The chairs of the Senate and Assembly energy committees introduced legislation to benefit renewable energy developers by exempting certain Inflation Reduction Act (IRA) funds from taxes. The IRA, passed in 2022, created a number of energy tax credits to promote the development of renewable energy.
SB 302 would exclude from gross income a refund payment made for the specified federal environmental credits and any payment received for a transfer.
The bill would also prohibit a transferee from deducting the amount paid as consideration for the transfer. The law would apply retroactively to tax years beginning on or after January 1, 2023.
The bill would conform California’s tax code to the federal tax code. Federal law authorizes a tax refund for certain environmental credits and excludes a refund payment from gross income.
Under federal law, payment for the transfer of a refundable credit is exempt from gross income, and the transferee cannot deduct the amount paid for the transfer.
The bill is a reintroduction of SB 1191, which the Franchise Tax Board estimated could cost $250 million a year.