This measure would respectfully request that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code.

This measure would respectfully request that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code.

This measure would respectfully request that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code.

This measure would respectfully request that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code.

This measure would respectfully request that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code.

This measure would respectfully request that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code.

WHEREAS, The United States has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the United States; and

WHEREAS, Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power; and

WHEREAS, Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power; and

WHEREAS, Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power; and

WHEREAS, Rural communities can benefit from the construction of utility scale solar energy projects; and

WHEREAS, All of these markets rely on the federal investment tax credit to make solar energy affordable for all who want it; and

WHEREAS, The solar energy industry employs 54,000 Californians and is one of the nations fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation; and

WHEREAS, The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017; and

WHEREAS, Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the United States, including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy; and

WHEREAS, The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth; and

WHEREAS, Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the Investment Tax Credit; and

WHEREAS, Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country; and

WHEREAS, Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and

WHEREAS, The federal investment tax credit for solar power, contained in Sections 48 and 25D of Title 26 of the United States Code, is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature respectfully requests that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the Congress of the United States.

WHEREAS, The United States has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the United States; and

WHEREAS, Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power; and

WHEREAS, Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power; and

WHEREAS, Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power; and

WHEREAS, Rural communities can benefit from the construction of utility scale solar energy projects; and

WHEREAS, All of these markets rely on the federal investment tax credit to make solar energy affordable for all who want it; and

WHEREAS, The solar energy industry employs 54,000 Californians and is one of the nations fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation; and

WHEREAS, The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017; and

WHEREAS, Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the United States, including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy; and

WHEREAS, The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth; and

WHEREAS, Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the Investment Tax Credit; and

WHEREAS, Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country; and

WHEREAS, Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and

WHEREAS, The federal investment tax credit for solar power, contained in Sections 48 and 25D of Title 26 of the United States Code, is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature respectfully requests that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the Congress of the United States.

WHEREAS, The United States has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the United States; and

WHEREAS, Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power; and

WHEREAS, Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power; and

WHEREAS, Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power; and

WHEREAS, Rural communities can benefit from the construction of utility scale solar energy projects; and

WHEREAS, All of these markets rely on the federal investment tax credit to make solar energy affordable for all who want it; and

WHEREAS, The solar energy industry employs 54,000 Californians and is one of the nations fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation; and

WHEREAS, The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017; and

WHEREAS, Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the United States, including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy; and

WHEREAS, The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth; and

WHEREAS, Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the Investment Tax Credit; and

WHEREAS, Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country; and

WHEREAS, Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and

WHEREAS, The federal investment tax credit for solar power, contained in Sections 48 and 25D of Title 26 of the United States Code, is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature respectfully requests that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the Congress of the United States.

WHEREAS, The United States has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the United States; and

WHEREAS, Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power; and

WHEREAS, Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power; and

WHEREAS, Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power; and

WHEREAS, Rural communities can benefit from the construction of utility scale solar energy projects; and

WHEREAS, All of these markets rely on the federal investment tax credit to make solar energy affordable for all who want it; and

WHEREAS, The solar energy industry employs 54,000 Californians and is one of the nations fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation; and

WHEREAS, The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017; and

WHEREAS, Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the United States, including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy; and

WHEREAS, The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth; and

WHEREAS, Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the Investment Tax Credit; and

WHEREAS, Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country; and

WHEREAS, Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and

WHEREAS, The federal investment tax credit for solar power, contained in Sections 48 and 25D of Title 26 of the United States Code, is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature respectfully requests that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the Congress of the United States.

WHEREAS, The United States has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the United States; and

WHEREAS, Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power; and

WHEREAS, Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power; and

WHEREAS, Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power; and

WHEREAS, Rural communities can benefit from the construction of utility scale solar energy projects; and

WHEREAS, All these markets rely on the federal investment tax credit to make solar energy affordable for all who want it; and

WHEREAS, The solar energy industry employs 54,000 Californians and is one of the nations fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation; and

WHEREAS, The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017; and

WHEREAS, Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the United States, including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy; and

WHEREAS, The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth; and

WHEREAS, Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the Investment Tax Credit; and

WHEREAS, Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country; and

WHEREAS, Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and

WHEREAS, The federal investment tax credit for solar power, contained in Sections 48 and 25D of Title 26 of the United States Code, is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature respectfully requests that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the Congress of the United States.

