BILL ANALYSIS Ó
SB 1485
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1485 (Kehoe) - As Amended: August 7, 2012
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes a person who uses tax-paid motor vehicle
fuel (MVF) as a blending component of a fuel taxed under the Use
Fuel Tax (UFT) Law to receive a refund of the excise tax paid on
that MVF. Specifically, this bill:
1)Allows a refund of MVF tax to any person who buys MVF to
produce a blended fuel that will be used to operate motor
vehicles on the state's highways, when that blended fuel is
taxed under the UFT Law, and if the applicable California fuel
tax has been paid on the blended fuel produced by the person.
2)Provides that, to be eligible for a refund, a person must show
that the applicable California fuel tax has been paid and
submitted the refund application request on or after January
1, 2011.
3)Takes immediate effect as a tax levy.
FISCAL EFFECT
1)Estimated costs of approximately $288,000 (Motor Vehicle Fuel
Tax Fund) in 2012-13 to pay refunds of excise taxes paid from
January 1, 2011 through June 30, 2012.
2)Ongoing estimated costs of $199,000 annually (Motor Vehicle
Fuel Tax Fund), beginning in 2012-13, for continued refunds of
excise taxes.
3)Negligible impact on Board of Equalization administrative
costs.
SB 1485
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COMMENTS
1)Purpose. According to the author, to diversify our state's
transportation energy sources, both state and national
policymakers allow the use of E-85, a fuel that is comprised
of 85% ethanol (derived from corn) and 15% gasoline. The
author explains that E-85 makes its way to retail gas stations
in two ways, it can be purchased from a refiner or distributor
pre-blended or the fuel is blended with ethanol and gasoline
being purchased separately. The author states the two methods
of making E-85 results in different taxation by the state.
The author contends this bill evens the playing field by
clarifying that E-85 blenders who have paid a MFV tax on the
gasoline they use in blending are entitled to a MVF tax refund
from the State Controller. The author concludes this bill
will result in everyone paying the same tax (UFT), regardless
of how the E-85 is produced.
2)Support . The California Independent Oil Marketers Association
(CIOMA) is sponsoring this bill. CIOMA notes several fuel
marketers in this state, who are blending E-85, have
encountered a problem regarding the refund of excessive state
excise tax paid on the gasoline component of this alternative
fuel. CIOMA states the State Controller's Office, the agency
that issues the refund checks to these marketers and fuel
blenders, does not believe the refunds are due. CIOMA argues
marketers should pay $.09 per gallon total tax on the blended
E-85.
3)Background . As noted above, E-85 is a product of blending
ethanol fuel and gasoline. Where the blending occurs,
however, impacts the fuel's taxation. If the E-85 is obtained
pre-blended at what is termed rack, then the product is
considered a use fuel and the vendor is responsible for
reporting and paying the tax. The rack is a level in the
distribution chain that is located at the refinery or
distribution point of a pipeline. However, if the E-85 is
blended below the distribution system from the rack where the
two component fuels are purchased separately and blended
elsewhere, the gasoline tax has already been paid and passed
on by the supplier at the rack. When the gasoline is blended
with ethanol, the resulting E-85 fuel is then subject to the
UFT on the full volume, so two taxes are charges on the
gasoline component. This bill is proposing to eliminate the
SB 1485
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paying of two taxes on the gasoline used in blending.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081