BILL NUMBER: SB 1647 CHAPTERED 07/10/00 CHAPTER 113 FILED WITH SECRETARY OF STATE JULY 10, 2000 APPROVED BY GOVERNOR JULY 7, 2000 PASSED THE SENATE JUNE 29, 2000 PASSED THE ASSEMBLY JUNE 22, 2000 AMENDED IN ASSEMBLY JUNE 15, 2000 AMENDED IN ASSEMBLY JUNE 14, 2000 INTRODUCED BY Senator O'Connell (Coauthors: Senators Alarcon, Chesbro, Costa, Karnette, McPherson, Murray, Rainey, and Soto) (Coauthors: Assembly Members Alquist, Calderon, Cardoza, Corbett, Davis, Dutra, Gallegos, Hertzberg, Honda, Jackson, Longville, Lowenthal, Machado, Mazzoni, Nakano, Romero, Scott, Shelley, Steinberg, Strom-Martin, Thomson, Torlakson, Villaraigosa, Washington, Wayne, Wiggins, and Wildman) FEBRUARY 22, 2000 An act to add Division 28 (commencing with Section 37000) to the Public Resources Code, and to add Sections 17039.1, 17053.30, 23036.1, and 23630 to the Revenue and Taxation Code, relating to conservation, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 1647, O'Connell. Conservation. (1) Existing law provides various programs for the conservation of specified public resources. This bill would enact the Natural Heritage Preservation Tax Credit Act of 2000, pursuant to which the Wildlife Conservation Board would implement a program under which property, as defined, may be contributed to the state, any local government, as defined, or to any nonprofit organization designated by a local government, based on specified criteria, in order to provide for the protection of wildlife habitat, open space, and agricultural lands. (2) The Personal Income Tax Law and the Bank and Corporation Tax Law authorize various credits against the taxes imposed by those laws. This bill would authorize a credit against those taxes under the Personal Income Tax Law and the Bank and Corporation Tax Law in an amount equal to 55% of the fair market value of any qualified contribution, as defined, contributed during the taxable or income year pursuant to the Natural Preservation Tax Credit Act of 2000, as provided. (3) This bill would also declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Division 28 (commencing with Section 37000) is added to the Public Resources Code, to read: DIVISION 28. NATURAL HERITAGE PRESERVATION TAX CREDIT ACT OF 2000 CHAPTER 1. INTENT 37000. This division shall be known and may be cited as the "Natural Heritage Preservation Tax Credit Act of 2000." 37001. The Legislature finds and declares all of the following: (a) The continued economic development of California will be fostered and improved if conflicts over the use of natural resources can be resolved without litigation or disputes. (b) The economic development of California can be facilitated if endangered species and other forms of plants, fish, and wildlife can be protected quickly and efficiently, so that development and agricultural use can proceed on other lands. (c) Water allocation decisions could be eased if water could be provided for fish, wildlife, and aquatic and riparian habitat without objection by other water users. (d) The intent of this division is to accommodate economic development and resolve land use and water disputes in a manner beneficial to all people in California, and to the benefit of California environmental quality. (e) The further intent of this division is to foster partnerships between the public and private sectors to resolve disputes and promote economic growth and environmental quality. (f) Conservation easements protect land, keep land in private ownership and on the tax rolls, and, where appropriate, are the preferred method to protect agricultural and habitat values. (g) The value of wildlife habitat to the state is very high, especially in the case of implementing habitat conservation plans and multispecies conservation plans. (h) Habitat stewardship shall be assisted and rewarded, and it is in the state's interest to encourage landowners to perceive habitat as an asset rather than a liability. (i) It is the intent of the Legislature, in enacting this division, to provide an additional tool for the protection of wildlife habitat, open space, and agricultural lands. However, there continues to be a recognized need for additional funding sources for park, wildlife, and recreation facilities, as well as for the preservation of open space and agricultural lands. (j) It is the intent of the Legislature in enacting this division to protect wildlife habitat, open space, and agricultural lands by providing up to one hundred million dollars ($100,000,000) in tax credits for donations of qualified land. CHAPTER 2. DEFINITIONS 37002. As used in this division, the following terms have the following meanings: (a) "Board" means the Wildlife Conservation Board created pursuant to Article 2 (commencing with Section 1320) of Chapter 4 of Division 20 of the Fish and Game Code. (b) "Conservation easement" means a conservation easement, as defined by Section 815.1 of the Civil Code, that is contributed in perpetuity. (c) "Department" means any entity created by statute within the Resources Agency. (d) "Designated nonprofit organization" means a nonprofit organization qualified under Section 501(c)(3) of Title 26 of the United States Code that has as a principal purpose the conservation of land