BILL ANALYSIS Ó
SB 1243
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1243 (Lowenthal) - As Amended: May 25, 2012
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill extends the sunset date for the current sales tax
exemption for specified fuel and petroleum products (bunker
fuel) sold to water common carriers. Specifically, this bill:
1)Extends, from January 1, 2014, to January 1, 2024, the sunset
date for the current sales tax exemption for fuel and
petroleum products sold to a water common carrier for
immediate shipment outside California for consumption after
the carrier's first out-of-state destination, as specified.
2)Provides, notwithstanding existing law, the state shall not
reimburse any local agency for any sales and use tax (SUT)
revenues lost as a result of this act.
3)Provides that there will be no reimbursement of local agencies
for any loss of local revenues.
4)Takes immediate effect as a tax levy.
FISCAL EFFECT : The State Board of Equalization (BOE) estimates
state and local revenue losses of between $91.7 million and
$137.5 million annually beginning in 2014 that could have been
collected if the exemption expired. The forecast does assume a
significant decline as shippers significantly reduce their use
of California ports for refueling. BOE estimates the revenue
loss would shrink as sales continue to drop because of higher
prices in California. The estimate does not include any change
in tax collections resulting from the employment impacts and
other economic impacts that could result if the exemption were
to sunset.
SB 1243
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COMMENTS
1)Purpose. The author notes this bill extends the January 1,
2014 sunset in current law, continuing a partial sales tax
exemption for maritime fuels. The author notes this partial
exemption has expired twice in the past, and both times the
state lost hundreds of jobs. Finally, the author argues SB
1243 seeks to protect port jobs and provide stability to the
marketplace by extending the sunset on the partial sales tax
exemption for maritime fuel.
2)Support . Proponents, including the shipping industry and
marine-related unions, state this bill would protect
California jobs and keep California ports competitive by
extending the partial sales tax exemption on the purchase of
marine fuel to January 1, 2024. According to supporters, only
12% of maritime fuels are consumed during the trip to the
first out-of-state destination and if the incentive were to
expire, maritime fuel sales would decline 40% to 60%.
Proponents conclude SB 1243 will provide exemptions for a
small percentage of carriers while continuing to maintain and
grow a relationship with a majority of carriers.
3)Background. As noted by the LAO, California's tax treatment
of bunker fuel has changed back and forth over time. From
July 15, 1991, through December 31, 1992, and again from
January 1, 2003 through March 31, 2004, California fully taxed
all bunker fuel sales in the state. On April 1, 2004,
however, California reinstated the partial exemption that had
been allowed prior to July 1991 and from January 1, 1993
through December 31, 2002. This partial exemption is
currently set to expire on January 1, 2014.
4)LAO reports. In 2001, the LAO released a statutorily mandated
study on bunker fuel and noted that the bunker fuel industry
experienced a decline in California in the 1990s, owing in
part to the temporary revocation of the Sales and Use Tax
(SUT) exemption for bunker fuel during this period. The LAO
concluded that a partial exemption for bunker fuel represents
"an appropriate tax policy."
In 2007, the LAO prepared a second report and found that the
revocation of the SUT exemption for bunker fuel during 2003
and 2004 produced impacts similar to those experienced during
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the early 1990s. The LAO also noted that, due to recent
increases in fuel prices, revoking the SUT exemption now would
likely have an even larger adverse impact than it did
previously and recommended removing the existing sunset for
the partial SUT exemption entirely.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081