BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 724 |Hearing |6/15/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Dodd |Tax Levy: |Yes | |----------+---------------------------------+-----------+---------| |Version: |4/14/16 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Bouaziz | |: | | ----------------------------------------------------------------- Sales and use taxes: exemption: museum displays: Jimmy Doolittle Air and Space Museum Education Foundation Provides a sales and use tax exemption for the purchase of museum display items and sprung instant structures purchased by the Jimmy Doolittle Air and Space Museum Education Foundation. Background State law imposes a sales and use tax (SUT) on the sale, storage, or use of tangible personal property unless exempted by state law. The current state SUT rate is 7.5%, but beginning January 1, 2017, the state SUT rate on tangible personal property will be 7.25%. Cities and Counties may increase the SUT rate up to 2% as a transactions and use tax for either specific or general purposes with voter approval as required by the California Constitution. State law provides several sales and use tax exemptions related to museums, as follows: Original works of art when they are, among other things, purchased by a California state or local entity, or by certain nonprofit organizations under contract with governmental entities, by certain nonprofit organizations for public exhibit, or by persons for donation directly to any governmental or nonprofit organization. AB 724 (Dodd) 4/14/16 Page 2 of ? Museum pieces purchased to replace destroyed property used exclusively for display purposes when purchased within three years from the date the property was destroyed by (1) the state or a local government entity as part of a public art collection, (2) a nonprofit museum regularly open to the public and operated by a local or state government entity, or (3) operated by certain nonprofit organizations. Purchases of museum display items and sprung instant structures (structures that serve as temporary buildings to house exhibits) purchased by the San Diego Air and Space Museum's and the California Science Center's. Proposed Law Assembly Bill 724 provides a sales and use tax exemption for the purchase of museum display items and sprung instant structures used as temporary exhibit housing purchased by the Jimmy Doolittle Air and Space Museum Education Foundation. AB 724 makes legislative findings and declarations as to the necessity of a special statute for the Jimmy Doolittle Air and Space Museum Education Foundation. State Revenue Impact According to the Board of Equalization (BOE), this bill would result in a one-time state and local revenue loss of $39,000. Comments 1. Purpose of the bill. According to the author, "AB 724 would provide the Jimmy Doolittle Air and Space Museum Education Foundation the rare opportunity to purchase the fully restored "Shell Lockheed Vega" piloted by General Doolittle himself. This largely volunteer supported nonprofit museum received a generous private donation covering 50% of the cost of purchasing the Vega. Because of limited funding sources, an exemption from paying sales and use tax on this purchase would allow the museum to more easily fundraise the remaining cost of this historic AB 724 (Dodd) 4/14/16 Page 3 of ? aircraft. Such an exemption is not precedent setting; two similar exemptions have been approved for museums seeking educational displays for public benefit." 2. History lesson. In 1986, the sales and use tax exemption for the San Diego Air and Space Museum's purchase of museum display items was enacted. In 1988, the exemption was extended to the California Science Center. In 1992, the Legislature again expanded the exemption to include sprung instant structures purchased by these entities for use as temporary exhibit housing. Other measures have been considered in the past to further expand this exemption to include purchases by the Museum of Flying, the March Field Museum Foundation, and the Air Force Flight Test Center Museum, but all of them ultimately failed. 3. What about me? Currently, only the San Diego Air and Space Museum and the California Science Center are exempted from sales and use tax for purchases of museum display items and sprung instant structures used as temporary exhibit housing. Ensuring that the public is able to learn about various subjects and view displays by visiting museums is a laudable goal and should be a policy priority. However, why should a couple of museums benefit from a sales and use tax exemption, while others do not? The Committee may wish to consider what policy rationale to apply when distinguishing between museums with sales and use tax exemptions from museums subject to sales and use tax. Assembly Actions Not relevant to this version of the bill. Support and Opposition (6/9/16) Support : City of Vacaville; Fiona Ma, Board of Equalization Member; George Runner, Board of Equalization Member; Jimmy Doolittle Air and Space Museum Education Foundation; Solano County - Nut Tree Airport. Opposition : Unknown. AB 724 (Dodd) 4/14/16 Page 4 of ? -- END --