BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1710

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          Date of Hearing:  May 11, 2016


                               Lorena Gonzalez, Chair

          1710 (Calderon) - As Amended April 5, 2016

          |Policy       |Transportation                 |Vote:|11 - 4       |
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          |             |Revenue and Taxation           |     |6 - 3        |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill requires the Air Resources Board (ARB) to establish a  
          comprehensive incentive program for the purchase of  
          zero-emission vehicles (ZEVs) or near zero-emission vehicles  
          (NZEVs), and provides specified sales tax and personal income  
          tax exemptions for the purchase of such vehicles. Specifically,  
          this bill:  


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          1)Requires ARB, by January 1, 2019, to develop and implement a  
            comprehensive program, as specified, to promote ZEV and NZEV  
            deployment to meet the ZEV goals established by the Governor  
            and the Legislature. This is to include an incentive program  
            targeting companies located outside population centers or  
            companies whose employees commute from a 50-mile radius.

          2)Provides that program incentives may include grants,  
            traditional loans, revolving loans, or other appropriate  
            measures, and requires the Greenhouse Gas Reduction Fund  
            (GGRF), Air Quality Improvement Fund (AQIP), or Alternative  
            and Renewable Fuel and Vehicle Technology Fund (ARFVTP) monies  
            be made available, upon appropriation by the Legislature, for  
            the incentive program.

          3)Require the ARB, in consultation with the California Energy  
            Commission (CEC), to identify opportunities for coordinated  
            investments in ZEV and NZEV infrastructure.

          4)Provides, on or after January 1, 2017, an exemption under the  
            Sales and Use Tax (SUT) Law, for that portion of the cost of a  
            new or used ZEV or NZEV that does not exceed $40,000 and is  
            purchased by a "low-income purchaser"-household income not  
            exceeding 80% of their county median income.

          5)Allows, from 2017 through 2025, a Personal Income Tax (PIT)  
            credit to a "qualified taxpayer," as defined, equal to $2,500  
            for purchase of a ZEV or NZEV.

          6)States legislative intent to enact legislation providing that  
            the credit shall be refundable, upon appropriation by the  


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          7)Allows, from 2017 through 2025, a PIT deduction of $2,500 to a  
            "qualified taxpayer," as defined, for purchase of a ZEV or  

          8)Requires the qualified taxpayer to irrevocably elect either  
            the tax credit or tax deduction.

          9)Requires the Franchise Tax Board (FTB), in consultation with  
            the State Board of Equalization (BOE), to annually report to  
            the Legislature regarding the efficacy of the SUT exemption,  
            PIT credit, and PIT deduction.   

          FISCAL EFFECT:

          1)General Fund revenue losses associated with the PIT  
            credit/deduction are estimated at $55 million in 2016-17, $120  
            million in 2017-18, and $160 million in 2018-10.

          2)General Fund revenue loss associated with the SUT exemption is  
            estimated at $9.5 million in 2017-18, and would likely  
            increase slightly each year assuming increase sales of ZEV and  
            NZEV to qualified taxpayers.

          3)Annual special fund costs to the ARB of around $150,000 to  
            develop and implement the employer incentive program and minor  
            annual costs for the reporting requirement. The ARB indicates  
            that costs to implement other aspects of the incentive program  
            are absorbable, as the commission is already developing and  
            implementing similar pilot projects. The ultimate cost of the  
            incentive program itself is unknown, but likely in the tens of  
            millions of dollars annually, from special funds.


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          1)Background. The Legislature and the Governor have called for  
            increased deployment of advanced-technology vehicles to  
            improve air quality, address climate change, and meet the  
            Governor's target of getting 1.5 million ZEVs and NZEVs on  
            California's roadways by 2025 as well as the Legislature's  
            goal of placing one million ZEVs and NZEVs on California's  
            roadways by 2023.

            To meet these goals, a number of programs have been developed  
            to encourage vehicle owners to scrap their older,  
            high-polluting cars and trucks and replace them with newer,  
            cleaner vehicles. While many of these programs are offered to  
            all consumers, some programs are specifically target toward  
            disadvantaged communities and lower-income individuals. For  
            example, the Enhanced Fleet Modernization Program (EFMP),  
            administered by ARB, provides funding for vehicle owners to  
            retire their high-polluting vehicles. In addition, ARB also  
            administers EFMP Plus-Up in two air districts classified as  
            extreme non-attainment (San Joaquin Valley and South Coast).   
            EFMP Plus-Up, provides additional payment incentives (on top  
            of the "base" EFMP incentives) to further encourage  
            individuals to retire and replace their older, less-efficient  
            vehicles with advanced-technology cars.  

            Other programs designed to incentivize the purchase of ZEVs  
            and NZEVs include the Clean Air Vehicle Rebate Program (CVRP),  
            which provides rebates for purchase of new ZEVs or NZEVs.  
            Specifically $5,000 rebate for a hydrogen fuel-cell vehicle; a  
            $2,500 rebate for a zero-emission battery electric vehicle; a  
            $1,500 voucher for a plug-in hybrid electric vehicle; or a  
            $900 rebate for a neighborhood electric vehicle. An additional  
            incentive of $1,500 is offered within CVRP for low-income  


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          2)Purpose. The author and the sponsor (CALSTART) note that while  
            incentive programs have been successful in encouraging ZEV and  
            NZEV adoption, California is far from reaching a its ZEV  
            adoption goals.  For example, they note that the ZEV Mandate  
            requires that 15% of new car sales in 2025 must be ZEVs, yet  
            last year, (2015) ZEVs made up only 3.1% of new cars sold.   
            The author points out that a substantial "ramp up" must occur  
            to increase the rate of ZEV sales in order to achieve the ZEV  
            mandate by 2025.  

          3)Related Legislation. AB 1965 (Cooper), pending on this  
            committee's Suspense file, expands the Enhanced Fleet  
            Modernization Program Plus-Up (EFMP Plus-Up) in disadvantaged  
            communities and in additional areas with poor air quality. 

            AB 1691 (Gipson), also on today's committee agenda, requires  
            the ARB to enhance EFMP guidelines to ensure that the program  
            is not misused and that priority is given to replacement of  
            the oldest, high-mileage vehicles. 

            AB 1851 (Gray), also on today's agenda, establishes and  
            expands incentive programs to increase the use of clean-air  

          Analysis Prepared by:Chuck Nicol / APPR. / (916)  


                                                                    AB 1710

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