Bill Text: CA SB1340 | 2021-2022 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Property taxation: active solar energy systems: extension.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2022-09-18 - Chaptered by Secretary of State. Chapter 425, Statutes of 2022. [SB1340 Detail]
Download: California-2021-SB1340-Amended.html
Bill Title: Property taxation: active solar energy systems: extension.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2022-09-18 - Chaptered by Secretary of State. Chapter 425, Statutes of 2022. [SB1340 Detail]
Download: California-2021-SB1340-Amended.html
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Amended
IN
Senate
April 28, 2022 |
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Amended
IN
Senate
March 15, 2022 |
CALIFORNIA LEGISLATURE—
2021–2022 REGULAR SESSION
Senate Bill
No. 1340
| Introduced by Senator Hertzberg |
February 18, 2022 |
An act to amend and repeal Section 64.1 of, to add Sections 64.2, 73.1, 73.2, and 73.4 to, and to add and repeal Section 73.3 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 1340, as amended, Hertzberg.
Property taxation: new construction: active solar energy systems and nonqualified active solar energy systems.
The California Constitution generally limits the maximum rate of ad valorem tax on real property to 1% of the full cash value of the property and defines “full cash value” for these purposes as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. Pursuant to constitutional authorization, existing property tax law excludes from the definition of “newly constructed” for these purposes the construction or addition of any active solar energy system, as defined, through the 2023–24 fiscal year. Under existing property tax law, this exclusion remains in effect only until there is a subsequent change in ownership, but an active solar energy system that qualifies for the exclusion before January 1, 2025, will continue to receive the exclusion until there is a subsequent change in ownership.
This bill would indefinitely extend the exclusion described above, except with respect to nonqualified active solar energy systems, as defined. For a nonqualified active solar energy system, commencing with property tax lien dates for the 2024–25 2025–26 fiscal years, the bill would instead include in the definition of “newly constructed” an unspecified percentage specified percentages of the full cash value of a nonqualified active solar energy system that would vary depending on the number of years following the date on which construction is completed.
This bill, commencing with the lien date for the 2022–23 fiscal year, would include only the tangible property comprising an active solar energy system, nonqualified active solar energy system, or portion thereof, and would exclude intangible assets and rights relating to the going concern of business, as described, when determining their full cash value, fair market value, or tangible value. The bill would set forth valuation methods for these solar energy systems. The bill would also provide that these systems or portions thereof are a separate appraisal unit from any other property that is not excluded from the definition of “newly constructed,” as described. The bill would also make conforming changes.
By imposing additional duties on local tax officials, the bill would impose a state-mandated local program.
The California Constitution requires the state to
reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
Existing law requires the state to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.
This bill would provide that, notwithstanding those provisions, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.
This
bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
This bill would take effect immediately as a tax levy.
Digest Key
Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares that Section 73 of the Revenue and Taxation Code was enacted to encourage and to provide incentives for the development of active solar energy systems by providing an exclusion from classifications as newly constructed the construction or addition of active solar energy systems.SEC. 2.
Section 64.1 of the Revenue and Taxation Code is amended to read:64.1.
(a) (1) Notwithstanding paragraph (1) of subdivision (c) of Section 64, in the case of a legal entity that owns an active solar energy system pursuant to a partnership flip transaction, neither an initial transfer of a capital and profits interest in the legal entity, nor any subsequent change in the allocation of the capital and profits of the legal entity among the members, shall be deemed to constitute a transfer of control of, or of a majority interest in, the legal entity.(2) Paragraph (1) shall not apply to any real property owned by the legal entity other than the active solar energy system. Real property owned by the legal entity, other than the active solar energy
system, shall be deemed to undergo a change in ownership to the extent otherwise provided under subdivision (c) of Section 64.
(3) Paragraph (1) shall not apply to more than one partnership flip transaction with respect to any portion of an active solar energy system.
(b) For purposes of this section, all of the following definitions apply:
(1) “Active solar energy system” has the same meaning as defined in Section 73.
(2) “Initial transfer” means a transfer or series of transfers of an interest in a partnership or limited liability company used to own the active solar energy system and that commence prior to the date that the active solar energy
system is placed in service for federal income tax purposes.
