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News: 03/01/2020

State tax credits for fire prevention

Tax relief act has solid support from local lawmakers and could help thousands save on costs

The aftermath of three years’ worth of terrible fires that severely impacted thousands of rural and urban homes has wrought a hugely expanded awareness of how vulnerable California lands are, especially those in wooded, now extremely fire prone areas. That awareness has led, in turn, to renewed efforts to get homeowners to make their properties safer by managing the surrounding vegetation and hardening the physical property against fire.

Good ideas, yes. Cheap, no.

The costs of cleaning up flammable vegetation within one to two hundred feet of homes can run to thousands of dollars where tree removal and pruning are required, and the price of a safer roof, siding, or deck can run into tens of thousands of dollars.

Fire safety is not the option it used to be. New laws, both county and state, require homeowners to manage their vegetation, even co-opting local fire departments to inspect every property in their districts and filling out a form telling homeowners what needs to be done.

Not asking. Telling.

Failure to comply with fire department “requests” to clean up vegetation can result in the work being contracted to third parties and liens being placed on the property until the bills are paid.

To give property owners some relief for such expensive outlays, State Senator Mike McGuire (D-Healdsburg) has proposed Senate Bill 944 – the Fire Safe Home Tax Credit, with every other state representative from Sonoma and surrounding counties co-signing. The bill offers “net tax” credits for fire mitigation expenses to qualified homeowners in qualified areas for five years, starting in 2021.

“Funding mitigation makes fiscal sense,” McGuire said when announcing the bill. “The Federal Emergency Management Agency estimates that for every dollar spent on fire hardening measures to bring buildings up to current codes, four dollars are saved – including countless lives, billions of dollars in property damage, and hundreds of millions of avoided insurance costs.”

McGuire also said that in California the return on these actions can approach six dollars for each dollar of fire hazard mitigation.

As with most tax issues, the details are complex and take up several new pages of the California Revenue and Tax Code; essentially, people who meet the income and residency requirements can deduct up to 50 percent of their costs directly off taxes owed on their California Personal Income Tax.

“Qualified taxpayers can get a one-time tax credit, for up to $10,000, for completing home hardening projects already embedded in the state’s fire code,” the bill reads, “which could include: replacing roofs, exterior walls, vents, decks, fences and chimneys. Out-of-pocket expenses for vegetation management will also be eligible for the tax credit and include wildfire mitigation measures like the creation of defensible space and establishing fuel breaks.”

Under state rules, “qualified vegetation management” means any of the following activities , performed by the qualified taxpayer for the primary purpose of reducing risk to structures from wildland fire: the creation of defensible space around structures; establishment of fuel breaks; thinning woody vegetation; secondary treatment of woody fuels by lopping and scattering; as well as piling, chipping, hauling, or prescribed burning.

According to a recent state tax credit proposal, “qualified costs” do not include inspection or certification fees, in-kind contributions, donations, or incentives. Nor do they include expenses paid from grants, either.

The rates and amounts of credits are based on the fire hazard rating of the properties at issue.There are moderate, high and very high fire hazard severity zones as determined by The California Department of Forestry and Fire Protection, commonly known as Calfire.

If your credit allowed under this act exceeds your “net tax,” the act allows excess credit to be carried over to reduce the “net tax” in the following taxable year, and “succeeding eight taxable years, if necessary, or until the credit has been exhausted.”

The total credit allowed is $500 million, over the five-year life of the program. Early birds may “reserve” a credit by notifying the Franchise Tax Board (FTB) that they intend to take the credit at a future date. Applicants must sign a statement that they are qualified, when they will take the credit, and how much they expect to spend and on what. Applicants will be notified by Dec. 31 of the taxable year if they are accepted, and any extra information needed will be requested at that time. Reservation programs are generally run on a first-come, first-served basis under the act. The bill does allow the FTB to set up a waiting list if the reserve amount is used up.

McGuire introduced SB944 on Feb. 10, along with co-signers senators Stern, Rubio, Dahle, Dodd, Galgiani, Hill, Jackson and Nielsen, alongside Assembly members Aguiar-Curry, Friedman, Wood and Gallagher.

The bill will receive a second reading and become available for action on March 12 according to the legislative analysis.


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