WHEREAS, The United States has an abundance of solar energy resources sufficient to supply a significant portion of the energy needs of the United States; and

WHEREAS, Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power; and

WHEREAS, Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power; and

WHEREAS, Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power; and

WHEREAS, Rural communities can benefit from the construction of utility scale solar energy projects; and

WHEREAS, All these markets rely on the federal investment tax credit to make solar energy affordable for all who want it; and

WHEREAS, The solar energy industry employs 54,000 Californians and is one of the nations fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation; and

WHEREAS, The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017; and

WHEREAS, Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the United States, including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy; and

WHEREAS, The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth; and

WHEREAS, Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the Investment Tax Credit; and

WHEREAS, Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country; and

WHEREAS, Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and

WHEREAS, The federal investment tax credit for solar power, contained in Sections 48 and 25D of Title 26 of the United States Code, is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature respectfully requests that the Congress of the United States take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the United States Code; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the Congress of the United States.

 UNFINISHED BUSINESS  

Bill No: SJR 10

Author: Stone (R), et al.

Amended: 9/10/15

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/24/15

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

SENATE FLOOR: 38-0, 8/20/15

AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak, Wieckowski, Wolk

NO VOTE RECORDED: Hall, Nguyen

ASSEMBLY FLOOR: 77-1, 9/10/15 - See last page for vote

SUBJECT: Federal Investment Tax Credit: solar energy

SOURCE: Author

DIGEST: This resolution requests Congress of the United States to take immediate action to extend two renewable energy tax credits.

Assembly Amendments add coauthors and insert a word.

ANALYSIS:

Existing federal law:

1. Allows taxpayers to claim a credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells placed in service during the taxable year, established by the Energy Policy Act of 2005 (Internal Revenue Code §25D):

1. Allows, additionally, taxpayers claim the credit for small wind-energy systems and geothermal heat pumps, effective January 1, 2008 under the Energy Improvement and Extension Act of 2008.

2. Provides that the credit is equal to 30% of qualified expenditures for a system that serves “a dwelling unit located in the United States that is owned and used as a residence by the taxpayer.”

3. Allows the taxpayer to carry over the excess of any credit to the succeeding six taxable years.

4. Repeals the credit on January 1, 2017.

2. Enacts an investment tax credit for 30% of the basis of a qualified energy property owned by the taxpayer placed in service during the taxable year (Internal Revenue Code §48):

1. Allows the credit for qualified energy property, which includes fuel cells, microturbines, geothermal energy, small wind energy, combined heat and power.

2. Additionally allows the credit equipment that uses solar energy to:

1. Generate heat,

2. Heat, cool, or provide hot water use in a structure,

3. Provide solar process heat, except for swimming pools, or

4. Illuminate the inside of a structure using fiberoptic distributed sunlight.

3. Reduces the percentage from 30% to 10% on January 1, 2017.

Existing state law allows various income tax credits, deductions, sales and use tax exemptions to provide incentives to compensate taxpayers that incur certain expenses, such as child adoption, or to influence behavior, including business practices and decisions, such as research and development credits.

This resolution:

1. Requests the Congress of the United States to take immediate action to extend the federal investment tax credit in Section 48 and 25D of the Internal Revenue Code.

2. Makes several findings and declarations supporting its purposes.

Comments

The effective period of the two federal tax credits that SJR 10 urges Congress to extend coincide with a rapid increase in solar energy generation: solar energy installations increased than 1,600% since the credit was implemented in 2006. Tax credit supporters state that industry employment has grown by 86% in the last four years, and creates jobs at a rate nearly 20 times higher than employment growth in the overall economy. Additionally, public investment in solar energy has reduced its costs, thereby allowing more widespread deployment. However, the renewable energy industry has matured significantly since Congress enacted the credit, and will likely continue to grow without a tax credit subsidy, which increases the current federal budget deficit by approximately $1.7 billion annually, according to the Joint Committee on Taxation. Allowing the credit to phase out under existing law resembles the structure of California’s signature solar energy program, the California Solar Initiative. Enacted by the Legislature in 2006 with the goal of supporting 2,000 megawatts of solar energy in the state, the initiative offered financial incentives to individuals that shrank over time to account for lower costs as solar technology advanced and demand increased. By 2014, the incentives had been exhausted, yet solar energy installation in California continues apace, indicating that installing solar energy makes sense without a subsidy.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 9/10/15)

California Solar Energy Industries Association

Environment California

OPPOSITION: (Verified 9/10/15)

None received

ARGUMENTS IN SUPPORT: According to the author, “SJR 10 is a resolution that calls on the U.S. Congress to extend the Federal Investment Tax Credit for Solar Energy.  The tax credit is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016. The solar energy industry employs 54,000 Californians and is one of the nation’s fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation.  The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth. The loss of the investment tax credit would not only lead to significant job losses in California and beyond in 2017, but would also make solar energy less affordable to all who want to take advantage of this source of clean energy.  This is a worthy tax credit, and is deserving of being extended.”

