BILL ANALYSIS Ó
AB 88
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CONCURRENCE IN SENATE AMENDMENTS
AB
88 (Gomez)
As Amended July 15, 2015
Majority vote
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|ASSEMBLY: |78-0 |(June 1, 2015) |SENATE: |35-5 |(September 1, |
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Original Committee Reference: REV. & TAX.
SUMMARY: Establishes a sales and use tax (SUT) exemption for
any "energy or water efficient home appliance" purchased by a
"public utility" that is provided at no cost to a "low-income
participant" in a federal, state, or ratepayer-funded energy or
water efficiency program for use by that "low-income
participant" in the energy or water efficiency program.
The Senate amendments:
1)Add references to water efficiency programs for consistency
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throughout the proposed statute.
2)Modify the definition of a "low-income participant" to mean a
person who is participating 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.
3)Provide that it is the Legislature's intent that no inference
be drawn in connection with the addition of this SUT exemption
"to events occurring before the passage of this act."
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).
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AS PASSED BY THE ASSEMBLY, this bill:
1)Provided 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)Defined 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)Defined a "public utility" as an entity defined in Public
Utilities Code (PUC) Section 216 or Section 224.3.
4)Defined 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)Provided 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)Took immediate effect as a tax levy, but only became operative
on the first day of the first calendar quarter commencing more
than 90 days after this bill's effective date.
7)Sunset on January 1, 2021.
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FISCAL EFFECT: According to the Senate Appropriations
Committee:
1)The BOE estimates that this bill would result in an annual
state and local revenue loss of $4.5 million, $2.1 million of
which would be General Fund.
2)The 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 impacted retailers.
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 ESAP: The 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
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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.
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.
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
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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 the 2013-14
Legislative Session, 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.
Analysis Prepared by:
M. David Ruff / REV. & TAX. / (916) 319-2098
FN:
0001718
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