CALIFORNIA extended a property tax exemption for active solar systems through 2024.
Such systems are exempted from property tax assessment the first time they change hands after being newly constructed. Assessments are delayed until there is a later sale of the project or change in control of the project company. Property tax rates vary by county. They can be as high as 2% of assessed value.
The special solar exemption had been scheduled to run only through 2016. California Governor Jerry Brown signed a bill extending it in late June.
The bill makes clear that batteries are considered part of the solar facility. The exemption is in section 73 of the state Revenue and Taxation Code.
Separately, California explained in late July under what circumstances companies holding interests in limited liability companies that have a connection to California must file state tax returns.
The explanation is in Legal Ruling 2014-01.
The ruling is important for anyone invested in an LLC that is headquartered or owns a project in California or that sells electricity or other products into California.
The state accepts the same classification of LLCs as corporations, partnerships or “disregarded entities” as the LLC uses for federal income tax purposes.
The following rules apply to LLCs treated as partnerships.
If the LLC is registered to do business in California or is organized under California law — meaning that it is a California LLC as opposed, for example, to a Delaware LLC — but it is not actually doing business in the state, then the LLC must pay an annual LLC fee, but the members have no obligations. The fee for 2014 is $900 for LLCs with total income of $250,000 to $500,000, $2,500 for LLCs with total income of $500,000 to $1 million, $6,000 for LLCs with income of $1 million to $5 million and $11,790 for LLCs with income of $5 million or more.
If the LLC is managed from California or is doing business in California — for example, it owns a project there — or its sales, property or payroll in California exceed low thresholds in section 23101 of the state Revenue and Taxation Code, then the LLC must file tax returns and pay the annual fee, and its members are considered doing business in California and must also file income tax returns on the income they are considered to earn from California sources.
The Franchise Tax Board said it does not matter whether the members participate in management. For example, it does not matter whether the LLC is member managed or appoints just one of the members as the manager: all the members must pay state taxes if they are considered engaged in business in the state through the LLC.