ASSEMBLY FLOOR: 77-1, 9/10/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Chávez

NO VOTE RECORDED: Dahle, Obernolte

Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119

9/11/15 8:50:13

**** END ****

SENATE THIRD READING

STR Bill Id:SJR 10

Author:(Stone)

As Amended Ver:September 4, 2015

Majority vote

SENATE VOTE: 38-0

SUMMARY: Requests that the United States (U.S.) Congress take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the U.S. Code (U.S.C.). Specifically, this resolution:

1. Contains the following recitals:

   1. The U.S. has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the U.S.;

   2. Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power;

   3. Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power;

   4. Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power;

   5. Rural communities can benefit from the construction of utility scale solar energy projects;

   6. All of these markets rely on the federal investment tax credit to make solar energy affordable for all who want it;

   7. The solar energy industry employs 54,000 Californians and is one of the nation's fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation;

   8. The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017;

   9. Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the U.S., including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy;

   10. The solar industry adds more than $15 billion to the U.S. economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth;

   11. Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the investment tax credit;

   12. Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country;

   13. Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and,

   14. The federal investment tax credit for solar power is set to decrease from 30% to 10% for commercial consumers and from 30% to 0% for residential consumers after December 31, 2016.

2. Directs the Secretary of the Senate to transmit copies of this resolution to the President and Vice President, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the U.S. Congress.

EXISTING FEDERAL LAW:

1. Allows a tax credit for residential energy efficient property. Specifically allows individuals, under 26 U.S.C. Section 25D, a credit equal to 30% of the:

   1. "Qualified solar electric property expenditures" made by the taxpayer during the year; and,

   2. "Qualified solar water heating property expenditures" made by the taxpayer during the year.

2. Defines a "qualified solar electric property expenditure" as an expenditure for property that uses solar energy to generate electricity for use in a dwelling unit located in the U.S. and used as a residence by the taxpayer.

3. Defines a "qualified solar water heating property expenditure" to mean an expenditure for property to heat water for use in a dwelling unit located in the U.S. and used as a residence by the taxpayer if at least half of the energy used by such property for such purpose is derived from the sun.

4. Provides that the credit allowed under 26 U.S.C. Section 25D shall not apply to property placed in service after December 31, 2016.

5. Allows a business energy investment credit under 26 U.S.C. Section 48. Specifically allows a credit generally equal to 10% of the taxpayer's basis in qualified energy property placed in service during the tax year. For property placed in service before 2017, the credit percentage is increased to 30% for equipment that uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat (except when used to heat a swimming pool).

FISCAL EFFECT: None

COMMENTS:

1. The author has provided the following statement in support of this resolution:

SJR 10 is a resolution that calls on the U.S. Congress to extend the Federal Investment Tax Credit for Solar Energy. The tax credit is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016.

The solar energy industry employs 54,000 Californians and is one of the nation's fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation. The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth.

The loss of the investment tax credit would not only lead to significant job losses in California and beyond in 2017, but would also make solar energy less affordable to all who want to take advantage of this sources of clean energy. This is a worthy tax credit, and is deserving of being extended.

2. This resolution is supported by Environment California, which notes the following:

Thanks to the pairing of California's robust solar energy polices and the Solar ITC at the federal level, California has become the nationwide leader in solar power, putting the state on the path towards fulfilling a number of critical environmental goals. This, in turn, has spurred significant job creation and economic development in communities across the state.

For example, solar power offers the agricultural community an important tool for controlling rising energy costs and making farmers more economically resilient and better able to invest in local jobs. In addition, solar offers school districts an increasingly important tool for lowering rising energy costs so as to put more scare public dollars toward education. Lastly, solar also gives homeowners and small businesses important opportunities to control rising energy costs. All of these solar energy consumers directly benefit from Sections 48 and 25D of [the] federal tax code, also known as the Solar Investment Tax Credit.

There is no known opposition.

3. Assembly Revenue and Taxation Committee staff comments:

   1. General background: SJR 10 (Stone) urges Congress to extend two federal income tax credits: the residential energy efficiency tax credit and the investment tax credit for qualified energy property. The first tax credit is set to expire on December 31, 2016; the second tax credit will be substantially modified on January 1, 2017, when the credit percentage will decrease from 30% to 10%.

The residential energy efficiency tax credit (Section 25D of the Internal Revenue Code (IRC)) was initially established by the Energy Policy Act of 2005, and then substantially expanded in 2008 and 2009. Thus, a taxpayer may claim a credit equal to 30% of qualified expenditures for a system or property that serves "a dwelling unit located in the United States that is owned and used as a residence by the taxpayer." These qualified expenditures must be incurred for, or in connection with, solar-electric systems, solar water heating systems, fuel cells, small wind energy property and geothermal heat pump property placed in service during the taxable year. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.

