BILL ANALYSIS Ó AB 2675 Page 1 Date of Hearing: May 18, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2675 (Chiu) - As Amended May 2, 2016 ----------------------------------------------------------------- |Policy |Revenue and Taxation |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill provides a partial Sales and Use Tax (SUT) exclusion and a tax credit under the Personal Income Tax (PIT) Law and the Corporation Tax (CT) Law for the purchase of electrical vehicle infrastructure for a qualified dwelling. Specifically, this bill: 1)Excludes 10% of the first $400,000 of gross receipts of purchased electric vehicle infrastructure from the state portion of the sales and use tax. This partial exclusion is operative between January 1, 2017, and January 1, 2020. AB 2675 Page 2 2)Creates a PIT and CT credit equal to 10% of the amount paid by a taxpayer for electric vehicle infrastructure, not to exceed $2,500. This credit is operative for taxable years beginning on or after January 1, 2017, and before January 1, 2020. 3)Defines a "qualified dwelling" as a multifamily residence or multifamily unit, mobile home, or manufactured home located at a mobile home park, duplex, townhome, apartment, and condominium. FISCAL EFFECT: 1)Significant administrative costs to the Board of Equalization (BOE) and the Franchise Tax Board (FTB) to implement these programs. 2)Annual GF revenue loss of approximately $1.7 million, $2.6 million, $2.8 million in FY 2016-17, FY 2017-18, FY 2018-19, respectively. COMMENTS: 1)Purpose. According to the author, AB 2675 will help promote zero-emission vehicles and help invest in EV infrastructure. Supporters argue that this bill would encourage building owners to make the decision to install fully functioning electric vehicle charging facilities. 2)Existing state programs. The Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) provides grants, AB 2675 Page 3 loans, loan guarantees, revolving loans, or appropriate measures to reduce California's dependence on petroleum. ARFVTP provides a loan and rebate program for small businesses that meet the criteria to install electric vehicle charging stations. Funded by the California Energy Commission, this program may provide up to 100% coverage to lenders on certain loan defaults. Borrowers may be eligible to receive a rebate of 10 to 15% of the enrolled loan amount if they had one or fewer late payments and the loan is paid off or it reaches 49 months. 3)How would the PIT and CT credit work? This bill allows a tax credit of 10 percent of the amount paid or incurred for electric vehicle infrastructure during the taxable year for use a qualified dwelling, not to exceed $2,500. Any unused credits could be carried over for four years or until exhausted. In its analysis of the bill, the Franchise Tax Board identifies a number of administrative concerns with this portion of AB 2675, including: a) As currently drafted, the maximum credit available for a jointly file return, which reflects the tax return of two taxpayers, would be $5,000, not $2,500. b) The bill does not specify how long the electric vehicle infrastructure must be placed in service in order for the taxpayer to receive the credit. Therefore, a taxpayer could claim a 10 percent credit for amounts paid or incurred for the same infrastructure for multiple years. c) Definitions remain broad and could cause confusion. For example, the costs of upkeep, maintenance and improvements to existing infrastructure could possibly qualify for costs incurred for electrical vehicle infrastructure. 1)How would the partial SUT exclusion work? This bill excludes AB 2675 Page 4 10% of the price of EV infrastructure from the state portion of SUT, up to the first $400,000. In practice, this exclusion is administratively difficult to implement. For example, if a taxpayer purchased $500,000 in electric vehicle infrastructure, this exclusion would result in only $460,000 of TPP being subject to the state portion of the SUT (6%). However, Bradley-Burns (1.25%) and any relevant local sales and use taxes would still be collected on the full $500,000. Assuming no local tax, the taxpayer in this example would owe $27,600 in state SUT and $6,250 in Bradley-Burns, compared to $36,250 without the exclusion, resulting in savings of $2,400. Analysis Prepared by:Luke Reidenbach / APPR. / (916) 319-2081