BILL ANALYSIS Ó AB 1717 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1717 (Perea) As Amended August 22, 2014 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |71-2 |(May 29, 2014) |SENATE: |29-2 |(August 26, | | | | | | |2014) | ----------------------------------------------------------------- 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 AB 1717 Page 2 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 Page 3 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. AB 1717 Page 4 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 AB 1717 Page 5 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 FN: 0005391