BILL ANALYSIS
AB 1705
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Date of Hearing: May 10, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Anthony J. Portantino, Chair
AB 1705 (V. Manuel Perez) - As Amended: March 11, 2010
VOTE ONLY
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Income tax: exclusions: energy property grants.
SUMMARY : Conforms to the recently enacted American Recovery and
Reinvestment Act (ARRA) of 2009 [Public Law (P.L.) 111-5] to
create an exclusion from gross income for energy grants received
by a taxpayer, in lieu of the federal energy credits, pursuant
to Section 1603 of the ARRA. Specifically, this bill :
1)Excludes from the taxpayer's gross income and the alternative
minimum taxable income, under both the Personal Income Tax
(PIT) and the Corporation Tax (CT) laws, the amount of energy
grants provided to a taxpayer by the Secretary of the Treasury
for qualified property placed in service during either the
2009 or 2010 tax year.
2)Specifies that the grant amount must be taken into account in
determining the basis of the property for which the grant was
provided to the taxpayer.
3)Prescribes the rules for adjusting the basis of the property
by reference to Internal Revenue Code (IRC) Section 50(c) and
Section 1603(f) of the ARRA.
4)Declares that this act serves a public purpose to ensure the
fair and consistent application of California law to
recipients of grants made by the Secretary of the Treasury
under IRC Section 1603 of the ARRA.
5)Takes effect immediately as a tax levy.
EXISTING FEDERAL LAW :
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1)Allows an income tax credit for the production of electricity
from qualified energy resources at qualified facilities.
"Qualified energy resources" include wind, closed-loop
biomass, open-loop biomass, geothermal energy, solar energy,
small irrigation power, municipal solid waste, qualified
hydropower production, and marine and hydrokinetic renewable
energy. "Qualified facilities" means facilities that generate
electricity using qualified energy resources. (IRC Section
45).
2)Allows an income tax energy credit for certain qualified
energy property placed in service. "Qualified energy
property" include certain fuel cell property, solar property,
geothermal power production property, small wind energy
property, combined heat and power system property, and
geothermal heat pump property. (IRC Section 48).
3)Authorizes the Secretary of the Treasury to provide a grant to
a person who places in service during the 2009 or 2010 tax
year energy property that is either a) an electricity
production facility otherwise eligible for the renewable
electricity production credit, or, b) qualifying property
otherwise eligible for the energy credit. (ARRA of 2009, P.
L. 111-5, February 17, 2009).
4)Specifies that the grant amount is 30% of the basis of the
property that would either be eligible for the energy credit
under IRC Section 48 or qualify as an electricity production
(IRC Section 45) credit eligible facility.
5)Provides that a grant application must be received by the
Treasury Department before October 1, 2011.
6)Excludes the grant amount from gross income for federal income
tax purposes.
7)Requires the basis of the qualified property to be reduced by
50% of the amount of the grant and subjects the grant amount
to recapture if the eligible property is disposed of by the
grant recipient within five years of being placed in service.
EXISTING STATE LAW conforms to federal law relating to the
exclusion of federal energy grants from taxpayers' gross income
for purposes of the PIT and the CT laws.
AB 1705
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FISCAL EFFECT : None
COMMENTS :
1)Author's Statement . The author states that, "AB 1705 ensures
that renewable energy projects are not unduly taxed on federal
grants, thereby allowing the creation of green jobs in our
state; specifically, this bill excludes from state income
taxes federal grants that are made in-lieu of renewable energy
tax credits.
"There are 38 in-state renewable projects that are currently
eligible for these grants, with a combined megawatt impact of
8,810 MWs - we can not afford to have these projects leave the
State of California. This bill will provide an exclusion from
taxation for specified ARRA Energy grants, bring California in
conformity with federal law, and help drive the immediate
creation of large-scale solar projects in our State."
2)Committee Staff Comments : On April 12, 2010, the Governor
signed into law SB 401 (Wolk), Chapter 14, Statutes of 2010.
In its final form, SB 401 was a comprehensive
California-federal conformity measure that included provisions
of AB 1705. Therefore, AB 1705 is unnecessary.
3)Similar Legislation .
SB 401 (Wolk) is a comprehensive California-federal conformity
measure that includes the provisions of AB 1705. SB 401 was
signed by the Governor on April 12, 2010.
SBx8 32 (Wolk), introduced in the 2010 8th Extraordinary
Session, changes California's specified date of conformity to
federal income tax law from January 1, 2005, to January 1,
2009, and thereby, generally conforms to numerous changes made
to federal income tax law during that four-year period,
including the exclusion from gross income for specified energy
grants. SB x8 32 was passed by both houses but was vetoed by
the Governor.
ABx6 4 (M. Perez), introduced in the 2010 6th Extraordinary
session, is similar to this bill. ABx6 4 currently has not
been referred to a committee.
SB 936 (Strickland), introduced in the 2009-2010 legislative
AB 1705
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session, is identical to this bill. SB 936 is in the Senate
Revenue and Taxation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Bright Source Energy
California Manufacturers and Technology Association
California Taxpayers' Association
Independent Energy Producers
California Chamber of Commerce
Large-scale Solar Association
NextEra Energy Resources
NextLight Renewable Power, LLC
Southern California Edison
Terra-Gen Power
Tessera Solar
The Solar Alliance
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098