BILL ANALYSIS Ó
AB 88
Page 1
ASSEMBLY THIRD READING
AB
88 (Gomez)
As Amended May 20, 2015
Majority vote. Tax levy
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+-----------------------+-----------------------|
|Revenue & |9-0 |Ting, Brough, | |
|Taxation | |Dababneh, Gipson, | |
| | |Roger Hernández, | |
| | |Mullin, Patterson, | |
| | |Quirk, Wagner | |
| | | | |
|----------------+------+-----------------------+-----------------------|
|Appropriations |17-0 |Gomez, Bigelow, Bonta, | |
| | |Calderon, Chang, Daly, | |
| | |Eggman, Gallagher, | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, Jones, | |
| | |Quirk, Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Establishes a sales and use tax (SUT) exemption for any
"energy or water efficient home appliance" purchased by a "public
AB 88
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utility" that is provided at no cost to a "low-income participant" in
a federal, state, or ratepayer-funded energy efficiency program for
use by that "low-income participant" in the energy efficiency program.
Specifically, this bill:
1)Provides that any amounts that would have been paid as sales tax
reimbursement or use tax by the "public utility" but for the
exemption must be used by the public utility to purchase additional
"energy or water efficient home appliances" to be provided at no
cost to "low-income participants" in the energy efficiency program.
2)Defines an "energy or water efficient home appliance" as a
refrigerator or clothes washer that meets performance requirements
under the ENERGY STAR program, established pursuant to United States
Code Title 42, Section 6294a.
3)Defines a "public utility" as an entity defined in Public Utilities
Code (PUC) Section 216 or Section 224.3.
4)Defines a "low-income participant" as any person who is a
participant in the California Alternate Rates for Energy program,
also known as the CARE program, as established by PUC Section 739.1.
5)Provides that, notwithstanding Revenue and Taxation Code Section
2230, the state shall not reimburse any local agency for any SUT
revenues lost as a result of this exemption.
6)Takes immediate effect as a tax levy, but only becomes operative on
the first day of the first calendar quarter commencing more than 90
days after this bill's effective date.
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7)Sunsets on January 1, 2021.
EXISTING FEDERAL LAW establishes ENERGY STAR as a voluntary program
within the Department of Energy and the Environmental Protection
Agency to identify and promote energy-efficient products and buildings
in order to reduce energy consumption, improve energy security, and
reduce pollution.
EXISTING STATE LAW:
1)Imposes a sales tax on retailers for the privilege of selling
tangible personal property (TPP), absent a specific exemption. The
tax is based upon the retailer's gross receipts from TPP sales in
this state.
2)Imposes a complimentary use tax on the storage, use, or other
consumption of TPP purchased out-of-state and brought into
California. The use tax is imposed on the purchaser, and unless the
purchaser pays the use tax to an out-of-state retailer registered to
collect California's use tax, the purchaser remains liable for the
tax. The use tax is set at the same rate as the state's sales tax
and must generally be remitted to the State Board of Equalization
(BOE).
FISCAL EFFECT: According to the Assembly Appropriations Committee:
1)Minor and absorbable costs to the BOE to update systems and
procedures; and,
2)Estimated revenue decreases for the state and local jurisdictions of
$4.5 million per year, $2.1 million of which is from the General
Fund.
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COMMENTS:
1)The author has provided the following statement in support of this
bill:
AB 88 seeks to provide a sales and use tax exemption for
energy or water efficient appliances provided free of
cost to eligible low-income utility consumers. This bill
helps further California's environmental and energy
efficiency goals by reducing energy and water
consumption, while reducing costs for a greater number
of low-income Californians.
2)Assembly Revenue and Taxation Committee Comments:
a) The Energy Savings Assistance Program: The Energy Savings
Assistance Program (ESAP) provides no-cost weatherization
services to low-income households meeting specified income
guidelines. For example, the income eligibility upper limit for
a household of four is currently $47,700. Services provided
include attic insulation, weather-stripping, caulking, and door
and building envelope repairs to reduce air infiltration.