In contrast, IRC Section 48 allows taxpayers an investment tax credit for 30% of the basis of a qualified energy property placed in service during the taxable year.¹ The qualifying energy property includes certain fuel cell, solar, geothermal power production, small wind energy, combined heat and power system, and geothermal heat pump property. The investment credit amount is generally equal to 30% of the taxpayer's basis in qualified fuel cell property, certain solar energy property, and wind energy property. The credit amount is 10% of the taxpayer's basis in all other types of qualifying energy property. Energy property is defined, among others, as equipment that uses solar energy to generate electricity to heat or cool a structure or to provide solar process heat, except property used to heat a swimming pool. Energy property also includes equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. The investment tax credit may be claimed entirely in the year the facility is placed in service.
In February 2009, Congress enacted, and President Obama signed, the American Recovery and Reinvestment Act, which, among other things, allowed taxpayers to make an irrevocable election to receive a federal grant payment in lieu of the investment tax credit, provided that a qualified facility was placed in service in 2009, 2010, 2011 or 2012. The grant program was created to help developers of renewable energy projects to finance these projects. Often, developers seek investors that are allocated 99% of the income, gains, losses, deductions and tax credits of the project. However, during the last economic downturn, the potential investors did not have enough tax liability to utilize those deductions and credits. The creation of the grant program allowed developers to receive a federal subsidy to continue with the renewable energy projects. However, by choosing to receive these payments, applicants elected to forego tax credits under IRC Sections 48 and 45 with respect to such property for the taxable year in which the payment is made or any subsequent taxable year.²

2. Reducing the investment tax credit and eliminating the residential energy efficiency tax credit: The federal energy tax credits reduce tax liability for individuals and businesses that purchase qualifying solar energy technologies, which should encourage additional private sector investment in solar manufacturing and solar project construction. As explained by the author's office, the solar industry is an important component of the U.S. economy, and long-term incentive programs can make solar energy practical and cost effective. The goal of this resolution, in part, is to prevent the significant job losses in California that would occur as a result of the federal tax credits being phased out. Despite this concern, however, job losses have not been shown to occur when other subsidies have been eliminated. In fact, even after exhausting the $2.2 billion California Solar Initiative, which offered financial incentives to individuals with the goal of supporting 2,000 megawatts of solar energy in the state, the industry has enjoyed a job growth rate that is 20 times higher than the overall economy. As such, the phasing out of the federal tax credits may not have the detrimental impact that this resolution aims to prevent. This contention is supported by the fact that the federal energy credits and the California Solar Initiative may not be the primary reason why over one-half of all solar panel installations have been made in California. According to Severin Borenstein, Professor at the Berkeley Hass School of Business, the reason why California leads the nation in residential solar panel installations is, in part, because California's two largest utilities have some of the country's highest average residential electricity prices and because the rates are tiered.³ The higher average prices make the installation of solar panels much more attractive. Although the elimination and reduction of the federal energy credits will have an impact, it may only eliminate marginal projects.

3. Should the tariff be eliminated? This resolution urges Congress to extend immediately the federal energy credits; but if the goal is to increase the number of solar panel installations in California, this resolution may also want to encourage the Commerce Department to eliminate tariffs on solar cells imported from China. Over the last few years, China has been subsidizing the production of solar panels. Many of these solar panels have been flooding the U.S. market, forcing the closure of many domestic producers. Unfortunately, the tariff and the federal energy credits appear to be working at odds with each other. On the one hand, the U.S. is providing huge subsidies to encourage more businesses and households to install solar panels; on the other hand, the U.S. is making it more expensive to purchase inexpensive Chinese made solar panels. As a result, the Commerce Department has potentially made the federal energy credits less effective.

Analysis Prepared by: Oksana Jaffe, M. David Ruff & Carlos Anguiano / REV. & TAX. / (916) 319-2098

FN: 0002328

Date of Hearing: September 9, 2015

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Philip Ting, Chair

SBPCA Bill Id:SJR 10

Author:(Stone) – As Amended Ver:September 4, 2015

SENATE VOTE: 38-0

SUBJECT: Federal Investment Tax Credit: solar energy

SUMMARY: Requests that the United States (U.S.) Congress take immediate action to extend the federal investment tax credit in Sections 48 and 25D of Title 26 of the U.S. Code (U.S.C.). Specifically, this resolution:

1. Contains the following recitals:

   1. The U.S. has an abundance of solar energy resources that are sufficient to supply a significant portion of the energy needs of the U.S.;

   2. Farmers can become more economically resilient to the unique and difficult challenges facing farming communities through solar power;

   3. Schools and educational institutions, as well as other governmental entities and nonprofit entities, can save considerable amounts of limited public moneys by investing in solar power;

   4. Homeowners, renters, and businesses statewide can control for rising energy costs through the investment in solar power;