(3) “Partnership flip transaction” means a financing arrangement that meets all of the following requirements:
(A) A developer of an active solar energy system and one or more unrelated parties enter into the financing arrangement.
(B) As part of the initial transfer, the unrelated party or parties agree to provide a capital contribution, or a series of contributions, to a partnership or limited liability company in exchange for, on a cumulative basis, an interest in a majority of the tax attributes, such as federal tax credits, depreciation, and a majority of either, or both, the capital and profits of the entity.
(C) The unrelated party or parties receive the tax attributes until the party or parties achieve a preestablished yield or until after a preestablished period of time, at which time the tax attributes are reduced, and the developer obtains a majority of both the capital and profit interests of the partnership or limited liability company.
(c) If the parties to a partnership flip transaction sell or exchange ownership of the partnership or limited liability company in a transaction or series of transactions, that are separate and apart from the partnership flip transaction conducted pursuant to this section, in such a manner that a change in ownership of the partnership or limited liability company occurs under paragraph (1) of subdivision (c) of Section 64, then paragraph (1) of subdivision (a) shall not apply to that transaction or
transactions.
(d) Nothing in this section shall be construed to exclude from a change in ownership any other transfer or change in the allocation in the interest in profits and losses, or the ownership interests, in an active solar energy system that is not a partnership flip
transaction.
(e) This section applies to all property tax lien dates through the 2023–24 2024–25 fiscal year.
(f) This section shall remain in effect only until January 1, 2025, 2026, and as of that date is repealed.
SEC. 3.
Section 64.2 is added to the Revenue and Taxation Code, to read:64.2.
(a) (1) Notwithstanding paragraph (1) of subdivision (c) of Section 64, in the case of a legal entity that owns an active solar energy system or nonqualified active solar energy system pursuant to a partnership flip transaction, neither an initial transfer of a capital and profits interest in the legal entity, nor any subsequent change in the allocation of the capital and profits of the legal entity among the members, shall be deemed to constitute a transfer of control of, or of a majority interest in, the legal entity.(2) Paragraph (1) shall not apply to any real property owned by the legal entity other than the active solar energy system or nonqualified
active solar energy system. Real property owned by the legal entity, other than the active solar energy system or nonqualified active solar energy system, shall be deemed to undergo a change in ownership to the extent otherwise provided under subdivision (c) of Section 64.
(3) Paragraph (1) shall not apply to more than one partnership flip transaction with respect to any portion of an active solar energy system or nonqualified active solar energy system.
(b) For purposes of this section, all of the following definitions apply:
(1) “Active solar energy system” has the same meaning as defined in Section 73.1.
(2) “Initial transfer” means a transfer or series of
transfers of an interest in a partnership or limited liability company used to own the active solar energy system or nonqualified active solar energy system and that commence prior to the date that the active solar energy system or nonqualified active solar energy system is placed in service for federal income tax purposes.
(3) “Nonqualified active solar energy system” has the same meaning as defined in Section 73.2.
(4) “Partnership flip transaction” means a financing arrangement that meets all of the following requirements:
(A) A developer of an active solar energy system or nonqualified active solar energy system and one or more unrelated parties enter into the financing arrangement.
(B) As part of the initial transfer, the unrelated party or parties agree to provide a capital contribution, or a series of contributions, to a partnership or limited liability company in exchange for, on a cumulative basis, an interest in a majority of the tax attributes, such as federal tax credits, depreciation, and a majority of either, or both, the capital and profits of the entity.
(C) The unrelated party or parties receive the tax attributes until the party or parties achieve a preestablished yield or until after a preestablished period of time, at which time the tax attributes are reduced, and the developer obtains a majority of both the capital and profit interests of the partnership or limited liability company.
(c) If the parties to a partnership flip transaction sell or exchange ownership of the partnership or limited liability company in a transaction or series of transactions, that are separate and apart from the partnership flip transaction conducted pursuant to this section, in such a manner that a change in ownership of the partnership or limited liability company occurs under paragraph (1) of subdivision (c) of Section 64, then paragraph (1) of subdivision (a) shall not apply to that transaction or transactions.
