FISCAL NOTE
ASSEMBLY, No. 2890
STATE OF NEW JERSEY
215th LEGISLATURE
DATED: JANUARY 4, 2013
SUMMARY
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Synopsis: |
The “Rainwater Capture and Water Conservation Incentives Act.” |
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Type of Impact: |
State and local government expenditure increase and possible revenue loss. |
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Agencies Affected: |
Department of Environmental Protection, Department of Community Affairs, and Department of the Treasury; counties and municipalities. |
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Fiscal Impact |
Year 1 |
Year 2 |
Year 3 |
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State Revenue |
($15 to $20 million) |
($15 to $20 million) |
($15 to $20 million) |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Year 1 |
Year 2 |
Year 3 |
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State Cost |
Indeterminate – See comments below |
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State Revenue |
Indeterminate loss – See comments below |
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Local Cost |
Indeterminate – See comments below |
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Local Revenue |
Indeterminate loss – See comments below |
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· The Office of Legislative Services (OLS) cannot determine the fiscal impact of this bill regarding the possible loss of State sales tax, income tax, corporation business tax, and local revenue because the number of residential, commercial, or public property owners that would participate is unknown.
· The State would incur some indeterminate costs to establish and implement the required tax credits and incentives in the bill, and would incur ongoing costs to administer and regulate the purchase and installation of the rainwater capture systems by property owners.
· Municipalities could be expected to incur ongoing costs related to requests that may be made of the local enforcing agency to certify property tax exemptions for the rainwater capture systems, and from the revocation of approved tax exemption certificates and the associated appeals process the bill provides claimants.
· Since the bill exempts rainwater capture systems and services from the State sales tax, prohibits the imposition or collection of any fees for the installation or operation of a rainwater capture system, and prohibits municipalities from taxing rainwater capture real property improvements, the State and municipalities would be unable to recover any of their costs.
BILL DESCRIPTION
Assembly Bill No. 2890 of 2012 would establish several incentives for the installation and operation of a rainwater capture system. The bill defines a rainwater capture system as any device, equipment, or group of devices and equipment which is (1) used for the purpose of subsequent onsite use of rainwater, (2) is not attached to any public water system, (3) does not require a permit from the Department of Environmental Protection (DEP), and (4) is designed to capture, retain, and store rainwater falling directly from the sky, flowing off shrubs, trees, lawns, rocks, or other plants or natural parts of a property whether naturally occurring or placed at the location, or flowing off a building, parking lot, or other manmade impervious surface. Rainwater capture systems would include rain barrels but not any stormwater runoff or capture and reuse system requiring a permit from the DEP.
The bill would specifically:
1) authorize any residential, commercial, or public property owner to install, maintain, and operate a rainwater capture system for outside non-potable water use or infiltration into the groundwater;
2) prohibit a county, municipality, county or municipal agency, or any State agency from imposing or collecting any fee for the installation or operation of a rainwater capture system;
3) prohibit a municipality from assessing property tax on a rainwater capture system as an improvement to real property;
4) exempt from State sales and use tax the retail purchase of a rainwater capture system and the services concerning the installation or maintenance of a rainwater capture system;
5) establish a gross income tax credit for the purchase price of a rainwater capture system and any installation costs or charges; and
6) establish a corporation business tax credit for purchase and installation of a rainwater capture system for use at a place of business, trade, or occupation.
FISCAL ANALYSIS
EXECUTIVE BRANCH
The impact of this measure upon the State’s finances is very difficult to estimate. However, an annual loss of $15 to $20 million per year spread across the General Fund and the Property Tax Relief Fund (dependent upon the mix of organizational structures of participating taxpayers) could be envisioned. This bill would establish several incentives for the purchase, installation, and operation of a rainwater capture system. According to David Crawford, Chief Executive Officer and Founder of Rainwater Management Solutions and member of the American Rainwater Catchment Systems Association, the cost to purchase and install rainwater capture systems vary by state depending on rainfall levels; however, an acceptable overall cost estimate to purchase and install a rainwater capture system would average $2 per square foot. Using this formula, and assuming the average size of a New Jersey home and commercial/industrial building to be 2,000 sq. ft. and 75,000 sq. ft. respectively, the total estimated cost to retrofit such a home with a rainwater capture system would be $4,000 and the total estimated cost to retrofit such a commercial/industrial building would be $150,000. The combined sales tax loss per individual purchase and installation for the home and commercial/industrial building is estimated at $10,780, and the gross income tax and corporation business tax credit is estimated at $154,000. Because the number of homeowners and commercial/industrial establishments which may take advantage of the tax incentives is unknown, an estimate is provided herein with the caveat that future taxpayer behavior is uncertain. The gross income tax and corporation business tax loss of $154,000 combined with the sales and use tax exemption of $10,780 would result in a total estimated potential revenue loss to the State of $164,780 per year per installation. There is no reliable and predictive measurement of expected participation by interested and eligible taxpayers in this rainwater conservation program. If 100 new establishments participate each year, the revenue loss would range from $15 million to $20 million per year.
OFFICE OF LEGISLATIVE SERVICES
The OLS cannot determine the fiscal impact of this bill regarding the possible loss of State sales tax, income tax, corporation business tax, and local revenue because the number of residential, commercial, or public property owners that would participate is unknown. Based on the various provisions and requirements of the bill, the State and municipalities would incur some additional costs. Specifically, the State would incur some indeterminate costs to establish and implement the required tax credits and incentives in the bill, and would incur ongoing costs to administer and regulate the purchase and installation of the rainwater capture systems by property owners. The bill requires the Director of the Division of Taxation to adopt rules and regulations for the certification of tax exemptions, and the Department of Community Affairs is required to adopt technical sufficiency standards for rainwater capture systems to qualify for the tax exemption. To qualify for the corporation business tax credit allowed by the bill, the DEP must review and approve an application for certification filed by the taxpayer. The DEP has informally advised the OLS that since this is a new responsibility, additional staff and resources would be needed to fully implement the bill. Also, some municipalities could be expected to incur ongoing costs related to requests that may be made of the local enforcing agency to certify property tax exemptions for the rainwater capture systems, and from the revocation of approved tax exemption certificates and the associated appeals process the bill provides claimants. The OLS notes that since the bill exempts rainwater capture systems and services from the State sales tax, prohibits the imposition or collection of any fees for the installation or operation of a rainwater capture system, and prohibits municipalities from taxing rainwater capture real property improvements, the State and municipalities would be unable to recover any of their costs.
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Section: |
Environment, Agriculture, Energy and Natural Resources |
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Analyst: |
Associate Fiscal Analyst |
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Approved: |
David J. Rosen Legislative Budget and Finance Officer |
This fiscal note has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).