BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1683

                                                                    Page  1

          Date of Hearing:  May 25, 2016


                               Lorena Gonzalez, Chair

          1683 (Eggman) - As Amended May 16, 2016

          |Policy       |Revenue and Taxation           |Vote:|9 - 0        |
          |Committee:   |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |

          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill:

          1)States that it is the intent of the Legislature that the  
            California Alternative Energy and Advanced Transportation  
            Financing Authority (CAEATFA) approve project applications on  
            a competitive basis. 

          2)Adds two ex officio members to the seven-member CAEATFA: one  
            state legislator appointed by the Assembly Speaker and another  
            state legislator appointed by the Senate Committee on Rules. 


                                                                    AB 1683

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          3)Allows any amount of the CAEATFA sales and use tax (SUT)  
            exclusion that is unallocated to be rolled over into the next  
            calendar year, but for that one year only. 

          FISCAL EFFECT:

          1)Unknown fiscal costs to CAEATFA to approve applications on a  
            competitive basis. 

          2)Unknown use of the SUT exclusion as a result of rolling  
            forward unallocated exclusion amounts for an additional year. 


          1)Background.  The California Alternative Energy Source  
            Financing Authority was established in 1980, with an  
            authorization of $200 million in revenue bonds to finance  
            projects utilizing alternative or renewable energy sources,  
            such as wind, solar, and cogeneration and geothermal.  In  
            1994, the authority was renamed the California Alternative  
            Energy and Advanced Transportation Financing Authority  

            CAEATFA is also allowed to provide a SUT exclusion for certain  
            specified projects, and this program has been expanded in  
            recent years. The first SUT exclusion was granted to Tesla in  
            2009.  SB 71 (Padilla), Chapter 10, Statutes of 2010, expanded  
            the SUT exclusion to apply to purchases of equipment used for  
            "advanced transportation technologies" and "alternative  
            source" products, components, or systems. In 2012, SB 1128  


                                                                    AB 1683

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            (Padilla), Chapter 677, Statutes of 2012 added "advanced  
            manufacturing" to the list of eligible projects and placed a  
            $100 million cap on the amount of the SUT exclusion that may  
            be awarded in a calendar year.  In 2015, AB 199 (Eggman),  
            Chapter 768, Statutes of 2015, further modified the SUT  
            exclusion program to include manufacturing projects that  
            either process or utilize "recycled feedstock."  The expanded  
            program is due to sunset on January 1, 2021. 

          2)Program oversubscription. Last year, CAEATFA had a high number  
            of applications requesting an allocation of the SUT exclusion,  
            and the existing cap of $100 million was quickly reached.   
            With the expansion of the CAEATFA program to include projects  
            that process or utilize recycled feedstock, the number of SUT  
            exclusion applications is expected to increase even more. 

          While historically small projects requesting less than $2.1  
            million in SUT exclusions comprised almost 75% of approved  
            applications, in recent years CAEAFTA has approved a number of  
            applications for large projects with more than $20 million in  
            SUT exclusions, such as for example, the ones submitted by  
            Tesla, Atieva, Lockheed, Space X, and Solyndra.  

          Existing law does not impose a cap on the amount that a company  
            may request in SUT exclusions, nor does existing law  
            prioritize certain types of projects. Thus, applications  
            involving large projects may utilize a considerable portion of  
            the allowable $100 million cap, leaving no funds for smaller  
            projects. Furthermore, the CAEAFTA does not have the authority  
            to utilize the unclaimed awards. Finally, CAEAFTA may not  
            award any amounts that remain unallocated in a particular  
            calendar year in the following years. In other words, the  
            un-awarded SUT exclusion amounts disappear.  


                                                                    AB 1683

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          3)Related legislation. AB 2334 (Mullin), also on today's agenda,  
            increases the amount of SUT exclusions available from $100  
            million to $575 million for 2016 and from $100 million to $350  
            million for 2017 through 2021. 

          Analysis Prepared by:Luke Reidenbach / APPR. / (916)