(d) Nothing in this section shall be construed to exclude from a change in ownership any other transfer or change in the allocation in the interest in profits and losses, or the ownership interests, in an active solar energy system or nonqualified active solar energy system that is not a partnership flip transaction.
(e) Active solar energy systems or nonqualified active solar energy systems that qualified under Section 64.1, as that section read on December 31, 2025, for exclusion from a change in the allocation of the capital and profits of the legal entity among the members before January 1, 2026, shall continue to be eligible for such protection under this section.
(e)
(f) This section applies to all property tax lien dates for the 2024–25
2025–26 fiscal year and for each fiscal year thereafter, inclusive.
SEC. 4.
Section 73.1 is added to the Revenue and Taxation Code, to read:73.1.
(a) Pursuant to the authority granted to the Legislature pursuant to paragraph (1) of subdivision (c) of Section 2 of Article XIII A of the California Constitution, the term “newly constructed,” as used in subdivision (a) of Section 2 of Article XIII A of the California Constitution, does not include the construction or addition of any active solar energy system, as defined in subdivision (b), except as provided in Section 73.2. (b) (1) “Active solar energy system” means a system that, upon completion of the construction of a system as part of a new property or the addition of a system to an existing
property, uses solar devices, which are thermally isolated from living space or any other area where the energy is used, to provide for the collection, storage, or distribution of solar energy.
(2) “Active solar energy system” does not include solar swimming pool heaters or hot tub heaters.
(3) Active solar energy systems may be used for any of the following:
(A) Domestic, recreational, therapeutic, or service water heating.
(B) Space conditioning.
(C) Production of electricity.
(D) Process heat.
(E) Solar mechanical energy.
(c) For purposes of this section, “occupy or use” has the same meaning as defined in Section 75.12.
(d) (1) (A) The Legislature finds and declares that the definition of spare parts in this paragraph is declarative of the intent of the Legislature, in prior statutory enactments of this section that excluded active solar energy systems from the term “newly constructed,” as used in the California Constitution, thereby creating a tax appraisal exclusion.
(B) An active solar energy system that uses solar energy in the production of electricity includes storage devices, power conditioning
equipment, transfer equipment, and parts related to the functioning of those items. In general, the use of solar energy in the production of electricity involves the transformation of sunlight into electricity through the use of devices such as solar cells or other solar collecting equipment. However, an active solar energy system used in the production of electricity includes only equipment used up to, but not including, the stage of conveyance or use of the electricity. For the purpose of this paragraph, the term “parts” includes spare parts that are owned by the owner of, or the maintenance contractor for, an active solar energy system that uses solar energy in the production of electricity and which spare parts were specifically purchased, designed, or fabricated by or for that owner or maintenance contractor for installation in an active solar energy system that uses solar energy in the production
of electricity, thereby including those parts in the tax appraisal exclusion created by this section.
(2) An active solar energy system that uses solar energy in the production of electricity also includes pipes and ducts that are used exclusively to carry energy derived from solar energy. Pipes and ducts that are used to carry both energy derived from solar energy and from energy derived from other sources are active solar energy system property only to the extent of 75 percent of their full cash value.
(3) An active solar energy system that uses solar energy in the production of electricity does not include auxiliary equipment, such as furnaces and hot water heaters, that use a source of power other than solar energy to provide usable energy. An active solar energy system that
uses solar energy in the production of electricity does include equipment, such as ducts and hot water tanks, that is utilized by both auxiliary equipment and solar energy equipment, that is, dual use equipment. That equipment is active solar energy system property only to the extent of 75 percent of its full cash value.
(e) (1) Notwithstanding any other law, for purposes of this section, “the construction or addition of any active solar energy system” includes the construction of an active solar energy system incorporated by the owner-builder in the initial construction of a new building that the owner-builder does not intend to occupy or use. The exclusion from “newly constructed” provided by this subdivision applies to the initial purchaser who purchased the new building from the owner-builder, but only if the
owner-builder did not receive an exclusion under this section for the same active solar energy system after completion of its construction, and only if the initial purchaser purchased the new building prior to that building becoming subject to reassessment to the owner-builder, as described in subdivision (d) of Section 75.12. The assessor shall administer this subdivision in the following manner:
(A) The initial purchaser of the building shall file a claim with the assessor and provide to the assessor any documents necessary to identify the value attributable to the active solar energy system included in the purchase price of the new building. The claim shall also identify the amount of any rebate for the active solar energy system provided to either the owner-builder or the initial purchaser by the Public Utilities Commission, the State
Energy Resources Conservation and Development Commission, an electrical corporation, a local publicly owned electric utility, or any other agency of the State of California.
