BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1717
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1717 (Perea)
          As Amended  August 22, 2014
          2/3 vote.  Urgency
           
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          |ASSEMBLY:  |71-2 |(May 29, 2014)  |SENATE: |29-2 |(August 26,    |
          |           |     |                |        |     |2014)          |
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          Original Committee Reference:    U. & C.  

           SUMMARY  :  Establishes a new point-of-sale system for collecting  
          and remitting specified fees, surcharges, and taxes applicable  
          to prepaid mobile telephony services (MTS).  Specifically,  this  
          bill  :  

          1)Establishes a prepaid MTS surcharge based on or after January  
            1, 2016, on a percentage of the sales price of each retail  
            transaction that occurs in the state for prepaid wireless  
            service. The prepaid MTS surcharge would include the emergency  
            telephone users surcharge (911) and California Public  
            Utilities Commission (PUC) surcharges and any applicable local  
            user utility tax.

          2)Requires a retail seller to collect the prepaid MTS surcharge  
            from a prepaid consumer and remit the amounts collected to the  
            State Board of Equalization (BOE) and allows a retail seller  
            to receive 2% of the amounts collected with certain  
            exceptions.

          3)Specifies the taxes to be separately stated on an invoice,  
            receipt, or other similar document provided to the prepaid  
            consumer, or otherwise disclosed electronically to the prepaid  
            consumer.

          4)Requires BOE, after deducting its administrative expenses, to  
            deposit the amounts collected for 911 user surcharge into the  
            Prepaid MTS 911 Account and to deposit the amounts collected  
            for PUC surcharges into the Prepaid MTS PUC Account in the  
            Prepaid Mobile Telephony Services Surcharge Fund, which the  
            bill would establish in the State Treasury.

          5)Requires PUC to annually compute for prepaid mobile telephony  
            services the PUC's reimbursement fee and six universal service  








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            program surcharges, to post notice of those fees and  
            surcharges on its Internet Web site, and to notify BOE and the  
            Office of Emergency Services (OES) of the amounts and the  
            computation method used to determine the amounts, which would  
            be adjusted, as specified, and together would be the PUC  
            surcharges.

          6)Requires the PUC, 30 days prior to adopting any adjustment to  
            a reimbursement fee or universal service surcharge on both  
            postpaid and prepaid intrastate service, to prepare a  
            prescribed resolution or other public document proposing the  
            fee or surcharge, and publicize on its Internet Web site.

          7)Exempts prepaid consumers from prepaid MTS surcharge if the  
            prepaid consumer is certified as eligible for the state or  
            federal lifeline program.

          8)Requires OES to annually compute the intrastate portion of the  
            911 surcharge to be collected on prepaid mobile telephony  
            services to post notice of those charges and to notify BOE of  
            the amount.

          9)Requires OES to prepare a prescribed summary of the  
            calculation of the proposed 911 surcharge and make it  
            available to the public on its Internet Web site.

          10)Creates statewide uniformity for user utility taxes (UUTs)  
            assessed on prepaid mobile telephony service and preempts  
            existing provisions pertaining to the tax or charge rate, base  
            and method of collection contained in all local ordinances,  
            rules or regulations concerning the imposition of a local  
            charge upon the consumption of prepaid mobile telephony  
            services, to the extent those provisions are inconsistent with  
            the new provisions, as specified.

          11)Requires a seller to refund prepaid consumers for any prepaid  
            MTS surcharges and local charges in excess of the surcharge  
            amount.

          12)Allows a consumer to rebut the presumed location of a retail  
            transaction for the purposes of the collection of the local  
            charges by filing a claim and declaration under penalty of  
            perjury.

          13)Ensures the State 911 fund is no less than $9.9 million  








                                                                  AB 1717
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            dollars and if it falls below that amount, each seller that is  
            a telephone corporation to shall divide and pay the difference  
            on a pro rata basis according to each such telephone  
            corporation's intrastate prepaid wireless revenues.

           The Senate amendments  :

          1)Require the BOE post individual, as well as cumulative, rates  
            for PUC surcharges and local charges to facilitate direct  
            seller remittance.

