BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
94 (Evans)
Hearing Date: 08/17/2009 Amended: 07/13/2009
Consultant: Mark McKenzie Policy Vote: NR&W 7-3; Rev&Tax
5-3
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BILL SUMMARY: AB 94 would reinstate the Natural Heritage
Preservation Tax Credit (NHPTC) program through June 30, 2019.
Specifically, this bill would:
Authorize the Wildlife Conservation Board (WCB) to award NHPTC
tax credits from January 1, 2010 through the 2018-19 fiscal
year.
Eliminate the $100 million limit on the total amount of tax
credits authorized.
Authorize local governments to submit completed applications
for tax credits directly to the WCB for approval.
Require reimbursement of tax revenue losses to the General
Fund from any of the following sources: state bond funds,
other authorized state funds, court settlements, public or
private donations, local government funds, or available
federal funds.
o Local government applicants would be required to
transfer funds in the full amount of the approved tax
credit to WCB prior to final approval of the credit.
o State departments within the Resources Agency would
be required to reimburse the General Fund on an accrued
basis, as specified.
Relieve a donee from paying relocation assistance if the land
is donated voluntarily and the source of funds cannot be used
to acquire property by eminent domain.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Tax credit revenue impact approximately $7,000 annual
General Fund Bond*/
loss offset by transfers of local, bond,
federal, Local/
special and other funds (see staff
comments) Special
Bond fund impact potential extension of life of bond
programs Bond*
Also substantial reallocation of bond
funds
-----(see staff comments)-----
WCB program admin absorbable costs to administer
programBond/
Special**
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* Specified Proposition 84 bond funds (see staff comments);
various state special funds such as the Environmental License
Plate Fund, Habitat Conservation Fund, or the Wildlife
Restoration Fund; federal funds; local funds; settlements; and
donations.
** Wildlife Restoration Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
California law authorized a non-refundable credit against income
and corporation taxes for landowners who donate land to the
state, local government, or nonprofit organizations for
conservation purposes from fiscal years 2000-01 through 2007-08.
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AB 94 (Evans)
The NHPTC is equal to 55% of the fair market value of the land
donated, and the credit may be carried over to reduce net tax
liabilities for up to 8 years. To qualify for the credit,
landowners must apply to WCB for approval and certification that
the property meets specified requirements. The Department of
General Services (DGS) determines the fair market value of the
property for purposes of establishing the amount of the tax
credit. A maximum of $100 million in credits was authorized up
to June 30, 2008. The law required that the General Fund be
reimbursed for lost revenue resulting from tax credits awarded
from July 1, 2002 through June 30, 2005. The WCB allocated
$48.6 million in tax credits before the program sunset, and an
average of $4 million in credits are claimed annually. The
Department of Fish and Game indicates that the program has been
used to protect more than 8,000 acres of property with a total
value of over $88 million.
Staff notes that Proposition 84, passed by the voters in 2006,
states that specified bond funds scheduled in Chapters 5, 6, 7,
and 8 that are not designated for competitive grant programs may
be used for purposes of reimbursing the General Fund, pursuant
to the NHPTC program. These sections of Proposition 84 are
dedicated to: the protection of rivers, lakes, and streams;
forest and wildlife conservation; the protection of beaches,
bays, and coastal waters; and parks and nature education
facilities. Approximately $1.5 billion of these funds, which
are dedicated to specific programs and projects, are not
specifically identified for grant programs. Staff notes that
while Proposition 84 authorizes the use of these bond funds for
the NHPTC program, absent this bill, these bond funds could
either remain unsold, so as not to burden the General Fund with
additional debt service payments, or they could be used for
other authorized expenditures. This bill would result in a
substantial reallocation of Proposition 84 bond funds away from
specified natural resource preservation purposes, to the extent
the bill provides an incentive to dedicate bond funds to
reimbursement of the General Fund under the NHPTC.
Staff notes that using bond funds to backfill General Fund tax
losses still results in a General Fund loss because bondholders
are repaid, with interest, from the General Fund. In effect,
the state would pay interest over a long term on the tax credits
it awards. If $4 million in general obligation bonds are sold
to repay the General Fund for tax credit usage in a single year,
the total debt service to repay bonds with a 30-year term would
be over $7.8 million in current dollars (assuming a 5% interest
rate and 3% inflation). Annual General Fund debt service would
be about $260,000 annually for 30 years. Any advantages gained
by acquiring land with bond funds for conservation purposes at
55 percent of its actual value would evaporate over time because
of the interest payments when compared to land purchases using
non-bond funds. Each $1 million in tax credit usage would
leverage purchases valued at $1.82 million. However, if bond
funds would be used for land acquisition for conservation
purposes at full fair market value absent the authority provided
in this bill, the NHPTC program would provide a clear benefit
since conservation lands could be acquired with only 55% of the
bond funds used for a fair market value acquisition.
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AB 94 (Evans)
The Franchise Tax Board estimates that WCB sponsored tax credit
usage would average approximately $4 million annually, based on
historical usage from 2001-02 through 2007-08. This bill would
also allow local governments to submit completed applications
directly to WCB for approval. FTB indicates that this is likely
to increase overall usage of the NHPTC program to $7 million
annually. Local governments that apply directly to WCB for
acceptance of a qualified donation would be required to transfer
the full amount of the tax credit to the WCB prior to final
approval of the tax credit. FTB estimates that local government
sponsored tax credit usage would average approximately $3
million annually. Unless a local agency sponsor uses an
allocation of state funds for reimbursement purposes, there
would be no state fiscal impact as a result of authorizing local
government participation, as costs to the General Fund as a
result of claimed credits would be paid in advance by the local
government.
This program acts as an economic incentive that allows property
owners to donate land or conservation easements to the state to
preserve fish and wildlife habitat, recreational lands, open
space, and agricultural and cultural lands. The advantage to
the donor of participating in the NHPTC program are: the 55%
state tax credit that can be carried forward to cover tax
liabilities for up to eight years; a federal tax credit for
donating lands for these purposes; and the ability to avoid
paying federal capital gains taxes on the value of the donated
land. The program also allows a donee (state or local agency)
to acquire conservation lands at 55% of the fair market value.
Under AB 94, the WCB would be the agency responsible for
administering the NHPTC program, including the evaluation of
donation proposals from landowners, reviewing local government
applications for participation, allocation of tax credits, and
coordinating with the Franchise Tax Board, the State Controller,
and the Department of Finance. WCB indicates that costs to
administer the program are absorbable as the review of
acquisitions is a part of its core function.
AB 94 would reauthorize the NHPTC program for nearly ten
additional years. To the extent eligible Proposition 84 bond
funds would be exhausted prior to the expiration of the NHPTC
program, this bill would create cost pressures on other eligible
funding sources. Staff recommends that the program be
reauthorized through the 2014-15 fiscal year, rather than the
2018-19 fiscal year. Staff notes that a nearly identical bill,
AB 2930 (Laird), which was held on this Committee's suspense
file in 2008, would have reauthorized the program for five
years.
Staff recommends the following technical amendment:
Page 8, line 17, strike "ha" and insert: has