BILL ANALYSIS
AB 1099
Page 1
ASSEMBLY THIRD READING
AB 1099 (Leno)
As Amended May 26, 2005
Majority vote
REVENUE & TAXATION 7-0 APPROPRIATIONS 18-0
-----------------------------------------------------------------
|Ayes:|Klehs, Walters, |Ayes:|Chu, Sharon Runner, Bass, |
| |Canciamilla, Chu, DeVore, | |Berg, Calderon, Emmerson, |
| |Jones, Leno | |Mullin, Haynes, |
| | | |Karnette, Klehs, Leno, |
| | | |Nakanishi, Nation, |
| | | |Oropeza, Ridley-Thomas, |
| | | |Saldana, Walters, Yee |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Extends 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 extends the
exclusion to include fiscal years (FYs) 2008-09, repeals the
exclusion as of January 1, 2010, 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
AB 1099
Page 2
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
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 direct loss to the General
Fund. The Board of Equalization (BOE) estimates the loss of
property tax revenue to be approximately $746,000 per FY.
COMMENTS : 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.
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
AB 1099
Page 3
incentives such as the property tax exemption help consumers
make the financial decision to install solar systems on their
homes.
SB 1017 (Campbell), introduced in the current legislative
session, extends the sunset date of the property tax exemption
until January 1, 2018 for active solar energy systems installed
after January 1, 1999. 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.
Analysis Prepared by : Kimberly Bott / REV. & TAX. / (916)
319-2098
FN: 0010550