BILL ANALYSIS Ó
AB 1032
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1032 (Salas) - As Introduced February 26, 2015
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill allows a diesel fuel tax refund to a supplier for that
portion of tax-paid biodiesel fuel removed from a terminal or
production facility as a dyed biodiesel blend (i.e., nontaxable
fuel).
FISCAL EFFECT:
1)Minor and absorbable administrative costs to the Board of
Equalization (BOE).
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2)Had this bill been in effect the previous two fiscal years,
estimated GF refunds for overpayment of diesel tax fuel would
have been $779,000 and $2,829,000 for FY 2012-13 and FY
2013-14, respectively.
COMMENTS:
1)Purpose. According to the author, while current law permits
reimbursement of tax paid on diesel fuel that has been taxed
more than once, the current statutory regime does not account
for tax-paid diesel fuel that is removed from a terminal or
production facility for nontaxable purposes. In such cases,
the supplier is unable to recover the tax from the customer
and is also unable to seek reimbursement for the tax from the
BOE. AB 1032 creates a refund mechanism for amounts of tax
paid on the biodiesel portion of dyed fuel when a supplier can
show the tax on that biodiesel fuel has been paid.
2)Dyed Fuels. Fuels that are not taxed or taxed at a lower rate
are often dyed colors in order to distinguish them from
fully-taxable fuels. Untaxed fuels are often simply referred
to as "dyed." Examples of dyed biodiesel fuels are those
allowed for use in equipment that will not be used on public
roads, including tractors, generators, boats, home heating,
lawn mowers, and other farm equipment.
3)Biodiesel Fuel Supply. Generally, suppliers of diesel fuel
owe excise tax at the moment the fuel: (i) is delivered from a
terminal, in the case of fuel that enters California through a
pipeline or vessel; or (ii) enters California on a train or
truck (such fuel is known as "below the rack"). Most domestic
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biodiesel comes from the Midwest and is distributed via train
or truck, attracting tax at the moment of entry into
California. Biodiesel that is produced in California,
however, is generally taxed upon removal from the fuel
production facility.
4)Double-Taxed Blended Fuel. Certain producers may blend
biodiesel produced outside California with biodiesel produced
in California. Such blending usually occurs at a fuel
production facility, and thereby attracts tax upon removal
from that facility. The blended portion of this fuel was
already taxed, however, upon entry into California, and as a
result a portion of the end product was subject to taxation
twice. In such cases, the state allows the supplier to claim
a credit or refund for that double tax.
5)Recovering Tax on Dyed Biodiesel. If blended fuel is removed
from a facility for a non-taxable purpose (i.e., a dyed
biodiesel blend), there is no tax event at the point of
removal, since the use of the fuel is not subject to tax. As
a result, some suppliers have been unable to obtain a credit
or refund for taxes paid on biodiesel that enters the state,
or has otherwise arrived at the facility as tax paid fuel.
This bill provides the statutory mechanism needed to allow
suppliers to claim a refund on the tax paid portion of the
biodiesel blend.
6)Prior Legislation. This bill contains the same provision as
initially proposed in AB 2757 (Committee on Revenue and
Taxation) of 2014, and later added to AB 2756 (Committee on
Revenue and Taxation) of 2014 in combination with a property
tax assessors measure. AB 2756 was vetoed by the Governor
because of the property tax assessors measure, and this
legislation has been reintroduced as a stand-alone item.
AB 1032
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Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081