and water resources and that is designated by a local government or a department to accept property pursuant to this division in lieu of the local government or a department. In order to be eligible to receive a donation of property pursuant to this division, a nonprofit organization shall have experience in land conservation. (e) "Donee" means any of the following: (1) A department to which a donor has applied to donate qualified property. (2) A local government that has filed a joint application with a donor requesting approval of a donation of property to that local government. (3) A designated nonprofit organization. (f) "Donor" means a property owner who donates, or submits an application to donate, property pursuant to the program. (g) "Final approval" or "approval for acceptance" means the board' s approval of the granting of a tax credit for a donation of qualified property pursuant to the program. (h) "Local government" means any city, county, city and county, special district, or any district, as defined in Section 5902 or in Division 26 (commencing with Section 35100), or any joint powers authority made up of those entities or those entities and state agencies. (i) "Program" means the Natural Heritage Preservation Tax Credit Program authorized by this division. (j) "Property" means any real property, and any perpetual interest therein, including land, conservation easements, and land containing water rights, as well as water rights. (k) "Secretary" means the Secretary of the Resources Agency. CHAPTER 3. NATURAL HERITAGE PRESERVATION TAX CREDIT PROGRAM 37005. The Wildlife Conservation Board shall implement the program. The board may request staff services from any department that submits an application to the board. 37006. (a) Under the program, upon approval by the board, a donor may contribute his or her qualified property to a donee and receive a tax credit for a portion of the value of the property, as provided in Sections 17053.30 and 23630 of the Revenue and Taxation Code. (b) The board shall adopt guidelines or regulations to implement the program, including procedures for applications submitted pursuant to Chapter 4 (commencing with Section 37010) and for the evaluation of properties proposed to be contributed pursuant to the program. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code does not apply to the guidelines or regulations adopted pursuant to this section. CHAPTER 4. PROCEDURES 37010. Applications shall be submitted to the donee to which the donor proposes to contribute the property. 37011. At a minimum, each application shall contain all of the following: (a) The identification of the donor and donee. (b) A description of the property, including documentation of how the property meets the criteria for qualified property. (c) A property appraisal meeting the requirements of Section 170 of Title 26 of the United States Code, setting forth the fair market value of the property. (d) (1) A certification by the donor that the contribution satisfies the requirements for a qualified contribution, pursuant to Section 37015, and that the donor received no other valuable consideration for the donation of property eligible for the tax credit. (2) The donor shall also certify that the contribution was not, and is not, required to satisfy a condition imposed upon the donor by any lease, permit, license, certificate, or other entitlement for use issued by one or more public agencies, including, but not limited to, the mitigation of significant effects on the environment of a project pursuant to an approved environmental impact report or mitigated negative declaration required pursuant to the California Environmental Quality Act (Division 13 (commencing with Section 21000)). (e) A certification by the donor that the application discloses any known or suspected environmental conditions associated with the property. 37012. (a) Each donee shall evaluate applications submitted to it and prepare a plan for the board that sets forth the donee's priorities for acquisition of qualified property under the program. Consistent with the criteria established for the program, each donee may use its own priority lists and procedures in determining which properties or types of properties shall be given priority. (b) Each donee or the board may request that the applicant supply further information reasonably necessary to allow the donee or the board to evaluate the proposed donation. The department may accept contributions of money from any taxpayer to pay or reimburse the costs of appraisal, escrow, title, and other transaction costs associated with the contribution of any particular property or set of properties, including any environmental assessments required by the department, and the costs of preparing any necessary management plan for the property or set of properties. (c) Prior to acquiring an easement or other interest in land pursuant to this division, a public hearing shall be held by the donee, if the donee is a public agency, or by the board if the donee is a non-profit organization, in the local community. Notice shall be given by the donee to the county board of supervisors of the affected county, adjacent landowners, affected water districts, local municipalities, and other interested parties, as determined by the donee or the board. (d) When submitting a donation of qualified property to the board for final approval, the donee shall provide the board with the fair market value of the property proposed for acceptance, based on appraisals that have been reviewed and approved by the Department of General Services. 