BILL ANALYSIS
AB 1099
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Date of Hearing: May 2, 2005
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Johan Klehs, Chair
AB 1099 (Leno) - As Introduced: February 22, 2005
Majority vote. Tax Levy. Fiscal Committee
SUBJECT : Property Tax: New Construction: Solar energy systems
SUMMARY : Deletes the sunset date for the exclusion of an active
solar energy system from the definition of new construction for
property tax purposes. Specifically, this bill makes the
exclusion permanent and requires no appropriation to reimburse
local governments for any loss of property tax revenues.
EXISTING LAW :
1)Provides that all real property is taxed at the same
percentage of fair market value, unless specifically exempted
by the California Constitution. "Fair market value" is
defined as the appraised value of property when purchased,
newly constructed, or when a change of ownership occurs. This
determination of fair market value is referred to as the base
year value, which is annually adjusted by the lesser of 2% or
the rate of inflation. The annual property tax is imposed as
a percentage of the adjusted base year value.
2)Provides for reassessment of the adjusted base year value for
new construction. "New construction" is defined as any
addition to real property since the last lien date and
includes major rehabilitation projects and construction that
changes the property for a different use. When the new
construction involves replacing existing improvements, the
value attributable to those improvements is first deducted for
the property's assessed value before adding the value for its
replacement.
3)Grants limited exclusions from the definition of new
construction for specified activities. Therefore, the value
attributable to the listed activities does not increase the
adjusted base year value for property tax purposes. Included
among the listed exclusions are active solar energy systems.
An active solar energy system means a system that uses solar
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devices, which are thermally isolated from living space or any
other area where energy is used, to provide for the
collection, storage, or distribution of solar energy. The
definition of "active solar energy systems" specifically
excludes solar swimming pool or hot tub heaters; the
definition includes storage devices, power conditioning
equipment, transfer equipment, and related parts.
4)Remains in effect only until January 1, 2006, and is
automatically repealed as of that date unless the termination
date is repealed or extended by specific statute.
5)Requires state reimbursement of revenues lost to local
governments from property tax exemptions granted by the
Legislature.
FISCAL EFFECT : There will be no loss to the General Fund. The
Board of Equalization (BOE) estimates the loss of property tax
revenue to be approximately $746,000 per fiscal year.
Proposition 98 Fiscal Effect : None.
COMMENTS :
1)The author states, "Solar energy use diversifies California's
energy portfolio with zero-emission renewable energy while
reducing the overall demand, and therefore price, of natural
gas and electricity." The author asserts that incentives such
as the property tax exemption encourage consumers to use solar
energy systems, which in turn will help California's
environment and reduce reliance by the state on out-of-state
energy resources.
2)Proponents of this measure cite the numerous benefits of solar
energy to California and state that it is important to not
penalize property owners for making an investment in solar
energy production. Further, proponents state that consumer
incentives such as the property tax exemption help consumers
make the financial decision to install solar systems on their
homes.
3)Another bill introduced in the current legislative session
amends the sunset date of the property tax exemption. SB 1017
(Campbell) extends the sunset date until January 1, 2018 for
active solar energy systems installed after January 1, 1999.
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SB 1017 also extends an existing personal income and
corporation tax credit related to the costs of solar systems
until taxable years beginning before January 1, 2017.
4)The BOE staff analysis identifies numerous financial
incentives available to property owners that install active
solar energy systems and concludes that active solar energy
systems are not cost effective. Committee staff believe that,
should this bill move forward, the sunset date should be
extended for a period of time rather than completely repealed.
REGISTERED SUPPORT / OPPOSITION :
Support
PV Manufacturers Alliance (Co-Sponsor)
California Solar Energy Industries Association
Sacramento Municipal Utilities District
Opposition
None in file
Analysis Prepared by : Kimberly Bott / REV. & TAX. / (916)
319-2098