Bill
AB 2389
Extends the property tax exclusion for customer-sited active solar systems (≤2 MW) and public-entity projects from 2027–2030 to support ongoing solar adoption and affordability.
Purpose and intent
- AB 2389 seeks to extend the property tax exclusion for active solar energy systems that are customer-sited, as well as systems on public entity property, beyond the current sunset.
- The bill aims to encourage continued adoption of solar energy by maintaining the existing tax incentive for certain solar installations, with a focus on keeping electricity and cost dynamics favorable for customers and public entities.
Key provisions and changes
- Exclusion extension window:
- Extends the property tax exclusion for customer-sited active solar energy systems with a system size of 2 megawatts or less, and for systems sited on the property of a public entity customer, for lien dates from January 1, 2027 through December 31, 2030 (i.e., lien dates on or after 1/1/2027 and before 1/1/2031).
- Public entity customer provisions:
- For solar systems on a public entity’s property, the bill requires that the resulting property tax savings be used to maintain affordability of, or reduce the cost of, future lease agreements.
- Owner-builder exclusions:
- Keeps a limitation that the exclusion for active solar energy systems installed by an owner-builder in the initial construction of a new building applies only if the initial construction permit is dated before January 1, 2027.
- Provides a mechanism for initial purchasers to claim an exclusion, including documentation of the portion of the purchase price attributable to the solar system and any rebates received (from PUC, CEC, utilities, etc.).
- If a claim is filed, the assessor determines the portion of value attributable to the solar system and adjusts the base year value accordingly (offset by rebates). The exclusion is valid only until a subsequent change in ownership.
- Administrative and reporting requirements:
- The State Board of Equalization (in consultation with the California Assessors’ Association) will prescribe forms and procedures for claiming the new construction exclusion.
- The bill requires performance indicators and data collection related to the number of excluded systems to assess goal achievement, with annual reporting to the Legislature beginning by 2028.
- Constitutional and fiscal notes:
- The bill is a tax levy and takes immediate effect.
- It imposes a state-mandated local program by increasing duties on local tax officials.
- Notably, the bill states that no new appropriation is made to reimburse local agencies for property tax revenue reductions resulting from the exemptions; thus, local governments would bear the revenue losses without state reimbursement under this bill.
- Sunset and transition:
- The bill retains the broader framework that defines “active solar energy system” and “newly constructed” concepts for assessment purposes and clarifies treatment of parts, ducts, and dual-use equipment for valuation purposes.
Who is affected
- Property owners with customer-sited active solar energy systems (≤ 2 MW) in California.
- Public entities hosting solar energy systems on their property.
- Owner-builders who install solar systems as part of initial construction in new buildings, and initial purchasers of such buildings.
- Local assessors and county tax officials who administer the exclusions and claims processing.
- State agencies (SBOE and California Assessors’ Association) responsible for forms, procedures, and reporting.
Timing and procedure highlights
- Effective date: immediate as a tax levy upon enactment.
- Lien-date window for extension: 1/1/2027 through 12/31/2030.
- For owner-builder exclusions: eligibility limited to permits dated before 1/1/2027.
- Annual reporting: SBOE to report by 4/1/2028 and annually thereafter on excluded systems, per Government Code 9795 standards.
Notes
- The bill does not provide new state reimbursements for property tax revenue losses; localities would experience revenue reductions without a state-funded offset.
- The bill’s goal indicators focus on the number of active solar energy systems excluded from “newly constructed” status during the 2027–2031 window.
Compiled from official sources — confirm details with the bill’s official record.
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