37013. The board shall provide a list to the Joint Legislative Budget Committee and the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board, of the names, taxpayer identification numbers, including taxpayer identification numbers of each partner or shareholder, as applicable, a description of the donated property, and the total amount of the tax credit approved for each donation. 37014. Assets received by a donee pursuant to this division shall not be deemed transfers pursuant to Chapter 9 (commencing with Section 2780) of Division 3 of the Fish and Game Code. Funds from the Habitat Conservation Fund, the Environmental Enhancement and Mitigation Program Fund created pursuant to Section 164.56 of the Streets and Highways Code, the State Parks and Recreation Fund, and the Wildlife Restoration Fund, may not be used to fund the tax credit authorized pursuant to this division. CHAPTER 5. CRITERIA FOR ACCEPTANCE OF PROPERTY 37015. The board shall approve only contributions of properties that meet one or more of the following criteria: (a) The property will help meet the goals of a habitat conservation plan, multispecies conservation plan, natural community conservation plan, or any other similar plan subsequently authorized by statute that is designed to benefit native species of plants and animals and development, including, but not limited to, protecting forests, old growth trees, or oak woodlands. In proposing and approving the acceptance of contributed property pursuant to this subdivision, the recovery benefits for listed species, the habitat value of the property, the value of the property as a wildlife corridor, and similar habitat-related considerations shall be the criteria on which the acceptance is based. (b) The property will provide corridors or reserves for native plants and wildlife that will help improve the recovery possibilities of listed species and increase the chances that the species will recover sufficiently to be eligible to be removed from the list, or will help avoid the listing of species pursuant to the California Endangered Species Act (Chapter 1.5 (commencing with Section 2050) of Division 3 of the Fish and Game Code) or the federal Endangered Species Act (16 U.S.C. Sec. 1531 et seq.), or protect wetlands, waterfowl habitat, or river or stream corridors, or promote the biological viability of important California species. (c) The property interest is a perpetual conservation easement over agricultural land, or is a permanent contribution of agricultural land, that is threatened by development and is located in an unincorporated area certified by the secretary to be zoned for agricultural use by the county. Property accepted pursuant to this subdivision shall be accepted pursuant to the California Farmland Conservancy Program Act established by Division 10.2 (commencing with Section 10200), pursuant to the agricultural conservation program of the Coastal Conservancy, or pursuant to the Bay Area Conservancy Program established pursuant to Chapter 4.5 (commencing with Section 31160) of Division 21. (d) (1) The property interest is a water right, or land with an associated water right, and the contribution of the property will help improve the chances of recovery of a listed species, will reduce the likelihood that any species of fish or other aquatic organism will be listed pursuant to the California Endangered Species Act (Chapter 1.5 (commencing with Section 2050) of Division 3 of the Fish and Game Code)) or the federal Endangered Species Act (16 U.S.C. Sec. 1531 et seq.), will improve the protection of listed species, or will improve the viability and health of fish species of economic importance to the state. The agency or local government receiving the water right, or land with an associated water right, shall ensure that it shall retain title to the water right, and that the water shall be used to fulfill the purposes for which the water right or land associated with a water right is being accepted. (2) Any contribution of a water right that includes a change in the point of diversion, place of use, or purpose of use may be made only if the proposed change will not injure any legal user of the water involved and is made in accordance with either Chapter 10 (commencing with Section 1700), or Chapter 10.5 (commencing with Section 1725), of Part 2 of Division 2 of the Water Code. (e) The property will be used as a park or open space or will augment public access to or enjoyment of existing regional, or local park, beach, or open-space facilities, or will preserve archaeological resources. 