BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 724


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          CONCURRENCE IN SENATE AMENDMENTS
          AB  
          724 (Dodd and Frazier)


          As Amended  April 14, 2016


          Majority vote.  Tax levy


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          |ASSEMBLY:  |      |(May 7, 2015)  |SENATE: |39-0  |(August 1, 2016) |
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          |COMMITTEE VOTE: |9-0  |(August 23,     |RECOMMENDATION:   |concur     |
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          (Rev. & Tax.)




          Original Committee Reference:  HEALTH


          SUMMARY:  Establishes a sales and use tax (SUT) exemption for  
          tangible personal property (TPP) purchased by the Jimmy  
          Doolittle Air and Space Museum Education Foundation for display  








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          purposes.  


          The Senate amendments delete the Assembly version of this bill  
          and instead:


          1)Expand the existing SUT exemption for TPP purchased by  
            specified nonprofit museums for display purposes to include  
            the Jimmy Doolittle Air and Space Museum Education Foundation.  
             


          2)Provide that, notwithstanding existing law, the State shall  
            not reimburse any city or county for any SUT revenues lost as  
            a result of this bill.  


          3)Contain findings and declarations that a special law is  
            necessary and that a general law cannot be made applicable  
            within the meaning of California Constitution Article IV  
            Section 16 because of the unique fiscal pressures experienced  
            by the Jimmy Doolittle Air and Space Museum Education  
            Foundation in promoting this country's aviation history and  
            encouraging patriotic endeavors by providing impactful  
            experiences through interactive aviation exhibits.  


          4)Provide that this bill shall take immediate effect as a tax  
            levy.  


          EXISTING LAW:  


          1)Imposes a sales tax on retailers for the privilege of selling  
            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  








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            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).


          3)Provides a SUT exemption for TPP purchased by the San Diego  
            Air & Space Museum and the California Science Center if the  
            property is purchased and used exclusively for display  
            purposes within the museum, as provided.  (Revenue and  
            Taxation Code (R&TC) Section 6366.4)


          4)Provides a SUT exemption for original works of art purchased  
            by specified entities, including the state, to become part of  
            the permanent collection of a museum.  (R&TC Section 6365)    


          AS PASSED BY THE ASSEMBLY, this bill added district fairs as a  
          type of "community event" in the California Retail Food Code.  


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.


          COMMENTS:  


          1)The author has provided the following statement in support of  
            this bill:
               AB 724 would provide this volunteer supported nonprofit  
               museum the unique opportunity to purchase the fully  
               restored "Shell Lockheed Vega" piloted by General Jimmy  
               Doolittle himself.  A generous private donation will cover  
               50% of the cost of the Vega, and this exemption would allow  
               the nonprofit museum to more easily fundraise money  
               necessary to purchase the remaining 50%.  AB 724 will  
               include the Doolittle Museum with other exempt museums and  
               will aid the nonprofit in accomplishing its educational  
               mission.  









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          2)Proponents of this bill note the following:
               Under existing law, the San Diego Air and Space Museum and  
               the California Science Center's purchases of property used  
               exclusively for display purposes within the museum are  
               exempt from sales and use tax.  No other aviation museums  
               are provided the same exemptions. 


               The Jimmy Doolittle Air and Space Museum Education  
               Foundation has an opportunity to add the fully restored  
               1932 "Shell Lockheed Vega" flown by General Doolittle to  
               its historic aircraft collection.  Fifty percent of the  
               aircraft has been donated.  The Foundation would like to  
               purchase the remaining 50% but it will be a challenge to  
               raise sufficient funding to make this purchase.  Exempting  
               this purchase from sales and use tax will assist them in  
               acquiring this antique aircraft.  


               AB 724 will allow an important piece of aviation history to  
               be displayed for Californians and tourists to enjoy.  


          3)The BOE notes the following in its staff analysis of this  
            bill:
             a)   Effect of the bill:  "Enables the Jimmy Doolittle Air  
               and Space Museum Education Foundation ("Foundation") to  
               purchase museum pieces for display purposes without payment  
               of sales tax reimbursement or use tax."  
             b)   Proposed exemption would apply prospectively only:  "The  
               bill would take effect immediately upon enactment.  Any  
               museum display items the Foundation has purchased or  
               purchases prior to the bill's effective date remain subject  
               to tax.  Once enacted, the Foundation's future museum  
               display item purchases (such as the historic aircraft) will  
               receive the exemption's benefit."


             c)   This bill does not materially impact the BOE's tax audit  
               or administrative functions:  "Since the bill only affects  
               one museum, its enactment would have an insignificant  








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               impact to the BOE."  


          4)Committee staff comments:
             a)   Background:  The original SUT exemption for the San  
               Diego Aero-Space Museum's purchases of display items was  
               enacted in 1986.  In 1988, the SUT exemption was extended  
               to purchases made by the California Science Center.  In  
               1992, legislation expanded the exemption to include sprung  
               instant structures purchased by these entities for use as  
               temporary exhibit housing.  This bill, in turn, would  
               expand the exemption to include the Jimmy Doolittle Air and  
               Space Museum Education Foundation.
               The BOE notes that, based on staff conversations with the  
               Foundation, the museum plans to purchase an aircraft with  
               an estimated value of $1 million.  The Foundation has  
               indicated that 50% of the plane's value is being donated,  
               while the Foundation will raise the other 50% to make the  
               purchase.  To facilitate this purchase, this bill would  
               exempt from the SUT museum pieces purchased by the Jimmy  
               Doolittle Air and Space Museum Education Foundation.  


             b)   Scope of this bill:  While this bill is designed to help  
               facilitate the purchase of one historic airplane, the SUT  
               exemption language is not limited to this single purchase.   
               Indeed, the exemption would apply indefinitely to the  
               Foundation's future display purchases, given that the  
               exemption does not contain a sunset provision.   
                In addition, this bill continues the practice of applying  
               the existing SUT exemption in an ad hoc fashion to  
               specifically named museums.  Given the inherently laudable  
               purposes served by historical and scientific museums  
               throughout California, the Legislature may wish to consider  
               whether it would be preferable to provide a broad-based  
               exemption to all nonprofit museums open to the public.   


              c)   Legislative history:  
               i)     SB 1004 (Knight) of 2001, would have provided a SUT  
                 exemption for TPP sold to the Flight Test Historical  
                 Foundation for its donation to the Air Force Flight Test  








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                 Center Museum.  SB 1004 was never heard by the Senate  
                 Committee on Revenue and Taxation.    
               ii)    AB 2475 (Kuehl) of 2000, would have extended the  
                 existing SUT exemption to the Museum of Flying.  Governor  
                 Davis vetoed AB 2475 noting, "Although I recognize that  
                 the revenue losses from this bill are minor, I am vetoing  
                 the bill based on my concern about the continued erosion  
                 of the sale and use tax base through the expansion of  
                 exemptions."


               iii)   AB 759 (Maddox) of 1999, would have extended the  
                 existing SUT exemption to specified purchases of property  
                 used in any museum, science center, or marine institute  
                 meeting certain conditions.  AB 759 died on the Assembly  
                 Appropriations Committee's Suspense File.        


             d)   Substantial amendments:  This bill was substantially  
               amended in the Senate and the Assembly-approved provisions  
               of this bill were deleted.  This bill, as amended in the  
               Senate is inconsistent with Assembly actions.
          Analysis Prepared by:                                             
                          M. David Ruff / REV. & TAX. / (916) 319-2098   
          FN: 0004856