          2)Include a reporting requirement by carriers of MTS 911  
            remittances to ensure they are included in the tabulation of  
            overall MTS 911 remittances.

          3)Add a sunset date of January 1, 2020, for guarantee of the  
            State 911 fund.

          4)Clarify the definition of direct sellers.

          5)Require a reporting of MTS costs by the BOE.

          6)Clarify the BOE's administrative role.

          7)Make a finding a declaration that the law in effect prior to  
            the imposition of the prepaid MTS surcharge as a result of the  
            enactment of this act is the subject of ongoing and potential  
            litigation.

          8)Specify that the remittance of local charges shall be  
            separately identified from any other local taxes that are  
            remitted to the local jurisdiction or local agency imposing  
            the local charge.

          9)Authorize the BOE share any seller, including direct seller  
            records, relating to local charges with local governments.

          10) Clarify that the local government is responsible for the  
            enforcement, including auditing, of collection and remittance  
            of local charges by direct sellers.

          11)Clarify that the local government is responsible for paying  
            to the BOE its pro rata share of the BOE's cost of collection  
            and administration.









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          12)Require the BOE to report to the Legislature no later than  
            July 1, 2017 the costs, number of sellers, and other pertinent  
            information to assist Legislature in determining whether to  
            re-enact this statute.

          13)Add language to permit deposit of funds to state 911 fund and  
            PUC accounts from the MTS accounts.

          14)Add double-jointing language to AB 1717 (Perea) of the  
            current legislative session, to prevent chaptering out issues.

          15)Make other non-substantive changes.

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee:

          1)$8.3 million for Fiscal Year (FY) 2015-16, $13.6 million for  
            FY 2016-17, $12.3 million for FY 2017-18, and $12.1 million  
            thereafter from fee revenues (special) for BOE to administer  
            and collect the new collection mechanism beginning in 2016,  
            not including additional costs associated with the potential  
            sunset of the new collection mechanism.

          2)$630,000 for the first two years of implementation and  
            $350,000 thereafter from the Public Utilities Commission  
            Utilities Reimbursement Account (special) to set the MTS and  
            track MTS revenues

          3)Unknown changes in state revenues, but potentially an increase  
            in $4.99 million, to various special funds by collecting  
            surcharges on more services and on retail prices. Staff  
            estimates that after the subtraction of the state's portion of  
            the BOE and PUC's increased administrative costs, net revenues  
            may be in the hundreds of thousands of dollars.

          4)Cost pressures on the General Fund for a loan for start-up  
            costs.

           COMMENTS  :   

          1)Purpose.  According to the author, everyone who uses phone  
            service pays a small monthly fee as part of their bill to help  
            fund 911 and support other important state and local programs.  
             However, for the fastest growing segment of wireless users,  
            prepaid wireless services, there is no collection mechanism  








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            for customers to pay these fees.  Nearly 25% of all wireless  
            customers are now prepaid customers.  

          2)Background.  The state's current system for collecting taxes  
            and fees is based on monthly bills.  Customers pay 911 fees  
            and state and local fees to fund telephone service for  
            low-income households, broadband for underserved areas, and  
            local government services.

             a)   According to the Wireless Association, the prepaid  
               wireless market is anticipated to grow at a rate of 10% per  
               year.  

          3)Collection of fees and surcharges for prepaid wireless  
            services.  Current law imposes a state 911 user surcharge on  
            intrastate communications service, administered by the  
            California Technology Agency; a PUC Reimbursement Fee to pay  
            for PUC operations, and several surcharges to pay for state  
            universal service programs administered by the PUC as follows:

          a)   California High Cost Fund A and B.

          b)   Deaf and Disabled Telecommunications program.

          c)   California Teleconnect Fund.

          d)   California Advanced Services Fund.

          e)   Lifeline Telephone Service.

          Post-paid fees and surcharges are assessed as they are reflected  
          on customer bills after service is used.  With prepaid service,  
          there is no specific billing process. 
           
           
           Analysis Prepared by  :    DaVina Flemings / U. & C. / (916)  
          319-2083 


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