Bill Text: CA SB1191 | 2023-2024 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Personal Income Tax Law and Corporation Tax Law: exclusions: environmental credits.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2024-05-16 - May 16 hearing: Held in committee and under submission. [SB1191 Detail]

Download: California-2023-SB1191-Amended.html

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Amended  IN  Senate  March 20, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill

No. 1191

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Introduced by Senator Padilla

February 14, 2024

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An act to amend Section 17501 of 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. 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.

Existing law, the Personal Income Tax Law, conforms to federal law in its treatment of deferred compensation, except as otherwise provided. Existing law limits the maximum amount of elective deferrals, as defined, that may be excluded from gross income for a taxable year for state personal income tax purposes to the amount of elective deferrals that may be excluded from gross income under a certain provision of the Internal Revenue Code in effect on January 1, 2010, as specified. Existing law increases the basis of a person in a plan, account, or annuity by the amount of elective deferrals not excluded as a result of the limitation on the maximum amount of elective deferrals that may be excluded from gross income.

This bill would make a nonsubstantive change to the above-described provision increasing the basis of a person in a plan, account, or annuity.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

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Bill Text

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, relating to elective payment of applicable credits. Sections 6417(c)(1)(C) and 6417(c)(1)(D) of the Internal Revenue Code 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, relating to transfer of certain credits.

(1) Sections 6418(c)(1)(A) and 6418(c)(1)(B) of the Internal Revenue Code 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.

(c) For purposes of this section, the following definitions apply:

(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, relating to elective payment of applicable credits.

(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, relating to transfer of certain credits. 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.

(c) For purposes of this section, the following definitions apply:

(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.

SECTION 1.Section 17501 of the Revenue and Taxation Code is amended to read:

17501.

(a)Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to deferred compensation, shall apply, except as otherwise provided.

(b)Notwithstanding the specified date contained in paragraph (1) of subdivision (a) of Section 17024.5, Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to pension, profitsharing, stock bonus plans, etc., and Part III of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to rules relating to minimum funding standards and benefit limitations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes.

(c)The maximum amount of elective deferrals (as defined in Section 402(g)(3)) for the taxable year that may be excluded from gross income under Section 402(g) of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of elective deferrals that may be excluded from gross income under Section 402(g) of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under Section 414(v) of the Internal Revenue Code, as in effect on January 1, 2010.

(d)(1)For taxable years beginning on or after January 1, 2002, the basis of a person in the plan, account, or annuity shall be increased by the amount of elective deferrals not excluded as a result of the application of subdivision (c).

(2)Any basis described in paragraph (1) shall be recovered in the manner specified in Section 17085.

(e)Notwithstanding the limitations provided in subdivision (c), any income attributable to elective deferrals in taxable years beginning on or after January 1, 2002, in conformance with Part I of Subchapter D of Chapter 1 of Subtitle A of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan or account was established until distributed pursuant to the plan or by operation of law.