California Enacts Tax Break for Federal Energy Credit Recipients

California Gov. Gavin Newsom (D) signed a bill Oct. 1 to exclude developers who receive federal tax credits for clean energy projects from state taxes.

The bill, S.B. 302, allows companies earning federal renewable energy credits and payments awarded under the 2022 federal tax-and-climate law to exclude them from California income tax. It brings California into tax conformity with provisions that allow certain taxpayers to monetize eligible clean energy tax credits. Taxpayers can sell the credits and receive cash payments from the government, and those payments will be exempted from state income tax.

However, the recently enacted Republican-backed federal ...