   5. Rural communities can benefit from the construction of utility scale solar energy projects;

   6. All of these markets rely on the federal investment tax credit to make solar energy affordable for all who want it;

   7. The solar energy industry employs 54,000 Californians and is one of the nation's fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation;

   8. The loss of the investment tax credit would lead to significant job losses in California and beyond in 2017;

   9. Accelerated development and use of solar energy technologies would provide numerous benefits to all citizens of California and the U.S., including improved national security, healthier rural economies, improved air and environmental quality, and abundant, reliable, and affordable energy;

   10. The solar industry adds more than $15 billion to the U.S. economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth;

   11. Increased use of solar energy is practical and can be cost effective with the help of consistent, long-term supportive policies and proper incentives to stimulate markets and infrastructure, such as the investment tax credit;

   12. Long-term supportive policies and proper incentives at the local, state, and federal levels have brought about significant cost reductions within the solar industry in California and across the country;

   13. Public policies aimed at enhancing solar energy production and accelerating technological improvements will further reduce energy costs over time and increase market demand; and,

   14. The federal investment tax credit for solar power is set to decrease from 30% to 10% for commercial consumers and from 30% to 0% for residential consumers after December 31, 2016.

2. Directs the Secretary of the Senate to transmit copies of this resolution to the President and Vice President, to the Speaker of the House of Representatives, to the Majority Leader of the Senate, and to each Senator and Representative from California in the U.S. Congress.

EXISTING FEDERAL LAW:

1. Allows a tax credit for residential energy efficient property. Specifically allows individuals, under 26 U.S.C. Section 25D, a credit equal to 30% of the:

   1. "Qualified solar electric property expenditures" made by the taxpayer during the year; and,

   2. "Qualified solar water heating property expenditures" made by the taxpayer during the year.

2. Defines a "qualified solar electric property expenditure" as an expenditure for property that uses solar energy to generate electricity for use in a dwelling unit located in the U.S. and used as a residence by the taxpayer.

3. Defines a "qualified solar water heating property expenditure" to mean an expenditure for property to heat water for use in a dwelling unit located in the U.S. and used as a residence by the taxpayer if at least half of the energy used by such property for such purpose is derived from the sun.

4. Provides that the credit allowed under 26 U.S.C. Section 25D shall not apply to property placed in service after December 31, 2016.

5. Allows a business energy investment credit under 26 U.S.C. Section 48. Specifically allows a credit generally equal to 10% of the taxpayer's basis in qualified energy property placed in service during the tax year. For property placed in service before 2017, the credit percentage is increased to 30% for equipment that uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat (except when used to heat a swimming pool).

FISCAL EFFECT: None

COMMENTS:

1. The author has provided the following statement in support of this resolution:

SJR 10 is a resolution that calls on the U.S. Congress to extend the Federal Investment Tax Credit for Solar Energy. The tax credit is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016.

The solar energy industry employs 54,000 Californians and is one of the nation's fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation. The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth.

The loss of the investment tax credit would not only lead to significant job losses in California and beyond in 2017, but would also make solar energy less affordable to all who want to take advantage of this sources of clean energy. This is a worthy tax credit, and is deserving of being extended.

2. This resolution is supported by Environment California, which notes the following:

Thanks to the pairing of California's robust solar energy polices and the Solar ITC at the federal level, California has become the nationwide leader in solar power, putting the state on the path towards fulfilling a number of critical environmental goals. This, in turn, has spurred significant job creation and economic development in communities across the state.

For example, solar power offers the agricultural community an important tool for controlling rising energy costs and making farmers more economically resilient and better able to invest in local jobs. In addition, solar offers school districts an increasingly important tool for lowering rising energy costs so as to put more scare public dollars toward education. Lastly, solar also gives homeowners and small businesses important opportunities to control rising energy costs. All of these solar energy consumers directly benefit from Sections 48 and 25D of [the] federal tax code, also known as the Solar Investment Tax Credit.

3. Committee Staff comments:

   1. General background: SJR 10 (Stone) urges Congress to extend two federal income tax credits: the residential energy efficiency tax credit and the investment tax credit for qualified energy property. The first tax credit is set to expire on December 31, 2016; the second tax credit will be substantially modified on January 1, 2017, when the credit percentage will decrease from 30% to 10%.

The residential energy efficiency tax credit (Section 25D of the Internal Revenue Code (IRC)) was initially established by the Energy Policy Act of 2005, and then substantially expanded in 2008 and 2009. Thus, a taxpayer may claim a credit equal to 30% of qualified expenditures for a system or property that serves "a dwelling unit located in the United States that is owned and used as a residence by the taxpayer." These qualified expenditures must be incurred for, or in connection with, solar-electric systems, solar water heating systems, fuel cells, small wind energy property and geothermal heat pump property placed in service during the taxable year. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.

