(a) There shall be allowed as a deduction the amount of interest paid or incurred by a taxpayer during the taxable year on any loan or financed indebtedness obtained from a publicly owned utility company for the purpose of acquiring and installing any energy efficient product or equipment to a qualified residence located in this state.
(b) For purposes of this section:
(1) “Energy efficient product or equipment” means any product or equipment certified by a publicly owned utility company that will improve the energy efficiency, as defined by paragraph (2) of subdivision (a) of Section 399.4 of the Public Utilities Code, of a qualified residence on which the product or equipment is installed or applied.
(2) “Energy efficient product or equipment” shall include, but not be limited to, heating, ventilation, air-conditioning, lighting, solar, advanced metering of energy usage, windows, insulation, zone heating products, and weatherization systems.
(3) “Zone heating products” mean gas room heaters certified by the California Energy Commission or wood fueled stoves certified by the federal Environmental Protection Agency.
(4) “Publicly owned utility company” has the same meaning as set forth in subdivision (d) of Section 9604 of the Public Utilities Code.
(5) “Qualified residence” has the same meaning as set forth in Section 163(h)(4)(A) of the Internal Revenue Code.
(6) “Publicly owned utility company loan or financial indebtedness” means any amount borrowed from a publicly owned utility company to finance the acquisition and installation of energy efficient products and equipment installed or applied to a qualified residence located in this state.
(c) Any interest amount that is allowed as a deduction pursuant to this section (and the application of Section 17072) may not otherwise be allowed as a deduction for purposes of this part.
(d) The publicly owned utility company shall issue a federal income tax Form 1098, or similar form, for the purpose of notifying the taxpayer of his or her eligibility for the deduction allowed by this section.
(e) The deduction allowed by this section shall be in lieu of any credit allowed by this part for interest paid or incurred by the taxpayer in connection with the purchase of energy efficient equipment.
(f) The Legislature finds and declares that many taxpayers may be unaware that they may deduct interest paid or incurred pursuant to this section. The Legislature further finds that it is important to inform taxpayers of this deduction. Therefore, it is the intent of the Legislature to encourage all publicly owned utility companies to inform their customers in writing that they may deduct interest paid or incurred pursuant to this section. It is the further intent of the Legislature to encourage all publicly owned utility companies that are unable to offer customer financing to acquire or install energy efficient products and equipment to inform their customers in writing that interest on a home equity or home improvement loan used to purchase energy efficient products and equipment may also be tax deductible.
(g) It is the intent of the Legislature to inquire with the Internal Revenue Service as to whether the loan program administered by the Sacramento Municipal Utility District qualifies for an interest deduction in compliance with the Internal Revenue Code and the regulations thereunder.
(Added by Stats. 2001, 2nd Ex. Sess., Ch. 5, Sec. 2. Effective October 1, 2001.)
Last modified: October 25, 2018