BILL ANALYSIS                                                                                                                                                                                                    Ó






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                                   THIRD READING 


          Bill No:  SB 1338
          Author:   Lara (D), et al.
          Amended:  5/4/16  
          Vote:     21 

           SENATE GOVERNANCE & FIN. COMMITTEE:  7-0, 4/27/16
           AYES:  Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,  
            Pavley
            
           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/27/16
           AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

           SUBJECT:   Sales and use taxes:  exemption:  zero-emission and  
                     near-zero-emission equipment


          SOURCE:    Author

          DIGEST:  This bill provides a partial sales and use tax (SUT)  
          exemption for zero and near zero-emission port equipment.

          ANALYSIS:  
          
          Existing law:

          1)Imposes a sales and use tax (SUT) on the sale, storage, or use  
            of tangible personal property unless exempted by state law.   
            Cities and Counties may increase the SUT rate up to 2% as a  
            transactions and use tax for either specific or general  
            purposes with a vote of the people.

          2)Imposes a SUT rate of 7.5%, but beginning January 1, 2017, the  
            state SUT rate on tangible personal property will be 7.25%.








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          This bill provides a partial SUT exemption for zero and near  
          zero-emission port equipment.  Specifically this bill:

          1)Provides a General Fund (3.9375%) SUT tax exemption for  
            "qualified TPP" purchased by a "qualified person" to be used  
            "primarily" in, at, or on a marine terminal of a California  
            public port for carriage, handling, or movement of freight,  
            cargo, and goods.

          2)Defines "qualified tangible personal property" as any of the  
            following:

             a)   Zero-emission or near-zero-emission equipment used in  
               conjunction with the movement of goods or freight,  
               including computers, data-processing equipment, and  
               computer software required to operate, control, regulate,  
               or maintain the qualified equipment. 

             b)   Parts used for the repair and replacement of qualified  
               equipment with a useful life of one or more years.

             c)   Special purpose buildings and foundations used as an  
               integral part of the utilization process of zero-emission  
               or near-zero-emission equipment.

             d)   Leases of qualified tangible personal property.

          3)Defines "primarily" as 50% or more of the time.

          4)Defines "qualified person" as a stevedore, marine terminal  
            operator, operator of a port, rail ramp, rail yard, imtermodal  
            facility, or freight yard, or any other person that is engaged  
            in cargo and freight loading, delivery, movement, storage, and  
            conveyance at or within a California public seaport.

          5)Defines "Zero-emission or near-zero-emission equipment" as  
            equipment, off-road vehicles, and related technologies used  
            within the boundaries of a California public seaport that  
            reduces or eliminates greenhouse gas emissions and improves  
            air quality as identified by the State Air Resources Board in  
            consultation with the State Energy Resources Conservation and  
            Development Commission.  Additionally, "zero-emission and  
            near-zero-emission equipment" may include advanced or  







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            alternative fuel engines and hybrid or alternative fuel  
            technologies for seaport equipment.

          6)Provides that the exemption does not apply if, within one year  
            from the date of purchase, the qualified person (a) uses the  
            qualified property in a manner not qualifying for the  
            exemption, (b) converts the qualified property from an exempt  
            use to a non-qualifying use, or (c) removes the qualified  
            property from California. Finally, this bill contains  
            reporting requirements, as specified.

          7)Applies to taxable years beginning January 1, 2017, and before  
            January 1, 2030.

          Background
          
          The ports of Los Angeles and Long Beach are the busiest in the  
          nation and generate more air pollution than any other facility  
          in the Los Angeles Basin.  In 2006, the ports of Long Beach and  
          Los Angeles together adopted the landmark Clean Air Action Plan  
          (CAAP).  The CAAP focuses on strategies to reduce health risks  
          to communities surrounding the ports by reducing air pollutants.  
           Both the ports of Los Angeles and Long Beach have each reduced  
          diesel particulates by over 80 percent, but more needs to be  
          done. According to the Air Resources Board, despite substantial  
          progress over the last decade, the remaining localized risks of  
          cancer and other adverse effects near major freight hubs must be  
          significantly reduced.  Infants and children are 1.5 to three  
          times more sensitive to the harmful effects of exposure to air  
          toxics, like those emitted from freight equipment, than  
          previously understood, which heightens the need for further risk  
          reduction.   


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          According to the Senate Appropriations Committee:




          The Board of Equalization (BOE) indicates that this bill would  







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          result in an annual General Fund revenue loss of $4.6 million.  
          BOE's implementation costs have yet to be determined, but would  
          minimally reach the hundreds of thousands of dollars annually  
          (General Fund).




          SUPPORT:   (Verified5/27/16)


          Bay Area Air Quality Management District
          Breathe California
          California Electronic Transportation Coalition
          California League of Conservation Voters
          Coalition for Clean Air
          Environment California
          Environmental Defense Fund
          Move LA
          Natural Resources Defense Council
          Pacific Merchant Shipping Association


          OPPOSITION:   (Verified5/27/16)


          International Longshore and Warehouse Union


          ARGUMENTS IN SUPPORT:     According to the author, "The  
          California economy is largely dependent on international trade  
          and commerce. The state is home to three of the largest ports in  
          the nation, located in Los Angeles, Long Beach, and Oakland, and  
          eight smaller public-owned ports situated from Humboldt Bay and  
          south to San Diego. More than 40% of containerized cargo  
          arriving in the United States enters through the state's 11  
          seaports.  The Southern California region allows for the  
          quickest, direct shipping routes to the Pacific Rim. 75% of  
          total container volume coming through the Ports of Los Angeles  
          and Long Beach come from East Asia alone.  However, greenhouse  
          gas emissions from the transportation sector continue to impact  
          public health throughout the state.  According the American Lung  
          Association's State of the Air 2016 report, the Los Angeles  
          region leaders the nation in harmful ozone pollution.  Simply  







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          put, air quality degradation, congestion, and additional  
          infrastructure impacts cripple not only the economic viability  
          of a region, but also the health and quality of life for those  
          living in communities situated in high volume transportation  
          corridors.  Capital expenses associated with the procurement of  
          the latest zero-emission or near-zero emission cargo handling  
          equipment is in the tens of billions of dollars.  Replacing  
          current equipment at the ports of Los Angeles, Long Beach, and  
          Oakland is estimated to cost $23 billion.  Smart investments to  
          offset and eliminate negative environmental impacts from freight  
          transport positions the state to work towards achieving clean  
          energy and climate goals established by landmark legislation  
          such as AB 32 (Nunez, Chaptered 2006) and SB 350 (De Leon,  
          Chaptered 2015).  To that end, the state has a critical role in  
          assisting California ports transition from the more conventional  
          to next generation infrastructure to improve the public health  
          of communities in and around our goods movement sector."

          ARGUMENTS IN OPPOSITION: Opponents argue this bill will lead to  
          jobs loss and will not address the true source of harmful  
          emissions, idle trucks. Specifically, the opponents argue this  
          bill may lead to automation of jobs currently held by union  
          members.

          Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
          5/28/16 17:12:00


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