In contrast, IRC Section 48 allows taxpayers an investment tax credit for 30% of the basis of a qualified energy property placed in service during the taxable year.¹ The qualifying energy property includes certain fuel cell, solar, geothermal power production, small wind energy, combined heat and power system, and geothermal heat pump property. The investment credit amount is generally equal to 30% of the taxpayer's basis in qualified fuel cell property, certain solar energy property, and wind energy property. The credit amount is 10% of the taxpayer's basis in all other types of qualifying energy property. Energy property is defined, among others, as equipment that uses solar energy to generate electricity to heat or cool a structure or to provide solar process heat, except property used to heat a swimming pool. Energy property also includes equipment that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. The investment tax credit may be claimed entirely in the year the facility is placed in service.

In February 2009, Congress enacted, and President Obama signed, the American Recovery and Reinvestment Act, which, among other things, allowed taxpayers to make an irrevocable election to receive a federal grant payment in lieu of the investment tax credit, provided that a qualified facility was placed in service in 2009, 2010, 2011 or 2012. The grant program was created to help developers of renewable energy projects to finance these projects. Often, developers seek investors that are allocated 99% of the income, gains, losses, deductions and tax credits of the project. However, during the last economic downturn, the potential investors did not have enough tax liability to utilize those deductions and credits. The creation of the grant program allowed developers to receive a federal subsidy to continue with the renewable energy projects. However, by choosing to receive these payments, applicants elected to forego tax credits under IRC Sections 48 and 45 with respect to such property for the taxable year in which the payment is made or any subsequent taxable year.²

2. Reducing the investment tax credit and eliminating the residential energy efficiency tax credit: The federal energy tax credits reduce tax liability for individuals and businesses that purchase qualifying solar energy technologies, which should encourage additional private sector investment in solar manufacturing and solar project construction. As explained by the author's office, the solar industry is an important component of the U.S. economy, and long-term incentive programs can make solar energy practical and cost effective. The goal of this resolution, in part, is to prevent the significant job losses in California that would occur as a result of the federal tax credits being phased out. Despite this concern, however, job losses have not been shown to occur when other subsidies have been eliminated. In fact, even after exhausting the $2.2 billion California Solar Initiative, which offered financial incentives to individuals with the goal of supporting 2,000 megawatts of solar energy in the state, the industry has enjoyed a job growth rate that is 20 times higher than the overall economy. As such, the phasing out of the federal tax credits may not have the detrimental impact that this resolution aims to prevent. This contention is supported by the fact that the federal energy credits and the California Solar Initiative may not be the primary reason why over one-half of all solar panel installations have been made in California. According to Severin Borenstein, Professor at the Berkeley Hass School of Business, the reason why California leads the nation in residential solar panel installations is, in part, because California's two largest utilities have some of the country's highest average residential electricity prices and because the rates are tiered.³ The higher average prices make the installation of solar panels much more attractive. Although the elimination and reduction of the federal energy credits will have an impact, it may only eliminate marginal projects.

3. Should the tariff be eliminated? This resolution urges Congress to extend immediately the federal energy credits; but if the goal is to increase the number of solar panel installations in California, this resolution may also want to encourage the Commerce Department to eliminate tariffs on solar cells imported from China. Over the last few years, China has been subsidizing the production of solar panels. Many of these solar panels have been flooding the U.S. market, forcing the closure of many domestic producers. Unfortunately, the tariff and the federal energy credits appear to be working at odds with each other. On the one hand, the U.S. is providing huge subsidies to encourage more businesses and households to install solar panels; on the other hand, the U.S. is making it more expensive to purchase inexpensive Chinese made solar panels. As a result, the Commerce Department has potentially made the federal energy credits less effective.

REGISTERED SUPPORT / OPPOSITION:

Support

Environment California

Opposition

None on file

Analysis Prepared by: Oksana Jaffe, M. David Ruff, & Carlos Anguiano / REV. & TAX. / (916) 319-2098

 THIRD READING 

Bill No: SJR 10

Author: Stone (R), et al.

Amended: 6/19/15

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/24/15

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

SUBJECT: Federal Investment Tax Credit: solar energy

SOURCE: Author

DIGEST: This resolution requests Congress of the United States to take immediate action to extend two renewable energy tax credits.

ANALYSIS:

Existing federal law:

1. Allows taxpayers to claim a credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells placed in service during the taxable year, established by the Energy Policy Act of 2005 (Internal Revenue Code §25D).

1. Additionally allows taxpayers claim the credit for small wind-energy systems and geothermal heat pumps, effective January 1, 2008 under the Energy Improvement and Extension Act of 2008.

2. Provides that the credit is equal to 30% of qualified expenditures for a system that serves “a dwelling unit located in the United States that is owned and used as a residence by the taxpayer.”

