As the California Legislature gets ready to adjourn for the year, the solar industry won a big victory with the passage of Senate Bill 364 (Mitchell). The bill protects the solar industry from a sudden change in the state's property tax that could occur with the passage of Proposition 15 in the November election. The bill passed with a bare two-thirds majority in the Senate and is on its way to the Governor's desk for expected signature.
Public employee labor unions are putting Proposition 15 on the ballot in order to increase funding for public schools, community colleges and local government by changing the way that commercial and industrial property is assessed for property taxes. Unexpectedly, the language of the ballot initiative would have included existing and shovel-ready solar projects for increased taxation. While that was not the intent of the ballot initiative organizers, the fact that the initiative would amend the state constitution left little protection for solar investors.
Commercial solar installations have been exempted from increases in property taxes as a way of stimulating solar development. SB 364 defines commercial solar projects as personal property rather than a real estate improvement. This change in definition would apply to any solar project installed prior to January 2025 and would protect such projects from a sudden increase in property taxes until there is a subsequent change in ownership. After 2025, new solar projects would be classified as a real estate improvement and would be subject to the higher property tax. This compromise provides sufficient time for projects that are currently under development to be completed and remain exempt from the state property tax.
The bill's passage was an example of a successful partnership between the solar industry, organized labor, and social justice groups. These groups stood with us to ensure solar wouldn’t be harmed by the change in tax law. Once the bill is signed into law, Vote Solar intends to support these partners by endorsing Proposition 15, which is needed to help support schools and local governments during these difficult times.