BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2119 HEARING: 6/11/14
AUTHOR: Stone FISCAL: No
VERSION: 5/14/14 TAX LEVY: No
CONSULTANT: Weinberger
TRANSACTIONS AND USE TAXES IN UNINCORPORATED AREAS
Allows a county board of supervisors to impose a
transactions and use tax within the county's unincorporated
area with the approval of voters within that area.
Background and Existing Law
Proposition 62 (1986) and Proposition 218 (1996) require
voter approval for new and increased local taxes.
Proposition 62 added statutes to the California Government
Code that prohibit a local government from imposing:
A special tax unless the special tax is submitted
to the electorate of the local government and approved
by a two-thirds vote.
A general tax unless the general tax is submitted
to the electorate of the local government and approved
by a majority vote.
Proposition 218 amended the California Constitution to
define the difference between general taxes and special
taxes and impose voter approval requirements that are
similar to Proposition 62's statutory provisions.
Counties can only impose taxes that state law specifically
authorizes them to impose. With some exceptions, state law
generally grants counties the power to impose taxes only in
their unincorporated areas. For example, the statutes
authorizing counties' transient occupancy taxes, business
license taxes, and utility user taxes all specify that the
those taxes may only be imposed within unincorporated
areas. In recent elections, different counties have taken
different approaches to seeking voter approval of taxes
levied in unincorporated areas. Some counties submit
ballot measures to all county voters, including those
residing in cities, while other counties only ask voters
residing in unincorporated areas to vote on the tax
AB 2119 -- 5/14/14 -- Page 2
proposals.
The Transactions and Use Tax Law authorizes a county to
levy a transactions and use tax throughout the county's
entire territory, at a rate of 0.125%, or multiples of
0.125%. A transactions and use tax is imposed on the total
retail price of any tangible personal property and the use
or storage of such property when sales tax is not paid.
The tax is added on to, and administered in tandem with,
the combined state and local sales and use tax rate. An
ordinance imposing a county-wide transactions and use tax
must be approved either by a majority of county voters, if
the tax is for general purposes, or by two-thirds of county
voters, if the tax is for special purposes.
Some county officials want to be able to impose county
transactions and use taxes only within a county's
unincorporated area, subject to the approval of either a
majority or two-thirds of only the voters who reside in the
unincorporated area.
Proposed Law
Assembly Bill 2119 allows a county's board of supervisors
to levy, increase, or extend a general-purpose transactions
and use tax either :
Throughout the entire county, if the tax is
approved by a majority vote of qualified voters of the
entire county, or
Within the unincorporated area of the county if the
tax is approved by a majority vote of qualified voters
of the unincorporated area.
AB 2119 directs that a county must use revenues from a
general-purpose transactions and use tax only for general
purposes within the area for which the tax was approved by
the qualified voters.
AB 2119 allows a county's board of supervisors to levy,
increase, or extend a special-purpose transactions and use
tax either :
Throughout the entire county, if the tax is
approved by a two-thirds vote of qualified voters of
the entire county, or
Within the unincorporated area of the county if the
AB 2119 -- 5/14/14 -- Page 3
tax is approved by a two-thirds vote of qualified
voters of the unincorporated area.
AB 2119 directs that a county must use revenues from a
special-purpose transactions and use tax only for specific
purposes within the area for which the tax was approved by
the qualified voters.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . In many counties throughout the
state, more than half of their territory is in
unincorporated areas, making those counties responsible for
financing a large amount of infrastructure. Unlike some
other statutes that authorize counties to impose taxes only
within their unincorporated areas, current law only
authorizes a county to impose an add-on transactions and
use tax rate throughout the entire county. AB 2119 would
allow counties to introduce a sales tax measure that would
be applied to unincorporated areas, spent on the
infrastructure of those unincorporated areas, and voted on
by the qualified voters of those areas. By allowing county
supervisors to limit the geographic area in which a county
transactions and use tax applies, this approach mirrors
current law for other county taxes. Additionally, when
cities impose a transactions and use tax, only voters who
reside in the area where the tax is going to be imposed get
to vote on that tax. AB 2119 makes the approval process
for county transactions and use taxes comparable to the
current process for approving city transactions and use
taxes.
2. Complications . Making it easier for counties to impose
add-on sales taxes in only a portion of their jurisdictions
will further complicate an already complex patchwork of
sales tax rates across the state. The Board of
Equalization's analysis of AB 2119 notes that allowing for
a separate transactions and use tax rate in unincorporated
areas could make it more complicated for taxpayers to
determine the proper rate to apply to a sale and more
AB 2119 -- 5/14/14 -- Page 4
difficult to properly identify and report the applicable
tax rates on their tax returns. Uniform county-wide rates,
by contrast, makes it easier for taxpayers to file accurate
returns, which improves compliance. AB 2119 may also
complicate counties' efforts to administer their
transactions and use tax revenues by requiring counties to
ensure that revenues generated from a tax imposed only
within the unincorporated area are used only within that
area.
3. What does "electorate" mean ? It is debatable whether,
simply by amending the Transactions and Use Tax Law, AB
2119 can allow a county tax to be approved only by voters
residing in an unincorporated area. In recent years,
several counties have sought voter approval for taxes that
are imposed only in unincorporated areas. Many of those
counties cite provisions of Proposition 62 (Government Code
§53722 and §53723) and Proposition 218 (California
Constitution, Article XIIIC, §2) as requiring all county
voters to vote on a measure to approve a county tax.
Officials in other counties hold a different view of state
law and ask only residents of unincorporated areas to vote
on taxes that are to be levied only in the unincorporated
areas. The question hinges on how to interpret statutory
and constitutional language requiring a local government to
submit any tax to "the electorate" of the local government
for voter approval. Statutory language can't override
voter-approved provisions of Propositions 62 and 218. As a
result, regardless of what AB 2119 says, it will be left to
individual counties, and perhaps the courts, to ultimately
decide whether a county tax can be approved by only a
portion of the county-wide electorate.
Assembly Actions
Assembly Local Government Committee: 7-2
Assembly Revenue and Taxation Committee: 6-3
Assembly Floor: 50-22
Support and Opposition (6/5/14)
Support : American Federation of State, County, and
Municipal Employees; California State Association of
Counties; California Tax Reform Association; Counties of
AB 2119 -- 5/14/14 -- Page 5
Humboldt, Monterey, San Luis Obispo, and Santa Cruz.
Opposition : California Taxpayers Association; Howard
Jarvis Taxpayers Association.