BILL ANALYSIS Ó
AB 2334
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Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2334 (Mullin) - As Amended May 16, 2016
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This modifies the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) Act to increase the
annual amount of the sales and use tax (SUT) exclusion available
for allocation by the CAEATFA and to extend the SUT exclusion to
purchases of tangible personal property (TPP) by certain
contractors, as provided. Specifically, this bill:
1)Extends the SUT exclusion to a lease or transfer of title of
eligible TPP to any contractor for use in the performance of a
construction contract for the participating party that will
use that property as an integral part of the approved project
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(a "construction contract").
2)Increases the annual amount of SUT exclusions available for
allocation to projects, including projects that involve
specified construction contracts, as follows:
a) For the 2016 calendar year, from $100 million to $575
million, plus any amounts not granted or used from the
prior year.
b) For calendar years 2017 through 2021, from $100 million
to $350 million, plus any amounts not granted or used from
the prior year.
FISCAL EFFECT:
Annual state and local revenue loss of up to $475 million in
2016 and $250 million annually thereafter. This bill expands the
total allowable sales and use tax exclusion, but this not
necessarily guarantee that the annual allocation will be used
every year. Between November 2010 and January 1, 2016, the
program approved $455 million in tax exclusions, but only $92
million was actually used, in part because some approved
projects never get off the ground. However, the increasing
popularity of the program, combined with this bill's provision
that unused dollars can be rolled forward into the current year,
means more of the allocated credits in any given year are more
likely to be used.
COMMENTS:
1)Background. The California Alternative Energy Source
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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).
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
(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
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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.
3)Related legislation. AB 1683 (Eggman), also on today's agenda,
adds two state legislators as ex officio members to CAEATFA
and allows unused or unallocated amounts of the SUT exclusion
to be carried forward one additional year.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081