BILL ANALYSIS
AB 94
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Date of Hearing: April 13, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 94 (Evans) - As Introduced: January 6, 2009
Majority vote. Fiscal committee.
SUBJECT : Natural Heritage Preservation Tax Credit Act of 2000
SUMMARY : Permanently reauthorizes the awarding of tax credits
under the Natural Heritage Preservation Tax Credit Act of 2000
(Act). Specifically, this bill :
1)Deletes the provisions of the Act that:
a) Limit the total amount of tax credits that can be
awarded under the Act to $100 million; and,
b) Prohibit tax credits from being awarded after fiscal
year (FY) 2007-08 without further statutory authorization.
2)Provides that tax credits may be awarded under the Act only if
the amount of all lost revenue resulting from the award of tax
credits is reimbursed by transfer to the General Fund (GF) of
"moneys that are not from the GF."
3)Defines "moneys that are not from the GF" as any of the
following:
a) State bond funds as described in Public Resources Code
(PRC) Section 37032;
b) State funds available for the purposes of the Act, other
than funds specified in PRC Section 37014;
c) Court settlements;
d) Private or public donations;
e) Local government funds of any type; or,
f) Federal funds available for the purposes of the Act.
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4)Expands the Act's definition of "donee" to include a local
government that has filed with a donor an application that was
submitted directly to the Wildlife Conservation Board (WCB).
5)Provides that, if a local government applies directly to the
WCB for acceptance of a qualified donation, the WCB may
provide conditional approval for the local government to
acquire the property under the Act. The local government
shall reimburse the GF for the tax credit claimed by
transferring funds in the full amount of the approved tax
credit to the WCB for deposit into the Natural Heritage
Preservation Tax Credit Reimbursement Account.
6)Provides that, if a local government applies directly to the
WCB for acceptance of a qualified donation, and the WCB
provides conditional approval, the local government shall have
60 days to transfer to the WCB the full amount of funds
necessary to reimburse the GF. Upon receipt of these funds,
the WCB shall provide the donor and the local government with
a notice of final approval of the tax credit.
7)Specifies that the information the Franchise Tax Board (FTB)
provides the WCB on tax credits claimed shall include the tax
year for which the credit was claimed.
8)Provides that, if a local government applies for a designated
nonprofit organization to acquire and accept donated property,
the local government shall comply with all requirements of the
Act that apply to the local government transferring funds to
the WCB necessary to reimburse the GF.
9)Amends the definition of "displaced person" contained in the
Government Code chapter that provides for relocation
assistance to those displaced by a public entity.
Specifically, this bill specifies that a "displaced person"
shall not include "[a]ny person who donates or willingly sells
his or her property for the purposes of protecting fish and
wildlife habitat, providing recreational areas, or preserving
cultural or agricultural resources and open space and any
person who occupies that property on a rental basis, and in
the case of a person who willingly sells the property only if
any state funds used for purchase are prohibited from being
used to acquire property by eminent domain."
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10)Makes certain technical and non-substantive changes to the
Act.
EXISTING LAW :
1)Establishes the WCB. The WCB is charged with authorizing and
allocating funds for the purchase of property suitable for
recreation and the preservation, protection and restoration of
wildlife habitat. The WCB consists of the President of the
Fish and Game Commission, the Director of the Department of
Fish and Game, and the Director of the Department of Finance.
Existing law also provides that three members of the Senate
and three members of the Assembly shall meet with the WCB and
participate in its activities to provide legislative
oversight.
2)Requires the WCB to implement the Natural Heritage
Preservation Tax Credit Program (Program). Under the Program,
upon the WCB's approval, a "donor" may contribute qualified
property to a "donee" and receive a nonrefundable tax credit
equal to 55% of the fair market value of any qualified
contribution of property made on or before June 30, 2008. Any
unused credit may be carried over for eight years. Moreover,
this credit is in lieu of any other state credit or deduction
that the taxpayer may otherwise claim with respect to the
contributed property.
3)Defines "donor" as a property owner that donates, or submits
an application to donate, property under the Program. The
term "property" is defined to include "any real property, and
any perpetual interest therein, including land, conservation
easements, and land containing water rights, as well as water
rights."