3. Allows the taxpayer to carry over the excess of any credit to the succeeding six taxable years.

4. Repeals the credit on January 1, 2017.

2. Enacts an investment tax credit for 30% of the basis of a qualified energy property owned by the taxpayer placed in service during the taxable year (Internal Revenue Code §48).

1. Allows the credit for qualified energy property, which includes fuel cells, microturbines, geothermal energy, small wind energy, combined heat and power,

2. Additionally allows the credit equipment that uses solar energy to:

1. Generate heat,

2. Heat, cool, or provide hot water use in a structure,

3. Provide solar process heat, except for swimming pools, or

4. Illuminate the inside of a structure using fiberoptic distributed sunlight.

3. Reduces the percentage from 30% to 10% on January 1, 2017.

Existing state law allows various income tax credits, deductions, sales and use tax exemptions to provide incentives to compensate taxpayers that incur certain expenses, such as child adoption, or to influence behavior, including business practices and decisions, such as research and development credits.

This resolution:

1. Requests the Congress of the United States to take immediate action to extend the federal investment tax credit in Section 48 and 25D of the Internal Revenue Code.

2. Makes several findings and declarations supporting its purposes.

Comments

The effective period of the two federal tax credits that SJR 10 urges Congress to extend coincide with a rapid increase in solar energy generation: solar energy installations increased than 1,600% since the credit was implemented in 2006. Tax credit supporters state that industry employment has grown by 86% in the last four years, and creates jobs at a rate nearly 20 times higher than employment growth in the overall economy. Additionally, public investment in solar energy has reduced its costs, thereby allowing more widespread deployment. However, the renewable energy industry has matured significantly since Congress enacted the credit, and will likely continue to grow without a tax credit subsidy, which increases the current federal budget deficit by approximately $1.7 billion annually, according to the Joint Committee on Taxation. Allowing the credit to phase out under existing law resembles the structure of California’s signature solar energy program, the California Solar Initiative. Enacted by the Legislature in 2006 with the goal of supporting 2,000 megawatts of solar energy in the state, the initiative offered financial incentives to individuals that shrank over time to account for lower costs as solar technology advanced and demand increased. By 2014, the incentives had been exhausted, yet solar energy installation in California continues apace, indicating that installing solar energy makes sense without a subsidy. It is unclear whether the Legislature should request that Congress extend a tax credit for an industry that may be sufficiently mature to thrive without government support.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 6/24/15)

California Solar Energy Industries Association

OPPOSITION: (Verified 6/24/15)

None received

ARGUMENTS IN SUPPORT: According to the author, “SJR 10 is a resolution that calls on the U.S. Congress to extend the Federal Investment Tax Credit for Solar Energy.  The tax credit is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016. The solar energy industry employs 54,000 Californians and is one of the nation’s fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation.  The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth. The loss of the investment tax credit would not only lead to significant job losses in California and beyond in 2017, but would also make solar energy less affordable to all who want to take advantage of this source of clean energy.  This is a worthy tax credit, and is deserving of being extended.”

Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119

6/24/15 15:28:20

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

FEDERAL INVESTMENT TAX CREDIT: SOLAR ENERGY

Requests Congress to extend two renewable energy tax credits.

Background and Existing Law

California law allows various income tax credits, deductions, sales and use tax exemptions to provide incentives to compensate taxpayers that incur certain expenses, such as child adoption, or to influence behavior, including business practices and decisions, such as research and development credits. The Legislature typically enacts such tax incentives to encourage taxpayers to do something that but for the tax credit, they would not do. The Department of Finance is required to annually publish a list of tax expenditures, currently totaling around $51 billion per year. At the federal level, tax expenditures reduced federal income tax revenue in 2014 by over $1.1 trillion, and payroll taxes and other revenues an additional $122 billion, the single largest category of federal expenditures.

I. Residential Energy Efficiency Tax Credit. Established by the Energy Policy Act of 2005, Internal Revenue Code (IRC) 25(d) allows taxpayers to claim a credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells placed in service during the taxable year. The Energy Improvement and Extension Act of 2008 extended the tax credit to small wind-energy systems and geothermal heat pumps, effective January 1, 2008, and the American Recovery and Reinvestment Act of 2009 removed the maximum credit amount for almost all eligible technologies placed in service after 2008. A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves “a dwelling unit located in the United States that is owned and used as a residence by the taxpayer.” If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.

