BILL ANALYSIS Ó
AB 724
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
724 (Dodd and Frazier)
As Amended April 14, 2016
Majority vote. Tax levy
--------------------------------------------------------------------
|ASSEMBLY: | |(May 7, 2015) |SENATE: |39-0 |(August 1, 2016) |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
(Vote not relevant)
----------------------------------------------------------------------
| | | | | |
| | | | | |
|COMMITTEE VOTE: |9-0 |(August 23, |RECOMMENDATION: |concur |
| | |2016) | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
----------------------------------------------------------------------
(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
AB 724
Page 2
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
AB 724
Page 3
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.
AB 724
Page 4
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
AB 724
Page 5
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
AB 724
Page 6
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