BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 88|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: AB 88
Author: Gomez (D), et al.
Amended: 7/15/15 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 7/8/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley
NOES: Moorlach
SENATE APPROPRIATIONS COMMITTEE: 6-1, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza
NOES: Nielsen
ASSEMBLY FLOOR: 78-0, 6/1/15 - See last page for vote
SUBJECT: Sales and use taxes: exemption: energy or water
efficient home appliances
SOURCE: Author
DIGEST: This bill provides a sales and use tax exemption for
the sale of energy or water efficient home appliances, purchased
by a public utility that is provided at no cost to a low income
participant in an energy efficiency program.
ANALYSIS:
Existing law:
1)Imposes a sales and use tax on the sale, storage, or use of
tangible personal property unless exempted by state law.
AB 88
Page 2
2)Imposes sales and use tax on nonprofits, public agencies, and
charities are subject to sales and use tax, unless otherwise
exempted.
3)Allows cities and counties to increase the sales and use tax
rate up to 2% as a transactions and use tax for either
specific or general purposes with a vote of the people.
This bill:
1)Provides a sales and use tax exemption for the sale of energy
or water efficient home appliances, purchased by a public
utility that is provided at no cost to a low income
participant in an energy efficiency program.
2)Specifies that any savings from the exemption must be used by
the public utility to purchase additional energy or water
efficient home appliances.
3)Defines "energy or water efficient home appliance" as a
refrigerator or clothes washer that meets performance
requirements under the ENERGY STAR program. This bill defines
a low-income participant as a person who is a participant in
the California Public Utilities Commission's Energy Savings
Assistance Program (ESAP), or a similar energy or water
efficiency program, provided by a public utility with income
guidelines that do not exceed the income guidelines for ESAP
participants.
4)Applies to federal, state, or ratepayer-funded energy or water
efficiency programs.
5)Becomes operative on the first day of the first calendar
quarter commencing more than 90 days after the effective date
of this act and shall remain in effect only until January 1,
2021.
Comments
1)Author's statement. According to the author, "AB 88 creates a
tax exemption for Energy Star clothes washers and
refrigerators that are purchased through the Energy Savings
Assistance Program for low income utility customers.
Maximizing rate payer funds to benefit rate payers
AB 88
Page 3
participating in ESAP is another effective tool to helping
California achieve energy efficiency and water reduction
goals. While the bill is a tax levy, it has a delayed
effective date to provide the Board of Equalization a timeline
for notifying businesses that would be retailing the
appliances. To provide appropriate review of the legislation,
AB 88 has a five year sunset to review its effectiveness."
2)Legal woes. The main proponent of AB 88, Appliance Recycling
Centers of America (ARCA), supplies and recycles ENERGY STAR
appliances for low income individuals in the Los Angeles area
through the Los Angeles Department of Water & Power's (LADWP),
and the Southern California Gas Company's low income programs.
ARCA bills LADWP and Southern California Gas Company after
delivering the new appliance, and recycling the old appliance.
Since 2006, ARCA has provided 140,533 refrigerators and
clothes washers in the Los Angeles area.
ARCA failed to assess, collect, or remit sales and use tax to
the Board of Equalization (BOE) for the sale of ENERGY STAR
appliances to LADWP and Southern California Gas Company, and
underwent a BOE managed audit as a result. The audit covered
the period from January 1, 2011 through September 30, 2014,
and was expected to be completed by March 31, 2015. ARCA
estimated that the audit will likely result in a Notice of
Determination from BOE of an assessment of at least $4.0
million. In a press release dated February 11, 2014, ARCA
stated the assessment is subject to protest and appeal, would
not need to be funded until the matter has been fully
resolved. The press release also stated the company was
pursuing legislation to help resolve the matter.
In March of this year, a federal securities class action was
filed against ARCA. The complaint claims ARCA made false
and/or misleading statements in their financial statements
concerning sales tax related to its appliance replacement
program, among other allegations. Specifically, the complaint
states ARCA knew or recklessly disregarded that material facts
were being misrepresented or omitted in their financial
statements concerning sales tax.
3)Effect of exemption. AB 88's exemption aids low income
individuals and families by providing low or no cost
refrigerators and washing machines, but reduces revenues for
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Page 4
cities, counties, and the state, which means less funds for
programs that may also benefit low income individuals and
families. For example, if the City of Blue purchases $100,000
in refrigerators in neighboring City of Green, the City of
Blue will save $7,500 in sales and use tax, allowing the City
of Blue to purchase additional refrigerators. The City of
Green, where the refrigerators were sold, will lose
approximately $2,063. The county City of Green is in will
lose $1,000, and the state General Fund will lose $4,438. In
effect, the state, city, and county governments would
subsidize the purchase of tax-free refrigerators.
Related Legislation
AB 816 (Hall, 2013) would have provided a sales and use tax
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 sales and use tax
exemption, and was withdrawn from the Senate Government
Organization Committee to Senate Rules Committee.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
1)BOE estimates that this bill will result in an annual state
and local revenue loss of $4.5 million, $2.1 million of which
would be General Fund.
2)BOE would incur some absorbable administrative costs related
to notifying affected retailers, developing and publishing
applicable guidelines, and answering inquiries from the
general public and affected retailers.
SUPPORT: (Verified8/27/15)
Appliance Recycling Centers of America
Asian Pacific Environmental Network; California Apartment
Association
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Board of Equalization Chairman, Jerome Horton
California Building Industry Association
California Contract Cities Association
California League of Conservation Voters
California Retailers Association
California Rural Legal Assistance Foundation
Californians Against Waste
Center for Employment Training
Center on Race Poverty and the Environment
Central Basin Municipal Water District
City of Lancaster
City of Long Beach
City of Oakland
Coalition for Humane Immigrant Rights of Los Angeles
Coalition of California Welfare Rights Organization
Community Water Center
Employers Training Resource
Independent Cities Association
La Cooperativa Campesina de California
Los Angeles Chamber of Commerce
Los Angeles County Supervisor, Don Knabe
Los Angeles County Supervisor, Michael Antonovich
Los Angeles Mayor, Eric Garcetti
Proteus Inc.
San Diego County Water Authority
Sierra Club California; State Board of Equalization
Western Center on Law and Poverty
OPPOSITION: (Verified8/27/15)
California State Association of Counties
League of California Cities
ARGUMENTS IN SUPPORT: The supporters of this bill argue that
this bill will allow additional low income individuals to
participate in appliance replacement programs. Further,
supporters of this bill argue that energy efficient appliance
replacement will result in the reduction of greenhouse gasses
and water conservation, which are goals that all Californians
wish to, in fact need to, participate in.
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ARGUMENTS IN OPPOSITION: The opponents of this bill argue
that this bill will restrict an increasingly limited revenue
source that cities depend upon to fund basic services. Cities
already face an accelerating decline in local sales tax
revenues, and an increasing concentration in a limited number of
taxable activities that do not reflect recent changes in our
economy. Also, this bill sets a dangerous precedent. This bill
allows the Legislature to use increasingly scarce local
government revenues to achieve a statewide policy objective.
ASSEMBLY FLOOR: 78-0, 6/1/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Harper, Roger Hernández, Holden, Irwin,
Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NO VOTE RECORDED: Hadley, Obernolte
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
8/30/15 19:49:00
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