By MADISON HIRNEISEN
THE CENTER SQUARE STAFF REPORTER
(The Center Square) — A new California law extends the sunset on an existing property tax exclusion for newly constructed active solar energy systems by two years, a measure that Gov. Gavin Newsom acknowledged has a “direct impact” on property tax revenues for local governments.
Over the weekend, Gov. Newsom signed Senate Bill 1340 into law, which extends the tax exclusion for installing a new active solar energy system. Under current law, installing a solar energy system does not result in an “increase or decrease in the assessment of the existing property, unlike other physical additions,” according to a bill analysis.
The tax exclusion was set to sunset on Jan. 1, 2025. The bill’s author, state Sen. Robert Hertzberg, D-Van Nuys, argued that the incentive should be extended through Jan. 1, 2027.
“Should this exclusion be allowed to sunset entirely, California would have a utility-scale solar tax burden 400-700% greater than neighboring states, resulting in significantly higher costs for in-state projects,” Sen. Hertzberg wrote in support. “This would force many projects serving California’s clean energy demand – and their associated jobs and tax revenues – to locate out of state, and impose new cost burdens on ratepayers for the projects built in-state.”
The bill faced opposition from Kern County as it passed through the Legislature.
Kern County said the solar tax exclusion has cost the county “$110 million over the last 10 years for what was – 15 years ago – a new and emerging industry.”
“The fiscal inequity created by the solar tax exclusion for large-scale commercial solar continues to divert resources from Kern’s General Fund and limits the essential services lost dollars could provide for its residents and quality of life,” the county wrote in an opposition statement.
Gov. Newsom acknowledged local government concerns in a signing letter, writing that the policy “has a direct impact on property tax revenues that support essential services at the local level.”
“I believe this two-year, temporary extension strikes an appropriate balance between ensuring that these delayed solar projects are brought online quickly, while recognizing the impacts to local governments,” the governor wrote, noting that this year’s budget includes $300 million in bridge funding for county governments advancing climate resilience projects.
If lawmakers bring forth another policy extension, Gov. Newsom wrote that he urges them to “consider the impacts to local agencies” before bringing it forward.
Madison Hirneisen covers California for The Center Square.