BILL NUMBER: AB 2040	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 6, 2016

INTRODUCED BY   Assembly Member Melendez

                        FEBRUARY 17, 2016

   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 2040, as amended, Melendez. Outdoor Water Efficiency Act of
2016: 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,
 2017,   2016,  and before January 1,
 2022,   2021,  would allow a credit equal
to 25% of the amount paid or incurred by a qualified taxpayer for
water-efficiency improvements, as defined, on qualified real property
in this state, as specified. 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.
    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 a
record-breaking 4.1 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) Californians can achieve water efficient landscapes by
installing a combination of drought-tolerant live plants; warm season
turf varieties, which require 25 percent less water compared to cool
season turf; soaker or drip-irrigation hoses; a moisture control for
a sprinkler or irrigation system; mulch and soil; a rain barrel or
an alternative rain and moisture collection system; a permeable
ground cover surface that allows water to reach underground basins,
aquifers, or water collection points; plant and grass seeds coated
with a water-saving surfactant; and a water saving surfactant. 

   (g) 
    (h)  Municipalities and local water agencies are tasked
with enforcing water conservation ordinances to eliminate water waste
and restrict outdoor water use. 
   (h) 
    (i)  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,  2017,   2016,  and before January 1,
 2022,   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 state.
   (b) 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.
   (c) For the purposes of this section, the following definitions
shall apply:
   (1) "Qualified real property" means 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.
   (2) "Qualified taxpayer" means the owner of any qualified real
property.
   (3) (A) "Water-efficiency improvements" means expenditures
voluntarily paid or incurred by the qualified taxpayer that are
certified by the appropriate regional or local water agency as
water-efficient improvements compatible with any of the following:
   (i) A local water-efficient landscape ordinance of a regional or
local water agency adopted or in effect at the time the improvements
are made.
   (ii) The state water-efficient landscape statutes adopted or in
effect at the time the improvements are made.
   (iii) 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.
   (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.
   (d) A qualified taxpayer shall:
   (1) 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.
   (2) Retain a copy of the certification specified in paragraph (1)
and, upon request, provide a copy of that certification to the
Franchise Tax Board.
   (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.
   (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.
   (g) Section 41 does not apply to the credit allowed by this
section.
   (h) This section shall remain in effect until December 1, 
2022,   2021,  and as of that date is repealed.
  SEC. 3.   This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.