BILL ANALYSIS Ó
AB 464
Page 1
ASSEMBLY THIRD READING
AB
464 (Mullin and Gordon)
As Amended April 6, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
|----------------+------+--------------------+-----------------------|
|Revenue & |5-3 |Ting, Gipson, |Brough, Patterson, |
|Taxation | |Roger Hernández, |Wagner |
| | |Mullin, Quirk | |
| | | | |
|----------------+------+--------------------+-----------------------|
|Local |5-3 |Gonzalez, Chiu, |Maienschein, Linder, |
|Government | |Cooley, Gordon, |Waldron |
| | |Holden | |
| | | | |
| | | | |
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SUMMARY: Increases the maximum combined rate of all transactions
and use taxes (district taxes) that may be levied by authorized
entities within a county from 2% to 3%.
EXISTING LAW:
1)Authorizes cities and counties, under the Bradley-Burns Uniform
Local Sales and Use Tax (SUT) Law, to impose local SUT.
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2)Provides counties and cities, under the Transactions and Use Tax
(TUT) Law and the Additional Local Taxes Law, with the authority
to impose district taxes under specified conditions.
3)Provides that counties and cities may impose a district tax for
general purposes and special purposes at a rate of 0.125%, or
multiple thereof, if the ordinance imposing the tax is approved
by the required percentage of voters in the city or county.
4)Provides that the combined rate of all district taxes imposed in
accordance with the TUT law in any county may not exceed 2%.
5)Exempts from the 2% cap the Counties of Alameda, Contra Costa,
and Los Angeles, as specified.
6)Allows a county to establish a transportation authority to
impose district taxes under the Public Utilities Code (PUC) and
authorizes a county board of supervisors to designate a
transportation-planning agency to impose a district tax.
Requires that district taxes imposed under the PUC conform to
the administrative provisions contained in the TUT Law.
7)Requires cities and counties to contract with the State Board of
Equalization (BOE) to perform all functions in the
administration and operations of the ordinances imposing the
Bradley-Burns local taxes and district taxes.
FISCAL EFFECT: None
COMMENTS:
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1)Author's statement. The author has provided the following
statement in support of this bill:
"Current law allows cities and counties to impose transaction
and use taxes, also known as district taxes, at a rate of up to
two percent of total sales. This cap is quickly reached when
both cities and counties impose their own district taxes. It is
particularly problematic for counties because if one city within
a county has reached the cap, then the county is precluded from
raising additional district taxes. Similarly, cities that have
already reached the cap are constrained when seeking additional
funding for programs and services over and above the cap.
"The two percent cap was implemented more than a decade ago, in
2003. Since then several bills have gone through the
Legislature to create individual exceptions to the cap. Most of
these bills were eventually signed into law, begging the policy
question: If raising the cap is good for individual
jurisdictions, then should we consider simply lifting it
statewide? AB 464 does exactly this, and as a result it would
not only make the policy statewide, but it would reduce the
amount of piecemeal one-off bills going through the Legislature
on the subject, savings state resources.
"Throughout California, districts are reaching the current cap,
and funding for services, including transportation, education
and public safety, is declining. This bill gives local
jurisdictions the freedom to seek voter approval for district
tax increases by raising the cap from two to three percent. If
the proposed tax goes for a specific purpose, it would require a
two-thirds majority vote of the people living within the
jurisdiction before going into effect. In other instances, when
a jurisdiction proposes a general purpose tax, a majority vote
would be required. AB 464 grants local governing bodies, and
the people living within them, the much needed flexibility to
raise additional funds for important programs and services."
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2)Background. The TUT law authorizes the adoption of local add-on
rates to the combined state and local sales tax rate. Under
existing law, cities and counties may impose a TUT (a district
tax) for general or special purposes, subject to voter approval,
provided that the combined countywide rate of tax does not
exceed 2% (with the exception of the Counties of Alameda, Contra
Costa, and Los Angeles). These taxes may be imposed either
directly by the city or county, or through a special purpose
entity established by the city or county. Counties may also
create a transportation authority to impose district taxes under
the PUC or designate a transportation planning agency to impose
a district tax, subject to the applicable voter approval
requirements. District taxes imposed under the PUC must conform
to the administrative provisions contained in the TUT Law,
including the requirement to contract with the BOE to perform
all functions related to the administration and operation of the
ordinance.
A district tax is imposed on the sale or the storage, use, or
other consumption of tangible personal property in the
jurisdiction that adopted the tax. Generally, a district tax is
imposed at a rate of 0.125%, or 0.125% increments, up to the 2%
limit. Some cities and counties have more than one district
tax, while others have none. Currently, the district tax rates
vary from 0.10% to 1%. The current combined state, local, and
district rates range from 7.50% to 9.5% (with the exception of
Cities of Albany, Hayward, San Leandro, and Union City in
Alameda County; and the Cities of La Miranda, Pico Riviera, and
South Gate in Los Angeles County). According to the BOE's
analysis of this bill, as of April 1, 2015, 202 local
jurisdictions, including cities, counties, and special purpose
entities, impose a district tax for general or specific
purposes. Of the 202 jurisdictions, 48 are county-imposed taxes
and 154 are city-imposed taxes. Of the 48 county-imposed taxes,
44 are imposed for special purposes. Of the 154 city-imposed
taxes, 124 are general purpose taxes and 30 are special purpose
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taxes.
3)Existing 2% combined countywide cap. In 1987, the Legislature
imposed a maximum combined rate of 1% on all district taxes
within any county. That rate was incrementally increased -
first to 1.5% in 1990 and then to 2% in 2003. At the present
time, the Counties of Alameda, Contra Costa, Los Angeles, and
San Mateo have reached the 2% limit. The Counties of Marin, San
Diego, and Sonoma are near the 2% limit.
4)Increasing the 2% Cap. In recent years, more and more cities
and counties seek individual legislation to increase the current
statutory 2% cap. This bill is intended to uniformly increase
the combined statutory cap for all counties to 3%, instead of
addressing the financial difficulties experienced by various
cities and counties on a case-by-case basis.
Local governments often find it difficult to make up for
decreases in state revenues with increases in local revenues
because counties have limited authority to raise revenues and
local special taxes require a two-thirds vote of the electorate.
Furthermore, the interaction between city-imposed and
county-imposed TUTs may cause some counties to "run out of room"
under the 2% maximum combined rate of tax. When a city or
district imposes a TUT, that tax rate counts toward the county's
cap, which means that the county is restricted in its ability to
raise revenues on a countywide basis. Since levying a tax on a
countywide basis is the only way for the county to support its
operations and fund services, including transportation, an
imposition of a new, or extension of an existing, tax by a city
or a district within the county will directly impact the
county's ability to raise revenues. This bill may help counties
that either have already reached, or are close to reaching, the
2% maximum combined rate limit to levy or extend a TUT.
Furthermore, cities and districts may also be constrained in
their ability to impose a new or increase an existing TUT in the
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counties that have reached the 2% limit. As such, this bill
would provide more flexibility for cities and other authorized
agencies as well and would also drastically reduce the number of
bills seeking to lift the cap on behalf of individual counties
or cities.
5)No change in voting requirements. While this bill increases the
countywide 2% cap, it does not change any of the voting
requirements applicable to the passage of local taxes, including
a TUT.
Analysis Prepared by:
Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN:
0000288