BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
AB 94 - Evans
Amended: April 20, 2009
Hearing: July 8, 2009 Fiscal: Yes
SUMMARY: Extends the Natural Heritage Preservation Tax
Credit until 2012-13, Removes the $100 million
Limit on Credits, and Specifies Funds Used to
Repay General Fund's Costs of Tax Credits
I. Natural Heritage Preservation Tax Credit
EXISTING LAW provides for a nonrefundable Natural
Heritage Preservation Tax Credit under the personal income
and corporation tax laws (SB 1647, O'Connell, 2000). To
qualify for the credit, landowners must apply to the
Wildlife Conservation Board (WCB) for approval to donate a
parcel of property and for certification that the property
meets certain requirements. If the WCB approves the
contribution, the landowner may claim a tax credit equal to
55% of the property's fair market value, and carryover the
credit for eight years. Unlike other tax credits, the WCB
must reimburse the Natural Heritage Preservation Tax Credit
Fund within the General Fund within 60 days of FTB's
notification that a taxpayer claimed a WCB awarded tax
credit. The WCB is authorized to award no more than a
cumulative total of $100 million in tax credits, but cannot
do so after June 30, 3008.
EXISTING LAW states that donating taxpayers may give
the land to the Resources Agency or any of its subsidiary
departments or agencies, a local government that signed a
joint agreement with a donor requesting approval of the
AB 94 - Evans
Page 5
local government to donate the property, or a designated
non-profit organization. Donations must certify that they
are not making the contribution due to a condition of a
lease, permit, license, or other entitlement, including
environmental mitigation.
THIS BILL allows WCB to award credits for fiscal years
2008-09 to 2018-19, inclusive, and deletes the $100 million
limit. The measure also allows a local agency that has
filed a donor application that was submitted directly to
the board to accept land as a donor. The bill specifies
the sources of funds that may be used to reimburse the
General Fund's costs incurred when taxpayers claim the
credit to include state bond funds, other state funds,
court settlements, private or public donations, local
government funds of any type, and federal funds.
II. Relocation Assistance
EXISTING LAW requires public agencies that undertake
programs or projects that it recognizes will displace
persons to provide advisory assistance to displaced
individuals, and pay for actual moving and relocation
assistance in certain circumstances. Current law defines
displaced persons who move from real property, or move
personal property from real property, because of a
notification that a public agency will undertake a project,
or from the project itself, on which the person is a tenant
or operates a business. Existing law provides exceptions
to the definition of displaced person, including a person
occupying land unlawfully, or when the public agency
acquires land from a person who occupies the property
subject to termination when the public agency needs the
land for a program or project.
THIS BILL excludes from the definition of displaced
person someone who willingly sells or donates property for
the purposes of providing fish and wildlife habitat,
AB 94 - Evans
Page 5
recreational areas, or cultural or agricultural resources
and open space; any person who occupies that land on a
rental basis; and a person who willingly sells his property
only if state funds used for purchase are prohibited from
being used to acquire the property by eminent domain.
FISCAL EFFECT:
Franchise Tax Board (FTB) projects no General Fund
revenue impact from AB 94.
COMMENTS:
A. Purpose of the Bill
According to the Author, "With a continually expanding
population, California needs to preserve land, restore
habitat, and protect water supplies. However, we are also
facing uncertain fiscal times, where every dollar of
spending, including 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.."
B. Different Kind of Credit
AB 94 - Evans
Page 5
Generally, the Legislature enacts tax credits to
change private decision making to yield socially desirable
outcomes. Taxpayers use tax credits to directly reduce
taxes due, and are often based on a percentage of the costs
incurred for making specified investments, in this case the
Natural Heritage Preservation Tax Credit is equal to 55% of
the fair market value of the land donated. Tax credits
are either non-refundable and enacted by a majority vote,
meaning that the value of the credit reduces tax due until
equal to zero, or, refundable and enacted by a 2/3 vote,
which requires the state to refund the remaining value of
the credit after tax due is reduced to zero.
Non-refundable credits rarely help lower-income taxpayers
and motion picture productions because they pay little to
no tax to offset the value of the credit. The more income
(and therefore tax due) a taxpayer has, the more a taxpayer
can make use of non-refundable credits.
The Natural Heritage Preservation Tax Credit operates
differently from other tax credits in the following ways.
Bond funds and private donations fund
these tax credits, instead of foregone tax
revenue which would otherwise flow to the general
fund. AB 94 removes the $100 million cap in law
because this tax credit has no general fund
impact.
