AMENDED IN ASSEMBLY JULY 1, 2026
AMENDED IN ASSEMBLY JUNE 22, 2026
AMENDED IN SENATE MARCH 23, 2026
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
96
TAX LEVY
Introduced by Senator McNerney
February 20, 2026
An act to add Section 73.3 401.7 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.
Vote: 2/3 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, except as specified.
This bill would prescribe rules for the valuation of an active solar energy system under certain valuation methods, including a requirement that, under the income method, the assessor exclude from income the benefit from, among other things, renewable energy credits, as defined. By expanding the duties of local tax officials, this bill would impose a state-mandated local program.
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.
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.
This bill would take effect immediately as a tax levy.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ⅔ of the membership of each house of the Legislature.
The people of the State of California do enact as follows:
Section 73.3 is added to the Revenue and Taxation Code, to read:
73.3.
(a) An assessor shall value an active solar energy system or portion thereof consistent with the requirements of Section 401. The methods of valuation shall include, but are not limited to, the comparable sales method, the income method, or the cost method.
(b) For purposes of applying Sections 110 and 212 to determine the “full cash value,” “fair market value,” or “taxable value” of any active solar energy system or portion thereof, as defined in Section 73, all of the following shall apply:
(1) “Full cash value,” “fair market value,” or “taxable value” shall include only the tangible property comprising the active solar energy system or portion thereof, excluding value attributable to any assets in accordance with subdivision (d) of Section 110 and subdivision (c) of Section 212.
(2) When determining “full cash value,” “fair market value,” or “taxable value” of the tangible property comprising the active solar energy system or portion thereof, both of the following shall apply to the extent applicable to the given valuation approach:
(A) The useful life and economic life of the active solar energy system shall not exceed the lesser of the following:
(i) Twenty-five years.
(ii) The active solar energy system’s remaining site lease term, including any extension options, measured from the time the system is placed in service.
(iii) The applicable useful life set forth in Table P of the California Assessors’ Association’s 2026 Position Paper 26-001 on Business Assessment Factors, as updated periodically, subject to a minimum percentage factor of 15 percent in the case of the cost method.
(B) Obsolescence includes, but is not limited to, external obsolescence. “External obsolescence” includes, but is not limited to, both the amounts of any United States duties and tariffs and the amounts of any federal tax credits and similar incentives that have been generated by the applicable solar energy system or portion thereof.
(3) The replacement cost new shall be the original cost or taxable original cost of the active solar energy system, reduced by government subsidies in the form of tax credits or other similar subsidies, and subsequently multiplied by a depreciation percent good factor and by an inflation cost index factor. In determining “replacement cost new,” the following shall apply:
(A) The original cost or taxable original cost shall be limited to the actual cost of the active solar energy system build.
(B) The tax credits and similar subsidies to be deducted from the original cost or taxable original cost shall include those set forth under clause (i) of subparagraph (A) of paragraph (4) that are applicable to the active solar energy system.
(4) (A) For purposes of paragraph (1), “tangible property” shall not include intangible assets and rights, or any income or value arising from or attributable to those assets and rights, relating to an active solar energy system or portion thereof, including, but not limited to, both of the following:
(i) Federal and state tax credits, cash grants, direct payments, or similar federal subsidies received or to be received.
(ii) Renewable energy credits, as defined in paragraph (2) of subdivision (h) of Section 399.12 of the Public Utilities Code.
(B) Nothing in this paragraph shall be construed to mean that a business operating an active solar energy system does not also have intangible assets and rights commonly found in general businesses, including, but not limited to, concessions, franchises, workforce in place, customer lists, trademarks, and copyrights.
(C) The treatment of intangible assets, rights, and attributes, as described in this paragraph, shall be consistent with Section 110. In this regard, the assets, rights, and attributes set forth in paragraph (3) shall not be considered intangible attributes of real property under subdivision (f) of Section 110.
SECTION 1.
Section 401.7 is added to the Revenue and Taxation Code, to read:
401.7.
(a) In valuing an active solar energy system under the income method of appraisal, the assessor shall exclude from income the benefit from both of the following:
(1) Renewable energy credits, as defined in paragraph (2) of subdivision (h) of Section 399.12 of the Public Utilities Code.
(2) Federal and state tax credits, cash grants, direct payments, or similar governmental subsidies.
(b) In valuing an active solar energy system under the cost method of appraisal, the assessor shall reduce the cost by any federal and state tax credits or similar governmental subsidies.
(c) For purposes of this section, “active solar energy system” shall have the same meaning as is provided in Section 73.
SEC. 2.
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. 3.
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. 4.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.