BILL ANALYSIS                                                                                                                                                                                                    






                  SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
                          Denise Moreno Ducheny, Chair
          
          Bill No:       SB 71
          Author:        Padilla
          As Amended:    March 22, 2010
          Consultant:    Keely Martin Bosler
          Fiscal:        Yes
          Hearing Date:  March 22, 2010
          
          Subject:  Sales and use tax exemption: qualified projects.

          Summary:  This bill authorizes the California Alternative  
          Energy and Advanced Transportation Financing Authority  
          (CAEATFA) to approve a sales and use tax exemption on  
          tangible personal property utilized for the design,  
          manufacture, production, or assembly of advanced  
          transportation technologies or alternative energy source  
          products, components or system.  The sales and use tax  
          exemption would sunset on January 1, 2021.

          Background:  The CAEATFA is a state authority at the State  
          Treasurer's Office.  The CAEATFA was created for the  
          purpose of promoting the development and utilization of  
          alternative energy sources and the development and  
          commercialization of advanced transportation technologies.   
          Existing law authorizes the Authority to finance projects  
          utilizing alternative energy sources and advanced  
          transportation technologies using lease revenue bonds.   
          Existing law exempts CAEATFA from paying the sales and use  
          tax on tangible personal property constituting a project as  
          defined by Public Resources Code 26003. 
          
          The CAEATFA consists of five members:  the Director of  
          Finance, the Chairman of the California Energy Commission,  
          the President of the Public Utilities Commission, the  
          Controller, and the Treasurer.  

          Proposed Law:  This bill creates a new definition of a  
          CAEATFA "project" and authorizes CAEATFA to approve a  
          project for financial assistance in the form of the sales  
          and use tax exemption under CAEATFA's existing authority.  

          This bill defines "project" for the purposes of the sales  
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          and use tax exemption as any tangible personal property  
          that is utilized for the design, manufacture, production,  
          or assembly of advanced transportation technologies or  
          alternative source products, components, or system.  This  
          bill specifies that alternative source includes advanced  
          electric distributive generation technology or energy  
          storage technologies and their component materials. 

          This bill would sunset the sales and use tax exemption for  
          the new definition of "project" in ten years on January 1,  
          2021.  This bill would require the Authority to provide a  
          20-day notice to the Legislature prior to making additional  
          approvals of sales and use tax exemption once the  
          exemptions exceed $100 million annually.

          This bill directs CAEATFA to evaluate "project"  
          applications for the sales and use tax exemption based upon  
          certain criteria that encourages manufacturing facilities  
          and jobs located in California, and the reduction of  
          greenhouse gases beyond the reduction required by federal  
          or state law or regulation.  

          The bill requires the Legislative Analyst's Office to  
          report to the Joint Legislative Budget Committee on the  
          effectiveness of this program prior to the sunset.  

          Fiscal Effect:  This bill is not likely to have a  
          significant impact on revenues in the 2010-11 budget year.   
          The bill is intended to attract new investments in  
          California by green technology companies that would not  
          occur in the absence of this tax incentive.  The resulting  
          revenue loss, therefore, would not be scored against the  
          baseline sales tax projections used by the Department of  
          Finance.  

          Additionally, any sales and use tax revenue loss could be  
          offset by an unknown amount of corporate tax revenue and  
          income tax revenues, to the extent that this credit  
          provides sufficient incentive for companies to establish  
          manufacturing facilities and create new jobs in California  
          that otherwise would not have been established in the  
          State.
          
          Support:  None available.
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          Opposed:  None available.

          Comments:  Sales and use tax exemptions are provided in  
          existing law for various purposes including providing an  
          incentive for certain economic investments in California.   
          This tax exemption is directed to provide incentives to  
          manufacturers of advanced transportation technologies and  
          alternative energy source products.  

          The Legislature approved and the Governor signed Chapter  
          488, Statutes of 2006 (AB 32, Pavley), which mandates that  
          California reduce its greenhouse gas emissions to 1990  
          levels by 2020.  The development of alternative  
          technologies will ultimately help the State comply with  
          these laws and regulations.



























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