The mechanics of the tax credit are very
different. First, state or local agencies
receive appropriations of funds from bonds or
other sources to pay for the general fund impact
of the tax credits, then offer the credit as a
consideration when negotiating with private
landowners to acquire land, instead of applying
to a general class of taxpayers who invest in
specified items like regular credits. WCB
subsequently reviews tax credit applications to
ensure that the agreement between the state,
local, or non-profit agency agrees and landowner
comply with the statute, then approve the credit.
WCB and FTB exchange information to ensure that
AB 94 - Evans
Page 5
only approved taxpayers may claim the credit.
C. Skin in the Game
Current law only allows local agencies receiving state
funds to use the credit as part of a join application. AB
94 expands the list of entities eligible to receive donated
land to include a local agency that has filed a donor
application that was submitted directly to the board to
accept land as a donor. The measure makes the change
because agencies may want to supply their own funds derived
from parcel taxes or other means to reimburse the General
Fund's costs resulting from a taxpayer claiming the credit.
D. Recent History
After its enactment in 2000, the Legislature twice
placed the on the budgetary chopping block, but also
successfully expanded and extended the Credit program too.
The Legislature suspended the credit for the 2002-03 (AB
3009, Committee on Budget), then suspended again for the
2003-04 and 2004-05 fiscal year unless the general fund
reimbursed the credit's costs, while extending the sunset
to the 2007-08 fiscal year (SB 1100, Committee on Budget,
2004). The Legislature allowed Proposition 40 and 50 bond
funds to reimburse the general fund for the tax credit's
costs, created the Natural Heritage Preservation Tax Credit
Fund within the General Fund for WCB to reimburse the costs
of the credit, allowed local governments and non-profit
entities to acquire land, and revised the process for
identifying land that may be acquired using the credit (AB
2722, Laird, 2004). The most current information shows that
WCB awarded $48.6 million in credits through 2006-07, but
taxpayers only claimed $23.4 million, for an average of $4
million per year.
AB 94 - Evans
Page 5
E. Alternatives
Public entities can offer several incentives for
landowners to sell or donate land for agricultural
conservation, habitat and species protection, or parks and
open space, often purchasing land outright or offering
conservation easements, where the land is enforceably
restricted to its current use in exchange for state or
federal tax benefits. Local agencies also may restrict
land uses by zoning restrictions or requirements for
environmental mitigation. Public entities must find the
right tool for each individual landowner's cost-benefit
analysis, some may not want to donate the land, but can
agree to a conservation easement, while others may be
amenable to cash, a tax credit, or both. The Natural
Heritage Preservation Tax Credit is another option for
agencies seeking to put land under public control in
exchange for a tax credit equal to 55% of the fair market
value. Landowners with state tax liabilities have availed
themselves of the credit according to the Department of
Fish and Game and tax records, leading landowners to donate
more than 8,000 acres of habitat and open space with no
ongoing general fund cost.
F. Caught in the Crossfire
In September, the Legislature approved AB 1452
(Committee on Budget), which limited taxpayers from
applying "business" tax credits to reduce tax liability by
more than 50%. The Legislature included the Natural
Heritage Preservation Tax Credit; however, the measure
pushes out carryforward periods by the amount of the
suspension period, ensuring that taxpayers can claim the
full amount of the credit awarded.
G. The Suspense is Killing Me
AB 94 - Evans
Page 5
AB 94 is identical to AB 2930 (Laird), which the
Committee approved last year, but was nonetheless held on
the Senate Appropriations Committee's Suspense File.
H. Amendments Needed
FTB offers the following technical amendments to
clarify the dates the credit is available.
On Page 13, line 28, after "January 1, 2000,"
insert "and not later than June 30, 2008, and on and
after January 1, 2010"
On Page 14, line 19, after January 1, 2000," insert
"and not later than June 30, 2008, and on and after
January 1, 2010"
Support and Opposition
Support:California Rangeland Conservation Coalition,
Southern California Edison, Rocky Mountain Elk Foundation,
Chevron, California Outdoor Heritage Alliance, Defenders of
Wildlife, Sempervirens Fund, California Council of Land
Trusts, California Council for Environmental and Economic
Balance, California State Parks Foundation, Sierra Club
California, Natural Resources Defense Council, Planning and
Conservation League, California League of Conservation
Voters, California Special Districts Association,
California Association of Recreation and Park Districts,
the Nature Conservancy, the Trust for Public Land
Oppose:None Received
AB 94 - Evans
Page 5
---------------------------------
Consultant: Colin Grinnell