37016. (a) The board shall accept applications under the program only upon a determination that: (1) (A) The donation of property satisfies the requirements for a qualified contribution pursuant to Section 170 of Title 26 of the United States Code. If only a portion (either an undivided fractional interest in the entire property or one or more discrete parcels) of a proposed conveyance of property satisfies the requirements of Section 170 of Title 26 of the United States Code, or if the property is sold for less than fair market value, only that portion, or the amount representing the difference between the amount paid by the donee and the fair market value, shall be eligible for the tax credit, to the extent permitted by Section 170(h) of Title 26 of the United States Code. The board may segregate eligible and ineligible interests in property contributed pursuant to this division. The donor shall receive no other valuable consideration for the donation of property subject to the tax credit. (B) For purposes of this division, if the property accepted by the board was donated to satisfy a condition imposed upon the donor by any lease, permit, license, certificate, or other entitlement for use issued by one or more public agencies, including, but not limited to, the mitigation of significant effects on the environment of a project pursuant to an approved environmental impact report or mitigated negative declaration required pursuant to the California Environmental Quality Act (Division 13 (commencing with Section 21000)), that property shall not qualify for the credit provided in Section 17053.30 or 23630 of the Revenue and Taxation Code. (2) There has been no release or threatened release of a hazardous material on the property, unless all of the following occur: (i) A final remedy in response to the release has been approved by the Department of Toxic Substances Control pursuant to Chapter 6.5 (commencing with Section 25100) of, Chapter 6.8 (commencing with Section 25300) of, or Chapter 6.85 (commencing with Section 25396) of, Division 20 of the Health and Safety Code, or the appropriate California regional water quality control board pursuant to Chapter 6.7 (commencing with Section 25280) of Division 20 of the Health and Safety Code. (ii) The donor or donee have agreed to implement the final remedy approved pursuant to clause (i). (iii) The donor or donee have agreed to fund and have made adequate funding available to pay for the response action, as defined by Section 25323.3 of the Health and Safety Code. (b) Notwithstanding paragraph (2) of subdivision (a), a donation of property containing hazardous materials may be accepted under the program without satisfying the requirements of paragraph (2) of subdivision (a) if the department that is the donee determines, based on written findings from the Department of Toxic Substances Control and the California regional water quality control board with jurisdiction over the property, that the hazardous materials present will pose no substantial risk to human health or the environment and no substantial risk of liability on the donee under the conditions under which the property will be used. The Department of Toxic Substances Control and the California regional water quality control board with jurisdiction over the property shall carry out their normal due diligence when developing the written findings that will be the basis for the department's or regional board's, whichever is applicable, written determination regarding the presence and risk of toxic materials on the property. As used in this subdivision, "hazardous materials" has the same meaning as contained in subdivision (d) of Section 25260 of the Health and Safety Code. CHAPTER 6. MISCELLANEOUS 37020. (a) Nothing in this division authorizes or increases the authority of any state or local agency to use eminent domain to acquire private property. (b) Nothing in this division diminishes existing land or water rights held by easement holders in any property proposed for donation. 37021. (a) If any property approved for acceptance pursuant to this division is later transferred by the donee, either the use of the property shall be restricted by deed to the conservation purposes for which the property was contributed pursuant to the program or the proceeds of the sale shall be used by the donee that accepted the property to acquire land in California of equal or greater value and comparable public resources values. The land acquired shall meet the criteria of Section 37015. Nothing in this division prohibits the transfer of donated property to a nonprofit organization that is qualified to manage the property for the purposes intended by this division, if the terms of this section are met. Any local government or nonprofit organization seeking to sell land pursuant to this subdivision shall first obtain the approval of the board that is the donee. (b) Other than as provided by subdivision (a), property accepted pursuant to this division shall only be used for purposes consistent with Section 37015. (c) (1) If any unauthorized use is made of the property after the property is donated to a local government or nonprofit organization pursuant to this program, the local government or nonprofit organization shall pay to the state the greater of the following: (A) The fair market value of the property based on appraisals when finally accepted by the board. (B) The fair market value of the property based on appraisals at the time of and based on the unauthorized use of the property. (2) The department that is the donee may seek injunctive relief to prevent the unauthorized use of the property, or may assume ownership or management of the property to assure that it is used in the manner originally authorized. (d) The board shall develop a process to monitor the uses of any land that a local government or nonprofit organization receives pursuant to this division in order to ensure those uses are in conformance with the purposes for which the property is accepted. 