Schwarzenegger won’t sign tax relief bill for some homeowners and green energy firms

Gov. Arnold Schwarzenegger’s administration announced Monday that he would not sign a bill passed by lawmakers that would ease taxes for some homeowners and green energy companies, largely because the measure would ramp up penalties against those who abuse such tax credits.

The decision came at the urging of a business coalition that lobbied against the bill, saying it would make businesses reluctant to claim the tax breaks for fear of making an error. The proposal, which would match credits and penalties already allowed for federal taxes, was intended to help Californians who lose their home in a short sale and businesses in the state’s green-technology sector.

Administration officials urged lawmakers to immediately craft, and pass, a new proposal in time for the credits still to be claimed on 2009 tax returns. But Democrats said it was unlikely that a new bill would get the required two-thirds vote of the Legislature to pass as an urgent measure.

Monday’s announcement set off a fresh round of bickering over the issue. Administration officials said the penalties against tax cheats, which would apply only to the wealthy and corporations, were inserted despite it already having been established that the governor would not support them.

“They are trying to leverage us,” administration spokesman Aaron McLear said of Democrats.

He said the Democrats who control the Legislature assumed the governor would approve the new penalties if the alternative were to have no relief for homeowners and green technologies. But the penalties “are just not something we will support,” McLear said.

SBX8 32, by Sen. Lois Wolk (D-Davis), is intended to allow Californians to claim on state returns the tax breaks permitted on federal returns, and there was broad bipartisan support for that part of the bill. But Democrats also wanted California to conform with federal penalty provisions put in place in 2007.

California companies say they already face other tax penalties in this state that are tougher than those enforced elsewhere. The coalition fighting SBX8 32 includes the California Chamber of Commerce, the Western States Petroleum Assn. and the California Manufacturers and Technology Assn.

evan.halper@latimes.com