BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 71
Author: Padilla (D), Alquist (D), and Strickland (R)
Amended: 3/22/10
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Tax exclusion: Alternative Technology Tax
Relief
SOURCE : Author
DIGEST : Assembly Amendments delete the Senate version of
the bill which expressed the intent of the Legislature to
enact statutory changes relating to the Budget Act of 2009.
This bill now expands the range of projects which may be
approved for a sales tax exclusion to include equipment
used to manufacture products that produce energy from
alternative sources such as solar, wind and biomass.
ANALYSIS : The California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) was
established in 1980 as a means to encourage the use of
equipment using alternative or renewable energy sources,
such as wind, solar, cogeneration and geothermal. Under
its existing authority, CAEATFA may approve projects and
authorize financial assistance for the purchase of
equipment that uses such alternative energy sources.
CAEATFA is authorized to provide financial assistance to
projects that meet its approval though the issuance of
CONTINUED
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bonds, loans, loan guarantees and credit enhancements. In
addition, existing law permits CAEATFA to approve projects
and exclude equipment purchased pursuant to those projects
from the state and local sales tax. Currently, projects
that may be approved by the authority do not include
equipment that is used to manufacture alternative or
renewable energy products (such as solar panels,
photovoltaic cells or wind turbines).
This bill:
1. Allows CAEATFA to authorize a state and local sales tax
exclusion for tangible personal property that is used
for the design, manufacture, production, or assembly of
advanced transportation technologies or alternative
source products, components or systems. Alternative
source products, components or systems includes
cogeneration technology, energy conservation, solar,
biomass, wind, geothermal, specified hydro-electric, or
any other energy efficient technologies that reduce the
use of fossil and nuclear fuels. Alternative sources
would also include advanced electric distributive
generation technology and energy storage technology.
2. Requires CAEATFA to evaluate project applications for
the sales tax exclusion based on the extent to which (a)
the project develops manufacturing facilities or
purchases equipment in California, (b) the benefits of
the project to the state equal or exceed the benefits to
the project applicant and other participants, (c) the
project creates new permanent jobs in California, (d)
the project results in a reduction in greenhouse gases,
a reduction in air or water pollution, an increase in
energy efficiency, or a reduction in energy consumption,
beyond what is required by state or federal law, (e)
unemployment exists in the area in which the proposed
project is to be located, and (f) any other factors
deemed appropriate.
3. Requires CAEATFA to provide 20-day notice to the
Legislature once the value of exclusions approved by
CAEATFA exceeds $100 million. The notification must be
provided prior to additional approvals being granted.
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4. Sunsets the expanded authority of CAEATFA to approve
specified projects effective January 1, 2021.
5. Requires the Legislative Analyst's Office to report to
the Joint Legislative Budget Committee on the
effectiveness of the program on or before January 1,
2019, evaluating factors including but not limited to
the number of jobs created in California, the number of
businesses retained in or relocated to California, and
the amount of state and local revenue and economic
activity generated.
Comments
This bill expands the realm of eligible projects which may
be approved for exclusion from the sales tax. This
expanded authority is limited to the period ending January
1, 2021. This bill does not result in placing a sunset
date on CAEATFA's authority under the existing program.
Under current law, CAEATFA may already approve projects
based on advanced transportation technologies, and approved
one such project in 2009. Thus, the addition of the
advanced transportation technology language in this bill
appears to be motivated by an effort to increase the
clarity of the existing statutory language.
According to the Department of Finance, the program would
have no impact on the budget, since absent the program, the
projects approved by CAEATFA would not have occurred.
Based on this analysis, the program would be stimulative in
design and effect and not result in granting exclusions to
investment activities that would have occurred anyway.
This bill is intended to retain companies and economic
activities in California that might otherwise relocate to
other states. This bill is also intended to increase
activity perceived as a potential economic growth area.
Based on the criteria to be used by CAEATFA in approving
projects and by the Legislative Analyst's Office in
evaluating the effectiveness of the program, this bill is
also motivated by a desire to create job opportunities in
this sector.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
The fiscal impact is dependent on the extent to which
alternative and renewable energy technologies expand in
California, as well as gross sales amount of the projects
approved for the sales tax exclusion by CAEATFA. The Board
of Equalization has estimated that in 2008, capital
expenditures related to renewable and alternative energy
were approximately $225 million. Assuming these
constituted projects meeting CAEATFA's criteria and were
approved, the General Fund revenue reduction based on the
current six percent rate would be $13.5 million, with total
state and local revenue losses of approximately $20
million.
According to the Department of Finance, the program would
have no impact on the budget, since absent the program, the
projects approved by CAEATFA would not have occurred.
Based on this analysis, the program would be stimulative in
design and effect and not result in granting exclusions to
investment activities that would have occurred anyway.
DLW:mw 3/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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