BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1032|
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THIRD READING
Bill No: AB 1032
Author: Salas (D)
Introduced:2/26/15
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE: 11-0, 6/23/15
AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva,
McGuire, Mendoza, Roth, Wieckowski
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/8/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
ASSEMBLY FLOOR: 80-0, 6/1/15 - See last page for vote
SUBJECT: Diesel Fuel Tax Law: reimbursements
SOURCE: California Biodiesel Alliance
DIGEST: This bill provides for a refund of the excise tax paid
on biodiesel that is blended with tax-exempt diesel fuel.
ANALYSIS:
Existing law:
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1)Defines biodiesel as an alternative vehicle fuel that contains
no petroleum and is produced from renewable resources, such as
palm oil or used vegetable oil. If biodiesel is combined with
petroleum diesel, the resulting fuel is referred to as Bxx
where xx equals the percentage of biodiesel in the fuel.
Thus, B5 refers to fuel that is 5% renewable diesel and 95%
petroleum diesel.
2)Considers biodiesel to be a diesel fuel and subject to the
excise tax on diesel fuel. Currently, the total excise tax
paid on a gallon of diesel is 13 cents per gallon. Typically,
the state collects the diesel excise tax when a tanker truck
picks up the diesel from a refinery or distribution terminal
(known as "the rack") or when it enters the state via truck or
rail.
3)Exempts diesel from the state excise tax if it is used for
purposes other than operating motor vehicles upon the public
streets and highways and a very few limited on-highway uses.
When diesel fuel is not taxed at the rack, then it is dyed to
make its illegal use on-road easier for law enforcement to
discover. Untaxed diesel is often referred to as dyed diesel.
Those who buy taxed diesel, but do not use it for a taxable
purpose, are eligible for a refund of the amount of tax paid.
To receive the refund, a taxpayer applies to the Board of
Equalization (BOE), which processes and issues the refunds,
typically as part of the taxpayer's annual return with the
board.
This bill makes a supplier of dyed biodiesel eligible for a
refund of the diesel excise tax that the supplier paid prior to
the biodiesel being blended with dyed diesel and removed from
the rack as tax-exempt.
Background
Most domestically produced biodiesel comes from the Midwest.
Typically, the excise tax applies upon the fuel's entry into
California. As such, the "enterer" is responsible for the
diesel fuel tax when the fuel enters the state. Biodiesel that
is produced in California, on the other hand, is generally taxed
upon removal from the fuel production facility.
In either case, when another supplier makes a subsequent
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purchase of this tax-paid biodiesel to create a blended diesel
fuel - B5 for example - the tax-paid biodiesel fuel is blended
with diesel fuel. When this blended fuel is subsequently
removed from the terminal rack, it results in tax being assessed
twice on the biodiesel portion. In such cases, the state allows
the supplier to claim a credit on their return.
If, however, it is blended with tax-exempt (i.e., dyed) diesel
fuel, then it leaves the rack without paying the excise tax. In
this case, suppliers have been unable to obtain a credit or
refund for taxes paid on that biodiesel. In other words, while
current law allows reimbursement for tax paid on diesel fuel
that has been taxed more than once, the current statutory regime
does not account for tax-paid diesel fuel that is taxed coming
into the terminal, but removed for nontaxable purposes (i.e.,
dyed biodiesel blends). In such cases, the supplier is unable
to recover the tax from the customer and is also unable to seek
reimbursement of the tax from the BOE.
Comments
Purpose. According to the author, this bill provides a
necessary and widely agreed upon solution to a tax policy
oversight in existing law.
According to the source, this bill helps level the playing field
for biodiesel in the state. The biodiesel industry estimates
that the current problem in existing law may be effectively
preventing biodiesel from being blended into 15-30% of the
diesel volume in the state. This bill will remove the tax
hurdle and presumably increase the amount of biodiesel used in
California.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, the BOE
estimates that the overpayment of diesel fuel tax was $779,000
in 2012-13, and $2.8 million in 2013-14 (special fund);
projections for future years when the bill would be in effect
are not available. BOE indicates that administrative costs are
absorbable.
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SUPPORT: (Verified8/28/15)
California Biodiesel Alliance (source)
California Independent Oil Marketers Association
OPPOSITION: (Verified 8/28/15)
None received
ASSEMBLY FLOOR: 80-0, 6/1/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
Prepared by:Eric Thronson / T. & H. / (916) 651-4121
8/31/15 16:36:41
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