4)Defines "donee" as any of the following:
a) A department to which a donor has applied to donate
property (a department, in turn, means the State Resources
Agency or any entity created by statute within the
Resources Agency and authorized to hold title to land);
b) A local government that has filed a joint application
with a donor requesting approval of a donation of property
to that local government; or,
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c) A designated nonprofit organization.
5)Limits the total amount of tax credits that can be awarded
under the Act to $100 million and prohibits tax credits from
being awarded after FY 2007-08 without further statutory
authorization.
6)Provides that, whenever a program or project to be undertaken
by a public entity will result in a person's displacement, the
displaced person is entitled to payment for actual moving and
related expenses as the public entity determines to be
reasonable and necessary.
FISCAL EFFECT : FTB projects no GF revenue impact from this
bill. While this bill does not directly impact GF revenues, the
reauthorization of credits would arguably encourage the donation
of private property to public entities. This could, in turn,
result in a loss of property tax revenues.
COMMENTS :
1)The author states, "With a continually expanding population,
California needs to preserve land, restore habitats, and
protect water supplies. However, we are also facing uncertain
fiscal times, where every dollar of previously approved bonds
must be maximized. This bill would extend a 'financial tool'
that can save 45% on the purchase price if the state or local
agency chooses to use the tax credit program to acquire
recreation or habitat lands AND if the landowner agrees.
Effectively, this voluntary program allows California to
acquire $18 million of land for every $10 million of bond
funding, while providing fair value to the landowner, and
keeping the General Fund whole. During its previous
authorization period, the Natural Heritage Preservation Tax
Credit saved California approximately $40 million in the
acquisition of more than 8,000 acres of land in Calaveras,
Lake, Los Angeles, Madera, Marin, Monterey, Sacramento, San
Luis Obispo, Santa Barbara, Tehama, and Ventura Counties.
This bill would allow the state to once again work with
interested landowners to provide a legacy for future
generations of Californians."
2)The sponsor states, "This is another tool in the toolbox for
the state in acquiring priority lands. With this tool, State
agencies, which currently pay 100% of fair market value, would
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be able to offer willing landowners a tax credit for 55% of
fair market value of their land. In doing so, the state
leverages federal dollars to acquire priority landscapes,
since the landowner would then be qualified for a federal
deduction as well. The benefit to the state is enormous."
The sponsor goes on to note, "Under this program California
has the ability to acquire land to restore habitat, protect
water quality and expand park space for 55 cents on the
dollar. Before the program expired in 2008, the Natural
Heritage Preservation Tax Credit saved California
approximately $40 million to acquire more than 8,000 acres
across the state."
3)Supporters state, "California is facing an extremely
challenging economic crisis and the Heritage Preservation Tax
Credit Program is a valuable tool to acquire resource lands at
significant savings to the state. Now more than ever we need
an economical incentive to bring critical open space,
agricultural, and habitat lands into public ownership. AB 94
provides a fiscally sensible mechanism to preserve some of
these threatened lands before they are lost forever to
development."
4)Opponents state, "We request that a sunset date be added. As
a matter of tax policy, it makes sense to include a sunset
date on all tax credits so that the state can periodically
review [their] effectiveness. Given the state's dire budget
situation, we also believe that the $100 million cap on the
credit is justified and should remain in place."
5)Committee Staff Comments:
a) Legislative History of the Act
i) SB 1647 (O'Connell), Chapter 113, Statutes of 2000,
established the Act. The Act had a number of stated
objectives, including accommodating economic development
and resolving land use and water disputes in a manner
beneficial to both the people of California and to
California's environment. The original Act limited the
aggregate amount of all credits to $100 million and
provided that no credits could be awarded after FY
2004-05 without further statutory authorization.
ii) In response to fiscal pressures on the GF, AB 3009
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(Committee on Budget), Chapter 1033, Statutes of 2002,
suspended the awarding of tax credits in FY 2002-03.
Following this suspension, SB 1100 (Committee on Budget
and Fiscal Review), Chapter 226, Statutes of 2004,
extended the tax credit through FY 2007-08, but provided
that credits could be awarded between July 1, 2002, and
June 30, 2005, only if the amount of all lost revenue
resulting from the credits was reimbursed by transfer to
the GF of moneys not from the GF.
iii) This bill is very similar to the version of AB 2930
(Laird), introduced in the 2007-08 Legislative Session,
that passed out of this committee on a 7 to 2 vote.