(B) The assessor shall evaluate the claim and determine the portion of the purchase price that is attributable to the active solar energy system. The assessor shall then reduce the new base year value established as a result of the change in ownership of the new building by an amount equal to the difference between the following two amounts:
(i) That portion of the value of the new building attributable to
the active solar energy system.
(ii) The total amount of all rebates, if any, described in subparagraph (A) that were provided to either the owner-builder or the initial purchaser.
(C) The extension of the new construction exclusion to the initial purchaser of a newly constructed new building shall remain in effect only until there is a subsequent change in ownership of the new building.
(2) The State Board of Equalization, in consultation with the California Assessors’ Association, shall prescribe the manner, documentation, and form for claiming the new construction exclusion required by this subdivision.
(f) Notwithstanding any other law, the
exclusion from new construction provided by this section shall remain in effect only until there is a subsequent change in ownership.
(g) Active solar energy systems that qualified for an exclusion under Section 73, as that section read on December 31, 2024, 2025, before January 1, 2025, 2026, shall continue to be excluded on and after January 1, 2025,
2026, as provided in that section until there is a subsequent change in ownership.
(h) This section applies to property tax lien dates for the 2024–25 2025–26 fiscal year and for each fiscal year thereafter, inclusive.
SEC. 5.
Section 73.2 is added to the Revenue and Taxation Code, to read:73.2.
(a) Notwithstanding subdivision (a) of Section 73.1, the term “newly constructed,” as used in subdivision (a) of Section 2 of Article XIII A of the California Constitution, shall include all of the following:(1) On the first lien date that is at least ____ years one year after the date on which construction is completed on a nonqualified active solar energy system, ____
80 percent of the full cash value of that nonqualified active solar energy system upon that first lien date.
(2) On the first lien date that is at least ____ four years after the date on which construction is completed on a nonqualified active solar energy system, an additional ____ 60 percent of the full cash value of that nonqualified active solar energy system upon that first lien date.
(3) On the
first lien date that is at least ____ seven years after the date on which construction is completed on a nonqualified active solar energy system, an additional ____ 50 percent of the full cash value of that nonqualified active solar energy system upon that first lien date.
(4)On the first lien date that is at least ____ years after the date on which construction is completed on a nonqualified active solar energy system, an additional ____ percent of the full cash value of that nonqualified active solar energy system upon that first lien date.
(b) For purposes of this section, “nonqualified active solar energy system” means an active solar energy system, as defined in subdivision (b) of Section 73.1, with a rated nameplate capacity of 20 megawatts of alternating current or higher.
(c) This section applies to all property tax lien dates for the 2024–25 2025–26 fiscal year and for each fiscal year thereafter, inclusive.
(d) Notwithstanding subdivision (a), a nonqualified active solar energy system that qualified for an exclusion under Section 73, as that section read on December 31, 2024,
2025, before January 1, 2025, 2026, shall continue to be 100 percent excluded under Section 73, as that section read on December 31, 2024, 2025, on and after January 1, 2025, 2026, until there is a subsequent change in ownership of the nonqualified active solar energy system.
SEC. 6.
Section 73.3 is added to the Revenue and Taxation Code, to read:73.3.
(a) An assessor shall value any active solar energy system or portion thereof consistent with the requirements of Section 401. The methods of valuation shall include, but are not limited to, the comparable sales method, the income method, or the cost method. The preferred method of any valuation of any active solar energy system or portion thereof is the replacement cost new less depreciation (RCNLD) method. The value determined by using the RCNLD method and this section shall be entitled to the presumption of correctness.(b) For purposes of applying Sections 110 and 212 to determine the “full cash value,” “fair market value,” or “taxable value” of any active
solar energy system or portion thereof under Section 73, both of the following shall apply:
(1) “Full cash value,” “fair market value,” or “taxable value” shall include only the tangible property comprising the active solar energy system or portion thereof.
