AMENDED IN ASSEMBLY APRIL 29, 2026

AMENDED IN ASSEMBLY APRIL 20, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

97

TAX LEVY

Introduced by Assembly Member Irwin

February 20, 2026

An act to amend Section 73 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: yes

LEGISLATIVE COUNSEL’S DIGEST

The California Constitution generally limits the maximum rate of ad valorem tax on real property to 1% of the full cash value of the property and defines “full cash value” for these purposes as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. Pursuant to constitutional authorization, existing property tax law excludes from the definition of “newly constructed” for these purposes the construction or addition of any active solar energy system, as defined, through the 2025–26 fiscal year, including the construction of an active solar energy system incorporated by the owner-builder in the initial construction of a new building that the owner-builder does not intend to occupy or use.

This bill would extend, for lien dates commencing on or after January 1, 2027, and before January 1, 2031, the above-described exclusion for the addition of customer-sited, active solar energy systems with a system size of less than or equal to 2 megawatts 10 kilowatts and for customer-sited, active solar energy systems that are sited on the property of a public entity customer. The bill would require that, for active solar energy systems sited on the property of a public entity customer, tax savings be utilized to maintain the affordability of, or to reduce the cost of, future lease agreements. The bill would limit the exclusion for active solar energy systems incorporated by the owner-builder to buildings where the initial construction permit for the new building is dated before January 1, 2027. The bill would make conforming changes. By imposing additional duties on local tax officials, the bill would impose a state-mandated local program.

Existing law requires bills authorizing a new tax expenditure, as defined, to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill also would include additional information required for bills authorizing a new tax expenditure.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Existing law requires the state to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

This bill would provide that, notwithstanding those provisions, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

This bill would take effect immediately as a tax levy.

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

SECTION 1.

Section 73 of the Revenue and Taxation Code is amended to read:

73.

(a) Pursuant to the authority granted to the Legislature pursuant to paragraph (1) of subdivision (c) of Section 2 of Article XIIIA of the California Constitution, the term “newly constructed,” as used in subdivision (a) of Section 2 of Article XIIIA of the California Constitution, does not include the construction or addition of any active solar energy system, as defined in subdivision (b).

(b) (1) (A) “Active solar energy system” means a system that, upon completion of the construction of a system as part of a new property or the addition of a system to an existing property, uses solar devices, which are thermally isolated from living space or any other area where the energy is used, to provide for the collection, storage, or distribution of solar energy.

(B) “Active solar energy system” does not include solar swimming pool heaters or hot tub heaters.

(C) Active solar energy systems may be used for any of the following:

(i) Domestic, recreational, therapeutic, or service water heating.

(ii) Space conditioning.

(iii) Production of electricity.

(iv) Process heat.

(v) Solar mechanical energy.

(2) “Customer sited” means a system that is installed on the property of a customer for the purpose of managing the customer’s own electrical needs.

(3) “Public entity customer” means a customer that is a “public entity,” as defined in Section 8036 of the Civil Code.

(4) “System size” of an active solar energy system means the solar nameplate capacity, as measured in megawatts of alternating current.

(c) For the purposes of this section, “occupy or use” has the same meaning as defined in Section 75.12.

(d) (1) (A) The Legislature finds and declares that the definition of spare parts in this paragraph is declarative of the intent of the Legislature, in prior statutory enactments of this section that excluded active solar energy systems from the term “newly constructed,” as used in the California Constitution, thereby creating a tax appraisal exclusion.

(B) An active solar energy system that uses solar energy in the production of electricity includes storage devices, power conditioning equipment, transfer equipment, and parts related to the functioning of those items. In general, the use of solar energy in the production of electricity involves the transformation of sunlight into electricity through the use of devices such as solar cells or other solar collecting equipment. However, an active solar energy system used in the production of electricity includes only equipment used up to, but not including, the stage of conveyance or use of the electricity. For the purpose of this paragraph, the term “parts” includes spare parts that are owned by the owner of, or the maintenance contractor for, an active solar energy system that uses solar energy in the production of electricity and which spare parts were specifically purchased, designed, or fabricated by or for that owner or maintenance contractor for installation in an active solar energy system that uses solar energy in the production of electricity, thereby including those parts in the tax appraisal exclusion created by this section.

(2) An active solar energy system that uses solar energy in the production of electricity also includes pipes and ducts that are used exclusively to carry energy derived from solar energy. Pipes and ducts that are used to carry both energy derived from solar energy and from energy derived from other sources are active solar energy system property only to the extent of 75 percent of their full cash value.

