BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SJR 10| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SJR 10 Author: Stone (R), et al. Amended: 9/10/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/24/15 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley SENATE FLOOR: 38-0, 8/20/15 AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak, Wieckowski, Wolk NO VOTE RECORDED: Hall, Nguyen ASSEMBLY FLOOR: 77-1, 9/10/15 - See last page for vote SUBJECT: Federal Investment Tax Credit: solar energy SOURCE: Author DIGEST: This resolution requests Congress of the United States to take immediate action to extend two renewable energy tax credits. Assembly Amendments add coauthors and insert a word. ANALYSIS: Existing federal law: SJR 10 Page 2 1)Allows taxpayers to claim a credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells placed in service during the taxable year, established by the Energy Policy Act of 2005 (Internal Revenue Code §25D): a) Allows, additionally, taxpayers claim the credit for small wind-energy systems and geothermal heat pumps, effective January 1, 2008 under the Energy Improvement and Extension Act of 2008. b) Provides that the credit is equal to 30% of qualified expenditures for a system that serves "a dwelling unit located in the United States that is owned and used as a residence by the taxpayer." c) Allows the taxpayer to carry over the excess of any credit to the succeeding six taxable years. d) Repeals the credit on January 1, 2017. 2)Enacts an investment tax credit for 30% of the basis of a qualified energy property owned by the taxpayer placed in service during the taxable year (Internal Revenue Code §48): a) Allows the credit for qualified energy property, which includes fuel cells, microturbines, geothermal energy, small wind energy, combined heat and power. b) Additionally allows the credit equipment that uses solar energy to: i) Generate heat, ii) Heat, cool, or provide hot water use in a structure, iii) Provide solar process heat, except for swimming pools, or iv) Illuminate the inside of a structure using fiberoptic distributed sunlight. c) Reduces the percentage from 30% to 10% on January 1, 2017. SJR 10 Page 3 Existing state law allows various income tax credits, deductions, sales and use tax exemptions to provide incentives to compensate taxpayers that incur certain expenses, such as child adoption, or to influence behavior, including business practices and decisions, such as research and development credits. This resolution: 1)Requests the Congress of the United States to take immediate action to extend the federal investment tax credit in Section 48 and 25D of the Internal Revenue Code. 2)Makes several findings and declarations supporting its purposes. Comments The effective period of the two federal tax credits that SJR 10 urges Congress to extend coincide with a rapid increase in solar energy generation: solar energy installations increased than 1,600% since the credit was implemented in 2006. Tax credit supporters state that industry employment has grown by 86% in the last four years, and creates jobs at a rate nearly 20 times higher than employment growth in the overall economy. Additionally, public investment in solar energy has reduced its costs, thereby allowing more widespread deployment. However, the renewable energy industry has matured significantly since Congress enacted the credit, and will likely continue to grow without a tax credit subsidy, which increases the current federal budget deficit by approximately $1.7 billion annually, according to the Joint Committee on Taxation. Allowing the credit to phase out under existing law resembles the structure of California's signature solar energy program, the California Solar Initiative. Enacted by the Legislature in 2006 with the goal of supporting 2,000 megawatts of solar energy in the state, the initiative offered financial incentives to individuals that shrank over time to account for lower costs as solar technology advanced and demand increased. By 2014, the incentives had been exhausted, yet solar energy installation in California continues apace, indicating that installing solar energy makes sense without a subsidy. SJR 10 Page 4 FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified9/10/15) California Solar Energy Industries Association Environment California OPPOSITION: (Verified9/10/15) None received ARGUMENTS IN SUPPORT: According to the author, "SJR 10 is a resolution that calls on the U.S. Congress to extend the Federal Investment Tax Credit for Solar Energy. The tax credit is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016. The solar energy industry employs 54,000 Californians and is one of the nation's fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation. The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth. The loss of the investment tax credit would not only lead to significant job losses in California and beyond in 2017, but would also make solar energy less affordable to all who want to take advantage of this source of clean energy. This is a worthy tax credit, and is deserving of being extended." ASSEMBLY FLOOR: 77-1, 9/10/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, SJR 10 Page 5 Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NOES: Chávez NO VOTE RECORDED: Dahle, Obernolte Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119 9/11/15 8:50:13 **** END ****