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SB-1191 Personal Income Tax Law and Corporation Tax Law: exclusions: environmental credits.(2023-2024)

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Date Published: 04/11/2024 09:00 PM
SB1191:v97#DOCUMENT

Amended  IN  Senate  April 11, 2024
Amended  IN  Senate  March 20, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 1191

Introduced by Senator Padilla

February 14, 2024

An act to add Sections 17132.3 and 24310.5 to the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


SB 1191, as amended, Padilla. Personal Income Tax Law and Corporation Tax Law: exclusions: environmental credits.
Existing law, the Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Existing federal law authorizes an applicable entity, as defined, to receive a refund for specified environmental credits against the taxes imposed under federal law and excludes a refund payment made pursuant to that law from gross income. Existing federal law also authorizes an eligible taxpayer, as defined, to transfer the value of that refundable credit and exempts from gross income payment received by the transferor as consideration for the transfer. Existing federal law prohibits the transferee from deducting the amount paid as consideration for the transfer.
This bill, in conformity with federal law, for taxable years beginning on or after January 1, 2023, would exclude from gross income a refund payment made to an applicable entity, as defined, for the specified federal environmental credits described above and any payment received by a transferor as consideration for a transfer, as provided. The bill would also prohibit a transferee from deducting the amount paid as consideration for the transfer, in conformity with federal law.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
This bill would make findings and declarations related to a gift of public funds.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17132.3 is added to the Revenue and Taxation Code, to read:

17132.3.
 (a) For taxable years beginning on or after January 1, 2023, gross income does not include any payment made to an applicable entity pursuant to Section 6417 of the Internal Revenue Code, as added by Public Law 117-169, relating to elective payment of applicable credits. Sections 6417(c)(1)(C) and 6417(c)(1)(D) of the Internal Revenue Code Code, as added by Public Law 117-169, shall apply.
(b) For taxable years beginning on or after January 1, 2023, gross income does not include any payment made to an eligible taxpayer pursuant to Section 6418 of the Internal Revenue Code, as added by Public Law 117-169, relating to transfer of certain credits.
(1) Sections 6418(c)(1)(A) and 6418(c)(1)(B) of the Internal Revenue Code Code, as added by Public Law 117-169, shall apply.
(2) No deduction shall be allowed for any amount paid in consideration of a transfer made as described in Section 6418 of the Internal Revenue Code. Code, as added by Public Law 117-169.
(c) For purposes of this section, the following definitions apply: “payment made pursuant to Section 6418 of the Internal Revenue Code” includes the value of a credit received by a transferee pursuant to Section 6418 of the Internal Revenue Code, as added by Public Law 117-169.

(1)“Applicable entity” has the same meaning as defined in Section 6417(d)(1)(A) of the Internal Revenue Code and includes a transferee of a credit as described in Section 6418 of the Internal Revenue Code.

(2)“Eligible taxpayer” has the same meaning as defined in Section 6418(f)(2) of the Internal Revenue Code.

(d) (1) For purposes of complying with Section 41, for this section and Section 24310.5, the Legislature finds and declares all of the following:
(A) The goal, purpose, and objective of the conformity to the exclusion and deduction provisions of Sections 6417 and 6418 of the Internal Revenue Code is to promote the investment and construction of clean energy projects and clean energy advanced manufacturing facilities in California.
(B) The performance indicators to measure whether the conformity meets the goal, purpose, and objective stated in paragraph (1) are the number of applicable entities that utilize Sections 6417 and 6418 of the Internal Revenue Code for federal income tax credits in taxable years beginning on or after January 1, 2025, as compared to investment in traditional tax equity structures in taxable years ending on or before December 31, 2024.
(2) (A) To assist the Legislature in determining whether the conformity fulfills the goal, purpose, and objective stated in subparagraph (A) of paragraph (1), the Franchise Tax Board shall annually collect data on the number of payments made to eligible taxpayers pursuant to Sections 6417 and 6418 of the Internal Revenue Code, relating to certain federal income tax credits, and compare the number of transactions to the investment in traditional tax equity structures in taxable years ending on or before December 31, 2024.
(B) On or before December 1, 2025, and each December 1 thereafter, the Franchise Tax Board shall submit the data required by paragraph (1) in a report to the Legislature in compliance with Section 9795 of the Government Code.
(C) The requirement for submitting a report imposed under this subdivision is inoperative on January 1, 2036.

SEC. 2.

 Section 24310.5 is added to the Revenue and Taxation Code, to read:

24310.5.
 (a) For taxable years beginning on or after January 1, 2023, gross income does not include any payment made to an applicable entity pursuant to Section 6417 of the Internal Revenue Code, as added by Public Law 117-169, relating to elective payment of applicable credits. Sections 6417(c)(1)(C) and 6417(c)(1)(D) of the Internal Revenue Code, as added by Public Law 117-169, shall apply.
(b) For taxable years beginning on or after January 1, 2023, gross income does not include any payment made to an eligible taxpayer pursuant to Section 6418 of the Internal Revenue Code, as added by Public Law 117-169, relating to transfer of certain credits. No
(1) Sections 6418(c)(1)(A) and 6418(c)(1)(B) of the Internal Revenue Code, as added by Public Law 117-169, shall apply.
(2)  No deduction shall be allowed for any amount paid in consideration of a transfer made as described in Section 6418 of the Internal Revenue Code. Code, as added by Public Law 117-169.
(c) For purposes of this section, the following definitions apply: “payment made pursuant to Section 6418 of the Internal Revenue Code” includes the value of a credit received by a transferee pursuant to Section 6418 of the Internal Revenue Code, as added by Public Law 117-169.

(1)“Applicable entity” has the same meaning as defined in Section 6417(d)(1)(A) of the Internal Revenue Code and includes a transferee of a credit as described in Section 6418 of the Internal Revenue Code.

(2)“Eligible taxpayer” has the same meaning as defined in Section 6418(f)(2) of the Internal Revenue Code.

SEC. 3.

 The Legislature hereby finds and declares that the exclusions authorized by Sections 17132.3 and 24310.5 of the Revenue and Taxation Code, as added by this act, serve the public purpose of promoting investment and construction of clean energy projects and clean energy advanced manufacturing facilities in California and does not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.