(3) An active solar energy system that uses solar energy in the production of electricity does not include auxiliary equipment, such as furnaces and hot water heaters, that use a source of power other than solar energy to provide usable energy. An active solar energy system that uses solar energy in the production of electricity does include equipment, such as ducts and hot water tanks, that is utilized by both auxiliary equipment and solar energy equipment, that is, dual use equipment. That equipment is active solar energy system property only to the extent of 75 percent of its full cash value.

(e) (1) Notwithstanding any other law, for purposes of this section, “the construction or addition of any active solar energy system” includes the construction of an active solar energy system incorporated by the owner-builder in the initial construction of a new building that the owner-builder does not intend to occupy or use. The exclusion from “newly constructed” provided by this subdivision applies to the initial purchaser who purchased the new building from the owner-builder, but only if the initial construction permit for the new building is dated before January 1, 2027, the owner-builder did not receive an exclusion under this section for the same active solar energy system, and the initial purchaser purchased the new building prior to that building becoming subject to reassessment to the owner-builder, as described in subdivision (d) of Section 75.12. The assessor shall administer this subdivision in the following manner:

(A) The initial purchaser of the building shall file a claim with the assessor and provide to the assessor any documents necessary to identify the value attributable to the active solar energy system included in the purchase price of the new building. The claim shall also identify the amount of any rebate for the active solar energy system provided to either the owner-builder or the initial purchaser by the Public Utilities Commission, the State Energy Resources Conservation and Development Commission, an electrical corporation, a local publicly owned electric utility, or any other agency of the State of California.

(i) (I) The claim for an exclusion under this subdivision shall be considered timely if it is filed within three years of the date of purchase.

(II) An otherwise valid claim for exclusion under this subdivision filed after the deadline set by subclause (I) shall be applied beginning on the lien date of the assessment year in which the claim is filed.

(ii) The provisions of clause (i) shall become operative on January 1, 2027.

(B) The assessor shall evaluate the claim and determine the portion of the purchase price that is attributable to the active solar energy system. The assessor shall then reduce the new base year value established as a result of the change in ownership of the new building by an amount equal to the difference between the following two amounts:

(i) That portion of the value of the new building attributable to the active solar energy system.

(ii) The total amount of all rebates, if any, described in subparagraph (A) that were provided to either the owner-builder or the initial purchaser.

(C) The extension of the new construction exclusion to the initial purchaser of a newly constructed new building shall remain in effect only until there is a subsequent change in ownership of the new building.

(2) The State Board of Equalization, in consultation with the California Assessors’ Association, shall prescribe the manner, documentation, and form for claiming the new construction exclusion required by this subdivision.

(3) The exclusion provided by this subdivision for an initial purchaser who purchases a new building from the owner-builder shall only apply if the initial construction permit for the new building is dated before January 1, 2027.

(f) Notwithstanding any other law, the exclusion from new construction provided by this section shall remain in effect only until there is a subsequent change in ownership.

(g) For active solar energy systems that are sited on the property of a public entity customer, funds that would have been necessary to pay property taxes shall be used to maintain the affordability of, or reduce the cost of, future lease agreements.

(h) (1) For all active solar energy systems, this section applies to property tax lien dates for the 1999–2000 fiscal year to the 2025–26 fiscal year, inclusive.

(2) For customer-sited, active solar energy systems with a system size of less than or equal to two megawatts 10 kilowatts and for customer-sited, active solar energy systems that are sited on the property of a public entity customer, this section shall continue to apply to property tax lien dates occurring on or after January 1, 2027, and before January 1, 2031.

(i) (1) The amendments made to this section by Chapter 358 of the Statutes of 2008 apply beginning with the lien date for the 2008–09 fiscal year.

(2) The amendments made to this section by the act that added this paragraph apply beginning with the lien date occurring on January 1, 2027.

(j) (1) Except as provided in paragraph (2), this section shall remain in effect only until January 1, 2032.

(2) Notwithstanding paragraph (1), active energy solar systems that qualify for an exclusion under this section prior to January 1, 2032, shall continue to be excluded on and after January 1, 2032, until there is a subsequent change in ownership.

(k) (1) For purposes of complying with Section 41, as it pertains to the exclusion provided by this section, the Legislature finds and declares as follows:

(A) The goal of the exclusion provided by this section is to encourage the adoption of active solar energy systems for customer-sited systems and public entity customers.

(B) The performance indicators for the Legislature to use in determining whether the exclusion is achieving its goal shall be the number of active solar energy systems excluded from the definition of “newly constructed” pursuant to this section for property tax lien dates occurring on or after January 1, 2027, and before January 1, 2031.

(2) The State Board of Equalization, no later than April 1, 2028, and annually thereafter, shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the number of active solar energy systems excluded from assessment pursuant to this section for the most recent property tax lien date.

SEC. 2.

If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.

SEC. 3.

Notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.

SEC. 4.

This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.