Qualified ESAP customers may also be eligible to receive
energy-efficient replacement appliances. For example, Pacific
Gas and Electric (PG&E) notes that energy-saving measures through
ESAP can include the repair or replacement of the customer's
refrigerator. In addition, furnace and water heater repair or
replacement may be available to eligible customers if PG&E
determines that existing natural gas units are inoperable or
unsafe. The author notes that ESAP helps to reduce energy and
water consumption, while at the same time reducing gas and
electricity costs for low-income customers. In addition, the
author states:
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ESAP leads to the safe recycling of old inefficient
appliances[,] which helps to reduce illegal dumping
and ensures that hazardous components and materials
including PCB-containing capacitors,
CFC[Chloro-Flouro-Carbon]/HFC[Hydroflurocarons]/HCFC[hy
drochlorofluorocarbon] refrigerants, polyurethane foam
insulation, and recyclable materials such as ferrous
and nonferrous metals, plastics, and glass are
properly handled.
According to the California Public Utilities
Commission, preliminary 2014 ESAP expenditures for the
four largest investor-owned utilities amount to $230
million. This total reflects expenditures for a broad
range of appliances and devices, including clothes
washers, refrigerators, microwaves, central air
conditioners, evaporative coolers, and compact
fluorescent lights, among other items. It should be
noted that these expenditures also include exempt
installation costs.
b) The ENERGY STAR program: This bill defines an eligible
"energy or water efficient home appliance" as a refrigerator or
clothes washer that meets performance requirements under the
ENERGY STAR program.
The ENERGY STAR program, in turn, is a voluntary federal program
designed to identify and promote energy-efficient products and
buildings in order to reduce energy consumption, improve energy
security, and reduce pollution through voluntary labeling of
products and buildings that meet the highest energy conservation
standards. ENERGY STAR has grown to include products in more
than 70 different categories, with more than 4.8 billion products
sold since 1992.
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Transitioning to ENERGY STAR-certified appliances has many
advantages. By way of example, there are an estimated 170
million refrigerators and refrigerator-freezers currently in use
in the United States. More than 60 million refrigerators are
over 10 years old, costing consumers $4.7 billion per year in
energy costs. ENERGY STAR-certified refrigerators, in turn, are
roughly 9% to 10% more energy efficient than models meeting the
federal minimum energy efficiency standard. By properly
recycling an old refrigerator and replacing it with a new ENERGY
STAR-certified model, the average consumer could save between $35
and $300 on energy costs over the lifetime of the appliance.
Cumulatively, if all refrigerators sold in the United States were
ENERGY STAR-certified, the energy cost savings would grow to more
than $400 million each year and eight billion pounds of annual
greenhouse gas emissions would be prevented. This is equivalent
to the emissions from 750,000 vehicles.
c) Everything's great until you get audited: The author notes
that, in the summer of 2014, a BOE audit determined that there is
no specific exemption for an energy- or water-efficient appliance
purchased by a public utility and provided at no cost to a
qualified low-income customer. The author notes that, without a
statutory exemption, fewer financial resources will be available
to serve low-income families. To this end, the author states,
"The goal of AB 88 is to make sure that the maximum number of
families are served in a federal, state, or ratepayer-funded
energy efficiency program."
d) Related legislation: AB 816 (Hall), of 2014, would have
provided a SUT exemption for energy- or water-efficient home
appliances purchased by a public utility and provided at no cost
to a participant in a federal, state, or ratepayer-funded energy
efficiency program. AB 816 originally related to alcoholic
beverages, was gutted and amended with the SUT exemption, and was
withdrawn from the Senate Governmental Organization Committee to
the Senate Rules Committee.
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Analysis Prepared by: M.
David Ruff / REV. & TAX. / (916) 319-2098 FN:
0000640