole or in
part, shall be treated as a mathematical error appearing on the
return. Any amount of tax resulting from the recapture shall be
assessed by the Franchise Tax Board, in the same manner as
provided by Section 19051.

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(c)

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begin insert (g) end insert  The credit is allowed by this section notwithstanding Section
41.

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

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(2) Notwithstanding paragraph (1), if the state of emergency is
terminated pursuant to Section 8629 of the Government Code prior
to the date specified in paragraph (1), this section shall remain in
effect only until December 1 of the year following the year in which
the state of emergency is terminated, and as of that date is
repealed.

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SEC. 3.  

Section 23698 is added to the Revenue and Taxation
Code, to read:

23698.  

(a)  begin insert (1) end insert begin insert   end insert For each taxable year beginning on or after
January 1, begin delete 2015, end delete begin insert 2016, and before January 1, 2021, end insert there shall be
allowed a credit against the “tax,” as defined by Section 23036,
to a qualified taxpayer in an amount equal to begin delete two dollars ($2) per
square foot of end delete begin insert 25 percent of the qualified costs paid or incurred
by the qualified taxpayer to replace end insert conventional lawn begin delete removed
from end delete begin insert on end insert the qualified taxpayer’s begin delete property. end delete begin insert property during the
taxable year. The amount of credit allowed for a taxable year shall
not exceed one thousand five hundred dollars ($1,500). end insert

begin insert

(2) Notwithstanding paragraph (1), if this section is repealed
pursuant to paragraph (2) of subdivision (h), the credit shall be
allowed only for the taxable year that began on or before the date
upon which the state of emergency is terminated.

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(b) For the purposes of this section, the following definitions
shall apply:

begin insert

(1) “Conventional lawn” means living, maintained grass turf
or as otherwise defined by the lawn replacement rebate program.

end insert begin delete

(1)

end delete

begin insert (2) end insert  “Lawn replacement begin insert rebate end insert program” means a begin delete local water
agency end delete program that offers incentives to customers encouraging
the replacement of conventional lawns with artificial lawns,
drought-resistant plants, or other water-efficient landscaping.

begin insert

(3) “Local water agency” means a public entity, as that term
is defined in Section 514 of the Water Code, that provides water
service, as that term is defined in Section 515 of the Water Code,
and offers a lawn replacement rebate program.

end insert begin delete

(2)

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begin insert (4) end insert  “Qualified taxpayer” means a person participating in a lawn
replacement begin insert rebate end insert program offered by a local water agency.

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(5) “Qualified costs” means the amount identified as costs
eligible for a rebate pursuant to a lawn replacement rebate
program in excess of the amount of the rebate actually received
from the local water agency.

end insert begin insert

(6) “State of emergency” means the state of emergency
proclaimed by the Governor on January 17, 2014, relating to
drought conditions.

end insert begin insert

(c) A credit shall only be allowed under this section as follows:

end insert begin insert

(1) The credit shall not be allowed for the removal of
conventional lawn from a property for which a qualified taxpayer
has been allowed the credit for a prior taxable year.

end insert begin insert

(2) The credit shall be allowed only for that amount that exceeds
the amount of rebate paid to the qualified taxpayer by a local water
agency for the replacement of conventional lawn with artificial
lawn, drought-resistant plants, or other water-efficient
landscaping.

end insert begin insert

(d) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and the succeeding four years, if necessary,
until the credit is exhausted.

end insert begin insert

(e) Any deduction otherwise allowed under this section for any
amount paid or incurred by a taxpayer upon which the credit is
based, shall be reduced by the amount of the credit allowed under
this section.

end insert begin insert

(f) (1) To the extent that a rebate is received in a taxable year
subsequent to the taxable year for which the credit under this
section was allowed, the excess credit amount shall be recaptured
in the taxable year in which the rebate was received. For the
purposes of this paragraph, the excess credit amount equals the
difference between the amount of credit allowed and the amount
of credit that would have been allowed if the rebate had been
received in the taxable year in which the credit was allowed. The
excess credit amount shall be added to the tax otherwise owed by
the qualified taxpayer for the taxable year in which the rebate was
received.

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(2) Any recapture pursuant to this subdivision, in whole or in
part, shall be treated as a mathematical error appearing on the
return. Any amount of tax resulting from the recapture shall be
assessed by the Franchise Tax Board, in the same manner as
provided by Section 19051.

end insert begin delete

(c)

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begin insert (g) end insert  The credit is allowed by this section notwithstanding Section
41.

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

end insert begin insert

(2) Notwithstanding paragraph (1), if the state of emergency is
terminated pursuant to Section 8629 of the Government Code prior
to the date specified in paragraph (1), this section shall remain in
effect only until December 1 of the year following the year in which
the state of emergency is terminated, and as of that date is
repealed.

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SEC. 4.  

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