Solar Industry, Tax Experts Reject Claim Prop. 15 Imposes ‘Massive Tax Increase’ On Solar In California
Opponents of Proposition 15 claimed it would “impose massive property tax increases” on solar in California if voters approve it in November. The solar industry and independent tax experts say that’s wrong.
Would California’s Proposition 15 really impose “massive property tax increases” on solar projects and drive up electricity costs?
Tax and solar industry experts don’t think so.
“Prop 15 will impose massive property tax increases on California’s solar power facilities, meaning Prop 15 will drive up the cost of electricity for consumers like us,” a narrator said in the radio spot that aired on KFBK in Sacramento in mid-September.
The campaign’s Facebook ad made a nearly identical claim: “Prop 15 will impose massive property tax increases on Solar in California.”
It was flagged as part of the social media platform’s effort to combat false news and misinformation on its News Feed. (Read more about PolitiFact California’s partnership with Facebook.)
The Yes on 15 campaign also disputes the claims.
Given the importance of solar energy in California and the fast-approaching election, we decided to shine a light on the facts.
Background On Proposition 15
If approved, Proposition 15 would be a major change to California’s historic property tax law Proposition 13, which voters passed in 1978.
Specifically, the new measure would require commercial and industrial real estate worth more than $3 million to pay property tax based on current market value. Right now, owners pay a much lower tax based on the original purchase price.
Residential properties would be exempt from the changes.
The measure would generate billions of dollars per year to fund public schools, community colleges and local governments statewide.
How Would Proposition 15 Affect Solar?
Tax and solar industry experts said there was some initial concern that Proposition 15 could affect an existing tax exclusion for commercial solar projects. They said those worries faded this summer.
Here’s how that exclusion works: Land under solar developments is still taxed, but the value of the solar arrays doesn’t add to the taxable value. California voters approved that benefit by passing Proposition 7 in 1980 to help ensure the growth of the solar industry.
The Legislature has extended that benefit several times, most recently through 2024, but industry officials worried Proposition 15 might end it much earlier.
So at the urging of the solar industry, the Legislature passed Senate Bill 364 at the end of August and Gov. Gavin Newsom signed it early this month. The law specifically ensures commercial solar projects retain this exclusion through 2024 whether or not Proposition 15 passes.
Solar industry and tax experts say the new law protects solar projects, despite concerns raised by the California Assessors’ Association that the law is unconstitutional.
A ‘Completely Misleading And Incorrect Allegation’
Ed Smeloff works with the Vote Solar Action Fund, which is the political arm of Vote Solar, a group that works to expand access to solar nationwide and pushed for SB 364.
He described the claim that Proposition 15 would impose “massive tax increases” on solar in California as a “completely misleading and incorrect allegation.”
“The No on Proposition 15 campaign is completely deceptive in its statements about solar power,” Smelnoff said. “There is nothing in Proposition 15, when it's combined with state legislation, that would undermine the future development of solar power.”
Rick Umoff, California senior director and counsel at the Solar Energy Industries Association, or SEIA, added in a written statement that SB 364 had “remedied” his group’s early concern over Proposition 15 “by preserving the current tax treatment for solar projects.”
SEIA is a national trade association of more than 1,000 member companies and partners, according to its website.
An Unconstitutional Law?
In a letter on Sept. 9, Don Gaekle, president of the California Assessors’ Association urged Newsom to veto SB 364, saying the Legislature had overstepped its authority. He added that the bill was “contrary to the California Constitution and sets a bad precedent for future erosions of the property tax base through legislative actions not envisioned by the Constitution.”
Specifically, Gaekle pointed to the law’s reclassification of commercial solar projects from real property to personal property to avoid any possible property tax hike under Proposition 15. He said only voters can approve such an exclusion.
San Luis Obispo County Assessor Tom Bordonaro said if Proposition 15 passes, he would be presented with conflicting messages on whether to reassess commercial solar projects. He said he believes he would eventually “be forced to reassess” them.
“The courts are going to have to sort it out,” added Bordonaro, a former state senator and past president of CAA.
Michael Bustamante, a spokesperson for the No on 15 campaign, pointed to the CAA arguments to justify the campaign’s claims about “massive property taxes” on solar, but he declined to say whether the campaign would sue to overturn the new state law.