Specifically, that version contained an indefinite
extension of the tax credit provisions of the Act. AB
2930 was subsequently amended in the Assembly Committee
on Appropriations to replace the indefinite extension
with an extension through FY 2012-13. AB 2930 was
eventually held on the Senate Appropriations Committee
suspense file.
b) A Different Kind of Credit
i) Credits are used to reduce the amount of taxes a
taxpayer owes. Typically, the Legislature enacts tax
credits to encourage socially beneficial behavior. Thus,
credit amounts are usually based on a percentage of
specified costs incurred by the taxpayer. In the present
case, the amount of the credit is equal to 55% of the
fair market value of land donated.
ii) Tax credits can either be nonrefundable or
refundable. Nonrefundable credits, like those authorized
by the Act, work only to reduce a taxpayer's tax
liability. Usually, any remaining credit amount left
after reducing the taxpayer's liability to zero can be
carried forward to offset the taxpayer's tax liability in
future years. With a refundable credit, however, the
state must refund the remaining value of the credit after
tax due is reduced to zero. It should be noted that
nonrefundable credits rarely help lower-income taxpayers
because these taxpayers have little or no tax liability
to offset.
iii) The Natural Heritage Preservation Tax Credit
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operates differently from other tax credits.
Specifically, these credits are funded by bond funds,
private donations, and other specified moneys, instead of
foregone tax revenues that would normally flow to the GF.
Because these credits have no impact on the GF, this
bill removes the current $100 million cap contained in
the Act.
iv) The WCB reports that, to date, the Program has been
used to acquire over 8,000 acres of land worth over $88
million. Tax credits totaling $48.6 million were
allocated before the credit sunset on June 30, 2008.
Actual credits applied on tax returns totaled $25.8
million, or an average of approximately $4 million
annually.
v) Approved donees include the American Farmland Trust,
the American Land Conservancy, the California Rangeland
Trust, the Cambria Community Services District, the
Conejo Recreation and Park District, the Department of
Fish and Game, the Department of Parks and Recreation,
the Land Trust for Santa Barbara County, the Riverside
Land Conservancy, the Sacramento Valley Open Space
Conservancy, the Santa Monica Mountains Conservancy, and
the Trust for Public Land.
c) Proposed Amendments
i) As noted above, this bill amends the definition of
"displaced person" contained in the Government Code
chapter that provides for relocation assistance to those
displaced by a public entity. Specifically, this bill
specifies that a "displaced person" shall not include
"[a]ny person who donates or willingly sells his or her
property for the purposes of protecting fish and wildlife
habitat, providing recreational areas, or preserving
cultural or agricultural resources and open space and any
person who occupies that property on a rental basis, and
in the case of a person who willingly sells the property
only if any state funds used for purchase are prohibited
from being used to acquire property by eminent domain."
In response to concerns that this language is somewhat
confusing, the author has agreed to amend the exclusion
as follows:
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(E) Any person who donates or willingly
sells his or her property for the purposes of
protecting fish and wildlife habitat, providing
recreational areas, or preserving cultural or
agricultural resources and open space , and or any
person who occupies that property on a rental basis .
This subparagraph shall not apply when a sale is in
response to an eminent domain proceeding. , and in
the case of a person who willingly sells the
property only if any state funds used for purchase
are prohibited from being used to acquire property
by eminent domain.
ii) The author wishes to take technical and clarifying
amendments providing that a "donee" shall include:
(1) A local government that has submitted a joint
application with a department requesting approval of a
donation of property to that local government; and,
(2) A local government that has submitted an
application directly to the WCB.
iii) The author also wishes to take technical amendments
replacing all references to the "Resources Agency" with
references to the "Natural Resources Agency."
REGISTERED SUPPORT / OPPOSITION :
Support
The Trust for Public Land (sponsor)
California Association of Recreation and Park Districts
California Council of Land Trusts
California League of Conservation Voters
California Special Districts Association
California State Parks Foundation
Defenders of Wildlife
Natural Resource Defense Council
Nature Conservancy
Planning and Conservation League
Sempervirens Fund
Sierra Club California
Opposition
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American Federation of State, County and Municipal Employees
California Tax Reform Association
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098