BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 2688
Author: Assembly Revenue and Taxation Committee
Amended: 8/6/12 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 7/3/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, Kehoe,
La Malfa, Liu
NO VOTE RECORDED: Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-0, 5/10/12 (Consent) - See last page
for vote
SUBJECT : Property taxes: sales and use taxes
SOURCE : Board of Equalization
California Assessors Association
DIGEST : This bill changes thresholds for property taxes
on air taxis and alters timing for filing an election for
bad debt deductions or refunds.
ANALYSIS :
I. Property taxes on aircraft . Section 1 of Article XIII
of the California Constitution provides that all
property is taxable unless explicitly exempted by the
Constitution or federal law. When assessors value
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aircraft, they must decide whether it is "certificated,"
meaning that the aircraft is operated by air carriers
for passenger or freight service. When a property owner
owns a certificated aircraft, assessors estimate the
value of the taxpayer's entire fleet, which is all
aircraft owned by the taxpayer by make and model.
Assessors may only value certificated aircraft with
"situs," or physical location, in California. If a
taxpayer owns an aircraft that enters into revenue
service in the state, then assessors must value the
entire fleet, and then allocate a share of the fleet
value to California to reflect that fleet's activity in
California. The value is then multiplied by the
property tax rate of 1% to determine the amount of tax
due.
In 2006, assessors and the airlines again agreed on a
new valuation methodology (AB 964 (Horton), Chapter 37,
Statutes of 2006).
The Legislature extended the valuation methodology to
the 2015-16 fiscal year (AB 384 (Ma), Chapter 228,
Statutes of 2010).
This bill increases the limit on seats to 60, and the
maximum payload capacity to 18,000 to reflect recent
changes made to the definition of air taxis in federal
regulations. This bill also requires air taxis to hold
a certificate of public convenience and necessity or
other economic authority from the United States
Department of Transportation to qualify for the lead
assessor methodology, replacing the Federal Aviation
Administration.
II. Bad debt deductions for sales taxes . If a retailer
sells a product, but later finds the sale to be
worthless due to nonpayment, the retailer can deduct the
loss from income taxes. Additionally, the retailer is
relieved from sales and use tax liability for the
transaction due and payable to the Board of Equalization
(BOE). The retailer must file an election with the BOE
to receive a deduction in the amount of the tax due on
the bad debt from future sales taxes due or claim a
refund of previous taxes paid. The Legislature allowed
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a lender, assignee, or affiliate of the retailer to
deduct the tax or claim a refund too, as retailers often
sell the debts to collections firms or assign them to an
affiliate to attempt to collect the debt (AB 599
(Lowenthal), Chapter 600, Statutes of 1999). The
retailer, lender, or affiliate must file an election
with BOE to for the deduction or the refund if:
The deduction has not been previously claimed or
allowed.
The accounts were found worthless and written off
by the lender.
The contract between the retailer and the lender
contains an irrevocable relinquishment of all rights
to the account from the retailer to the lender.
Last year, the Legislature removed the requirement that
the form be filed with BOE (AB 242 (Assembly Revenue and
Taxation Committee), Chapter 727, Statutes of 2011).
Instead, the retailer and the lender retain the election
form in case of an audit. Prior to the change, BOE
allowed the retailer to file the election after the
claim for deduction or refund, at which time BOE
considered the claim valid.
This bill deletes the requirement that the election be
made prior to claiming the deduction or refund.
Comments
According to BOE, this bill simply deletes the unnecessary
requirement that the election form be prepared and retained
prior to claiming a deduction or refund, thereby
establishing a "proper election" when the signed election
form is prepared, regardless of whether that election was
established after a deduction or refund is claimed.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/7/12)
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Board of Equalization (co-source)
California Assessors Association (co-source)
ASSEMBLY FLOOR : 73-0, 5/10/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Beth Gaines,
Galgiani, Garrick, Gatto, Gordon, Gorell, Grove, Hagman,
Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill,
Huber, Hueso, Huffman, Jones, Knight, Lara, Logue, Bonnie
Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell,
Monning, Morrell, Nestande, Nielsen, Pan, Perea,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Cook, Fletcher, Furutani, Jeffries,
Norby, Olsen, V. Manuel Pérez
AGB:k 8/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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