In August, Matt Klink, another spokesperson for the No on 15 campaign, told Capital & Main that SB 364 “won’t provide relief to the clean energy sector, and it will be immediately challenged in court and overturned. The only way to truly protect the solar industry is by defeating Prop. 15 in November.”
The campaign aired and published its ads nearly a week after Newsom signed the new law and nearly a month after the Legislature passed the bill.
Asked about the CAA’s legal concerns, Umoff of the solar trade association, added in a statement: “We are aware of their arguments and disagree. Senate Bill 364 is constitutional.”
Tax Experts Weigh In
Darien Shanske, a UC Davis law professor who specializes in taxation, wrote in an email that the No on Prop 15 claims about a massive tax hike on solar are “misleading.” He added that the argument that SB 364 is unconstitutional “is not a trivial argument as it turns out, but I would characterize (that argument) as more likely than not to fail.”
Shanske added that the campaign ads give the impression that even residential solar projects could be subject to tax increases. “That is clearly not permitted by Prop 15,” he wrote.
He added that perhaps there’s an argument to be made that starting in 2025 solar projects would pay more after the state’s commercial solar property tax exemption ends. But, as others including Smelnoff noted, that exemption was going to end in 2024 regardless of Proposition 15.
“Though puffery is allowed in politics, the idea that the increase would be ‘massive’ and ultimately much affect the costs of the average consumer strikes me as quite far-fetched,” Shanske wrote.
Kirk Stark, a professor of tax law and policy at UCLA, added in email that it’s simply “not accurate” to say Proposition 15 will lead to a “massive property tax increase” for solar in California.
Last month, Stark told Capital & Main that he’s skeptical that SB 364 would be ruled unconstitutional. “Prop. 15 itself authorizes the legislature to decide how to implement it,” he said, “and it’s certainly possible that courts would defer to lawmakers on what is and is not subject” to the proposed law.
Response From Yes On 15 Campaign
Asked about their opponents’ claims, a spokesperson for the Yes On 15 campaign said “these false ads should be taken down immediately."
"The corporate-backed opponents of Prop. 15 will say whatever it takes to keep their tax loopholes, but this is crossing the line,” Alex Stack said in a written statement. “Not only are they blatantly lying to voters just weeks before ballots drop, but they are trying to take advantage of Californians' financial struggles at a time when so many are hurting financially right now.”
Opponents of Prop. 15 claimed the measure “will impose massive property tax increases on Solar in California.”
But the solar industry and tax experts reject that idea. That’s because California approved SB 364 this summer, protecting commercial solar projects from a property tax increase through 2024 should the measure win. A property tax exclusion unrelated to Proposition 15 is set to expire in January 2025.
Not everyone agrees the new state law is on solid legal ground. The California Assessors’ Association says it is unconstitutional. And the No on Proposition 15 campaign says a court could overturn it.
Still, two independent tax experts and solar officials reviewed those legal concerns and determined it’s unlikely a court would throw out the new law.
In the end, we found the claims by the No on Prop. 15 campaign are misleading and unfounded.
We rate them False.
FALSE – The statement is not accurate.
Click here for more on the six PolitiFact ratings and how we select facts to check.
California Senate Bill 364, accessed September 2020
Ed Smeloff, senior director, Vote Solar Action Fund, video interview Sept. 24, 2020
Darien Shanske, UC Davis tax law professor, email exchange, Sept. 23, 2020
Kirk Stark, UCLA tax law professor, video interview Sept. 22, 2020
Tom Bordonaro, San Luis Obispo County assessor and past president of the California Assessors’ Association, video interview Sept. 24, 2020
Michale Bustamante, No on 15 spokesperson, phone interview, Sept. 24, 2020
Alex Stack, Yes on 15 spokesperson, phone interview, Sept. 23, 2020
Don Gaekle, president, California Assessors’ Association, SB 364 veto request letter, Sept. 9, 2020 and AB 105 Oppose letter, June 25, 2020
Rick Umoff, California senior director and counsel, Solar Energy Industries Association, written statements Sept. 23 and 24, 2020 and SB 364 support letter, June 23, 2020
Ballotopedia, California Proposition 7, accessed September 2020
CapRadio, California’s Proposition 15 Would Raise Taxes On Businesses While Supporting Schools, Local Governments, Sept. 15, 2020
Capital & Main, California’s Proposition 15 Has Nothing to Do With Clean Energy, Aug. 13, 2020