(2) (A) For purposes of paragraph (1), “tangible property” shall not include intangible assets and rights relating to the going concern value of the business, as that phrase is used in Section 110, of operating an active solar energy system or portion thereof. “Intangible assets and rights relating to the going concern value of the business of operating an active solar energy system or portion thereof” includes, but is not limited to, all of the following:
(i) Federal
and state tax credits, cash grants, direct payments, or similar federal subsidies received or to be received.
(ii) Contracts for energy, resource adequacy, ancillary services, or related market products.
(iii) Renewable energy credits, as defined in paragraph (2) of subdivision (h) of Section 399.12 of the Public Utilities Code.
(iv) Environmental commodities, including, but not limited to, carbon credits and emission credits.
(B) Nothing in this paragraph shall be construed to mean that a business operating an active solar energy system does not also have intangible assets and rights commonly found in general businesses, including, but not limited to, concessions,
franchises, workforce in place, customer lists, trademarks, and copyrights.
(c) For purposes of Section 51, in the case of any active solar
energy system or portion thereof excluded from the term “newly constructed” pursuant to Section 73, the active solar energy system or portion thereof is a separate appraisal unit from any other property that is not excluded from the definition of “newly constructed” pursuant to Section 73
(d) This section applies to all property tax lien dates for the 2022–23 and 2023–24 2022–23 to 2024–25 fiscal years. years, inclusive.
(e) This
section shall remain in effect only until January 1, 2025,
2026, and as of that date is repealed.
SEC. 7.
Section 73.4 is added to the Revenue and Taxation Code, to read:73.4.
(a) An assessor shall value any active solar energy system, nonqualified active solar energy system, or portion thereof consistent with the requirements of Section 401. The methods of valuation shall include, but are not limited to, the comparable sales method, the income method, or the cost method. The preferred method of any valuation of any active solar energy system, nonqualified active solar energy system, or portion thereof is the replacement cost new less depreciation (RCNLD) method. The value determined by using the RCNLD method and this section shall be entitled to the presumption of correctness.(b) For purposes of applying Sections 110 and 212 to determine the
“full cash value,” “fair market value,” or “taxable value” of any active solar energy system, nonqualified active solar energy system, or portion thereof under Sections 73.1 and 73.2, both of the following shall apply:
(1) “Full cash value,” “fair market value,” or “taxable value” shall include only the tangible property comprising the active solar energy system, nonqualified active solar energy system, or portion thereof.
(2) (A) For purposes of paragraph (1), “tangible property” shall not include intangible assets and rights relating to the going concern value of the business, as that phrase is used in Section 110, of operating an active solar energy system, nonqualified active solar energy system, or portion thereof. “Intangible assets and rights relating
to the going concern value of the business of operating an active solar energy system, nonqualified active solar energy system, or portion thereof” includes, but is not limited to, all of the following:
(i) Federal and state tax credits, cash grants, direct payments, or similar federal subsidies received or to be received.
(ii) Contracts for energy, resource adequacy, ancillary services, or related market products.
(iii) Renewable energy credits, as defined in paragraph (2) of subdivision (h) of Section 399.12 of the Public Utilities Code.
(iv) Environmental commodities, including, but not limited to, carbon credits and emission credits.
(B) Nothing in this paragraph shall be construed to mean that a business operating an active solar energy system or nonqualified active solar energy system does not also have intangible assets and rights commonly found in general businesses, including, but not limited to, concessions, franchises, workforce in place, customer lists, trademarks, and copyrights.
(c) For purposes of Section 51, in the case of any active solar energy system, nonqualified active solar energy system or portion thereof excluded from the term “newly constructed,” pursuant to Sections 73.1 and 73.2, such active solar energy system, nonqualified active solar energy system, or portion thereof is a separate appraisal unit from any other property that is not excluded from the definition of “newly
constructed” pursuant to Section 73.1 or 73.2.
(d) This section applies to all property tax lien dates for the 2024–2025 2025–26 fiscal year and for each fiscal year thereafter, inclusive.