37022. (a) No more than a total of one hundred million dollars ($100,000,000) in tax credits may be awarded pursuant to this division. (b) Tax credits may be awarded pursuant to this division in the fiscal years 2000-01, 2001-02, 2002-03, 2003-04, and 2004-05. No tax credits may be awarded subsequent to fiscal year 2004-05 without further statutory authorization. SEC. 2. Section 17039.1 is added to the Revenue and Taxation Code, to read: 17039.1. Notwithstanding Section 17039 or any other provision in this part to the contrary, the credit allowed by Section 17053.30 (relating to natural heritage) may reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, but only after allowance of the credit allowed by Section 17063. SEC. 3. Section 17053.30 is added to the Revenue and Taxation Code, to read: 17053.30. (a) There shall be allowed as a credit against the "net tax," as defined in Section 17039, an amount equal to 55 percent of the fair market value of any qualified contribution made on or after January 1, 2000, and prior to December 31, 2005, by the taxpayer during the taxable year to the state, any local government, or any designated nonprofit organization, pursuant to Division 28 (commencing with Section 37000) of the Public Resources Code. (b) For purposes of this section, "qualified contribution" means a contribution of property, as defined in Section 37002 of the Public Resources Code, that has been approved for acceptance by the Wildlife Conservation Board pursuant to Division 28 (commencing with Section 37000) of the Public Resources Code. (c) In the case of any passthrough entity, the fair market value of any qualified contribution approved for acceptance under Division 28 (commencing with Section 37000) of the Public Resources Code shall be passed through to the partners or shareholders of the passthrough entity in accordance with their interest in the passthrough entity as of the date of the qualified contribution. For purposes of this subdivision, the term "passthrough entity" means any partnership, S corporation, or limited liability company treated as a partnership. (d) If 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 seven years if necessary, until the credit is exhausted. (e) This credit shall be in lieu of any other credit or deduction which the taxpayer may otherwise claim pursuant to this part with respect to the property or any interest therein that is contributed. SEC. 4. Section 23036.1 is added to the Revenue and Taxation Code, to read: 23036.1. Notwithstanding Section 23036 or any other provision in this part to the contrary, the credit allowed by Section 23630 (relating to natural heritage) may reduce the "tax" below the tentative minimum tax, as defined by paragraph (1) of subdivision (a) of Section 23455, but only after allowance of the credit allowed by Section 23453. SEC. 5. Section 23630 is added to the Revenue and Taxation Code, to read: 23630. (a) There shall be allowed as a credit against the "tax," as defined in Section 23036, an amount equal to 55 percent of the fair market value of any qualified contribution made on or after January 1, 2000, and prior to December 31, 2005, by the taxpayer during the income year to the state, any local government, or any designated nonprofit organization, pursuant to Division 28 (commencing with Section 37000) of the Public Resources Code. (b) For purposes of this section, "qualified contribution" means a contribution of property, as defined in Section 37002 of the Public Resources Code, that has been approved for acceptance by the Wildlife Conservation Board pursuant to Division 28 (commencing with Section 37000) of the Public Resources Code. (c) In the case of any passthrough entity, the fair market value of any qualified contribution approved for acceptance under Division 28 (commencing with Section 37000) of the Public Resources Code shall be passed through to the partners or shareholders of the passthrough entity in accordance with their interest in the passthrough entity as of the date of the qualified contribution. For purposes of this subdivision, the term "passthrough entity" means any partnership or S corporation. (d) If 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 seven years if necessary, until the credit is exhausted. (e) This credit shall be in lieu of any other credit or deduction that the taxpayer may otherwise claim pursuant to this part with respect to the property or any interest therein that is contributed. SEC. 6. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to remedy critical shortages in open space and to safeguard the state's natural habitats from further degradation, it is necessary that this act take effect immediately.