II. Investment Credit. IRC 48 allows taxpayers an investment tax credit for 30% of the basis of a qualified energy property placed in service during the taxable year, distinct from IRC 45’s production credit, which awards a tax credit based on the amount of energy produced. Among other, qualified energy property includes fuel cells, microturbines, geothermal energy, small wind energy, combined heat and power, and equipment that uses solar energy to:

• Generate electricity,

• Heat, cool, or provide hot water use in a structure,

• Provide solar process heat, except for swimming pools, or

• Illuminate the inside of a structure using fiber-optic distributed sunlight

On January 1, 2017, the residential credit sunsets entirely, and the percentage for the investment tax credit falls from 30% to 10%. The author wants the Legislature to request that Congress extend the credits.

Proposed Law

Senate Joint Resolution 10 respectfully requests the Congress of the United States to take immediate action to extend the federal investment tax credit in Section 48 and 25D of the Internal Revenue Code. The resolution makes several findings and declarations supporting its purposes, and directs the Secretary of the Senate to transmit copies of the resolution to the President, Vice President, the Speaker of the House of Representatives, the Majority Leader of the Senate, and to each Senator and representative from California in the Congress.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “SJR 10 is a resolution that calls on the U.S. Congress to extend the Federal Investment Tax Credit for Solar Energy.  The tax credit is set to decrease from 30 percent to 10 percent for commercial consumers and from 30 percent to 0 percent for residential consumers after December 31, 2016. The solar energy industry employs 54,000 Californians and is one of the nation’s fastest growing job creators, employing 173,807 people nationwide and growing at a rate nearly 20 times faster than the overall economy, according to The Solar Foundation.  The solar industry adds more than $15 billion to the United States economy and increased energy production from domestic solar energy resources would attract substantial new investments in energy infrastructure and create local economic growth. The loss of the investment tax credit would not only lead to significant job losses in California and beyond in 2017, but would also make solar energy less affordable to all who want to take advantage of this source of clean energy.  This is a worthy tax credit, and is deserving of being extended.”

2. Not so fast? The effective period of the two federal tax credits SJR 10 urges Congress to extend coincide with a rapid increase in solar energy generation: solar energy installations increased than 1,600 percent since the ITC was implemented in 2006. Tax credits supporters state that industry employment has grown by 86% in the last four years, and creates jobs at a rate nearly 20 times higher than employment growth in the overall economy.  Additionally, public investment in solar energy has reduced its costs, thereby allowing more widespread deployment. However, the renewable energy industry has matured significantly since Congress enacted the credit, and will likely continue to grow without a tax credit subsidy, which increases the current federal budget deficit by approximately $1.7 billion annually, according to the Joint Committee on Taxation. Allowing the credit to phase out under current law resembles the structure of California’s signature solar energy program, the California Solar Initiative. Enacted by the Legislature in 2006 with the goal of supporting 2,000 megawatts of solar energy in the state, the initiative offered financial incentives to individuals that shrank over time to account for lower costs as solar technology advanced and demand increased. By 2014, the incentives had been exhausted, yet solar energy installation in California continues apace, indicating that installing solar energy makes sense without a subsidy. It is unclear whether the Legislature should request that Congress extend a tax credit for an industry that may be sufficiently mature to thrive without government support.

3. One of many. A recent United States Government Accountability Office (GAO) Report, “Federal Support for Renewable and Advanced Energy Technologies,” identified 82 federal wind-related projects implemented by nine different federal agencies, including the tax credits SJR seeks to extend, grants, loans, and loan guarantees. While seven of these initiatives overlap, GAO states that they may address different needs of wind project developers or the communities their projects serve. GAO also states that many states additionally offer tax incentives, grant and loan programs, and renewable portfolio standards such as California’s that further support wind energy. GAO states that their review indicates that two wind projects for which it reviewed documentation would’ve been built without federal support. Given the scope and size of federal and state government support for renewable energy, the Committee may wish to consider whether the tax credit is the best alternative to increasing wind energy production.

4. Financial innovation. Many renewable energy projects in California use a novel model to monetize the federal tax credits SJR 10 seeks to extend, leading to lower costs of renewable energy capital, known as “tax equity financing.” Tax equity financing relies on the tax credit appetites of large financial institutions, who receive a return based not only on cash flow from the asset or project, but also on tax benefits. Unlike financial institutions, developers generally don’t have sufficient income from other sources to make use of the federal tax credit. The investor doesn’t manage or operate the asset or project it owns, but can claim the credit because the law only allows the owner of the asset or project to do so. Two tax equity financing structures are currently in use: flip partnerships and sale-leaseback models. In the flip partnership model, the tax equity investor forms a partnership with a developer, who has near complete ownership of the development until a predetermined circumstance “flips” the ownership to the project developer. Sale leasebacks involve a renewable energy project developer selling the project’s assets to a tax equity investor, who then leases them back to the developer while agreeing to be responsible for the operating expenses.

Support and Opposition

(6/17/15)

Support: Unknown.

Opposition: Unknown.

-- END --