BILL ANALYSIS Ó
AB 1269
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1269 (Dababneh) - As Introduced February 27, 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 extends the authority of the California Alternative
Energy and Advanced Transportation Financing Authority (CAEATFA)
to grant sales and use tax exclusions for projects that promote
the use of advanced manufacturing until January 1, 2021.
FISCAL EFFECT:
Expected decreases in GF revenue of approximately $15-20 million
per fiscal year.
AB 1269
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Existing law limits the aggregate allowable sales and use tax
exclusions for all projects approved by CAEAFTA to $100 million
per calendar year. According to data provided by the
Treasurer's office, from November 2010 to March 1, 2015,
approximately $290 million in sales and use tax exclusions were
approved by CAEATFA, and approximately $82 million in exclusions
have been claimed, or approximately $19 million in claimed
exclusions on an annualized rate.
COMMENTS:
1)Purpose. According to the author, the sales and use tax
exclusion program for advanced manufacturing under CAEATFA is
critical for attracting and retaining high tech companies and
jobs in California. The author contends the program has
created approximately 1,350 jobs and generated net benefits to
the state of approximately $168 million since its inception.
Supporters state the program has provided financial assistance
for solar photovoltaic manufacturing, biogas and landfill gas
capture and production, electric vehicle and battery
manufacturing, biomass process, and fuel production in
California.
2)CAEAFTA. The California Alternative Energy Source Financing
Authority was established in 1980 to finance projects
involving alternative or renewable energy sources, including
wind, solar, cogeneration, and geothermal. In 1994, the
authority's mandate was expanded to include financing advanced
transportation technologies, and it was renamed CAEAFTA. In
2001, CAEAFTA's mandate was again expanded to include
financing public power entities, independent generators, and
others for new and renewable energy sources, and to develop
clean distributed generation.
AB 1269
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CAEAFTA provides financing through revenue and prepayment
bonds, loans, guarantees, and other credit enhancements.
Since 2010, CAEAFTA has also been allowed to grant sales and
use tax exclusions to assist in the purchase of equipment used
for an approved project, and since 2012, the exclusion has
been allowed for advanced manufacturing projects. Total sales
and use tax exclusions are limited to $100 million in any
calendar year.
3)Sales and Use Tax Relief. Sales and use tax exemptions and
exclusions provide tax relief on the purchase of business
inputs. The policy justification for relief is that the
inputs will be used for, or incorporated into, a final
consumer item, which is itself taxable, resulting in the
imposition of sales and use tax at multiple points along the
item's manufacturing process.
The state provides certain partial sales and use tax
exemptions for manufacturing or research and development,
resulting in a reduction in the state portion of sales tax
owed on certain inputs. The exemption is widely available and
relatively easy to claim, though it does not relieve the
taxpayer of all state sales and use taxes or any local sales
and use taxes.
In contrast, the CAEATFA exclusion relieves a taxpayer of all
state and local sales and use taxes, but requires a more
robust application and approval process from CAEATFA in order
to claim. As a result, CAEATFA is able to direct the tax
relief to projects that provide the greatest return on
investment for the state. Manufacturers that qualify for both
the partial sales and use tax exemption and the CAEAFTA
exclusion are prohibited from claiming both with respect to
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the same inputs.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081