BILL ANALYSIS Ó
AB 2518
Page 1
Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2518 (Gomez) - As Amended May 18, 2016
-----------------------------------------------------------------
|Policy |Revenue and Taxation |Vote:|9 - 0 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill creates a sales and use tax (SUT) exemption for
building and construction supplies used by nonprofit
organizations that build and rehabilitate affordable homes.
AB 2518
Page 2
Specifically, this bill:
1)Establishes an SUT exemption, from January 1, 2017 to January
1, 2020, for building and construction supplies, materials,
equipment, and machinery, and the parts thereof that are
purchased for use by a nonprofit corporation that has received
a welfare exemption for the construction and rehabilitation of
properties in California sold to "persons and families of low
income."
2)Provides that the purchaser is liable for payment of the sales
tax if, within one year from the date of purchase, the
supplies purchased are moved outside California, converted for
use not qualifying for the exemption, or used in a manner not
qualifying for the exemption.
FISCAL EFFECT:
Annual state and local revenue loss in the range of $332,000,
including $175,000 GF.
COMMENTS:
1)Purpose. According to the author, AB 2518 will help increase
construction of affordable housing in California. It would do
this by providing tax relief to certain nonprofits that build
homes to be sold to low-income families.
2)Habitat for Humanity. Under the eligibility rules established
in this bill, Habitat for Humanity would be one of only a
small number of organizations eligible for the exemption.
AB 2518
Page 3
3)Eligible items. AB 2518 creates a sales and use tax exemption
for a broad range of goods, including flooring, lumber, paint,
stucco, as well as ceiling fans, stoves, generators, or even
bulldozers, pick-up trucks and tractors. Therefore, an
organization could get a partial sales tax exemption for
equipment it could eventually use for projects that aren't for
the construction of affordable housing. For example, an
organization could buy a pick-up truck for the purpose of
helping with a construction project, but then transition that
pick-up truck for another purpose after a year. The Committee
may wish to limit eligible items to goods and materials that
are part of the home itself, such as flooring, lumber, and
sheetrock. This will reduce cost pressures while ensuring that
the exemption goes toward the intended use of encouraging
affordable home construction.
1)Recent amendments. AB 2518 was amended on May 18, 2016 to make
the sales and use tax exemption a full exemption rather than a
partial exemption. Earlier versions of the bill exempted only
the GF portion of the state sales and use tax, and the local
government portion still applied to qualified goods purchased
by an organization such as Habitat for Humanity. By making the
exemption a full exemption, the May 18 amendments make AB 2518
more valuable to nonprofits, but more costly for local
governments
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
AB 2518
Page 4