BILL ANALYSIS Ó
AB 2127
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Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2127 (O'Donnell) - As Amended May 12, 2016
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
This bill increases the allowable percentage of gasoline that
may be included in ethanol and methanol, from 15% to 18%, for
the purposes of the excise tax upon ethanol and methanol, and
makes a corresponding change to the definition of "Gasohol" for
the purposes of the Motor Vehicle Fuel Tax (MVFT) Law. These
expanded definitions will sunset on January 1, 2022.
FISCAL EFFECT:
Ongoing annual revenue loss of approximately $98,000 annually.
COMMENTS:
AB 2127
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1)Purpose. According to the author, the purpose of this bill is
to provide incentives to produce fuel products with lower
emissions and carbon intensity. It does this by ensuring that
state laws and regulations related to fuel standards are
consistent in both language and intent.
2)Background. E85 fuel is derived from blending ethanol fuel
and gasoline. Typically, gasoline represents 15% of the
blended product. However, the actual percentage may vary.
Current California Air Resources Board (CARB) standards
specify that allowable percentage of gasoline in E85 is a
range of 15 to 21%.
While CARB standards establish an acceptable range of the E85
share that can be gasoline, existing state tax law is more
restrictive. The Use Fuel Tax (UFT) Law sets the excise tax
rate for fuels. Vendors that sell fuel placed in the tank of
motor vehicles, such as retailers and wholesalers, are charged
the excise tax. UFT Law sets the excise tax rate for ethanol
and methanol containing no more than 15% gasoline at a lower
rate, even though E85 may consist of more than 15% gasoline if
CARB standards are followed.
The MVFT Law similarly has a more restrictive definition of
E85. The MVFT is imposed on each gallon of fuel entered into,
or removed from a refinery or terminal rack in, California.
The tax is typically paid by blenders and refiners. The MVFT
Law defines ethanol and methanol containing more than 15%
gasoline as "gasohol" rather than a blended fuel like E85.
AB 2127
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3)Blenders. Under existing law, a gasoline tax refund is allowed
to any person who buys and uses gasoline for the purposes of
producing a blended fuel, such as E85, when that fuel is taxed
as a use fuel. In other words, a blender can get a
reimbursement of the portion of the fuel that is taxed as
gasoline prior to blending. The author notes that the tension
between these standards has made it difficult for some
blenders to obtain gas tax refunds on their fuel blends. The
author notes that to receive this refund, blenders must submit
receipts for their fuel purchases that show an exact 15% ratio
of gas to ethanol, even though there is some confusion over
what elements of their blend count as gasoline for tax
purposes.
4)Reid Vapor Pressure (RVP). Another wrinkle for fuel blenders
is that an ethanol blend with exactly 15% gasoline and 85%
ethanol - which meets the definition required for a tax
reimbursement and as well as CARB specifications - does not
meet standards in place for the minimum RVP. RVP is a measure
of fuel volatility that much be managed to avoid smog
formation in the summer.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
AB 2127
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