BILL ANALYSIS Ó
AB 2749
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Date of Hearing: May 11, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2749 (Brough) - As Amended May 3, 2016
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill allows a heavy equipment renter to add an estimated
property tax reimbursement to the rental price of heavy
equipment that is paid by the lessee. Specifically, this bill:
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1)Creates a rebuttable presumption that the renter and lessee
agree to the personal property tax reimbursement if the
following conditions are met:
a) The personal property tax reimbursement is part of the
rental agreement;
b) The estimated tax reimbursement is separately stated and
charged on the rental agreement;
c) The rental agreement states that the reimbursement
amount is the amount estimated by the renter owed for
personal property tax, and any excess amount of the actual
property tax owed will be remitted to the BOE for deposit
to the General Fund; and,
d) The estimated property tax reimbursement is not more
than 0.75% of the rental price of the heavy equipment
property.
1)Defines "heavy equipment property" and "qualified heavy
equipment renter" for the purposes of the property tax
reimbursement.
2)Requires every qualified heavy equipment renter to register
with BOE on a form that BOE prescribes.
3)Requires a qualified heavy equipment renter to file a return
with BOE on or before September 30 for the preceding 12-month
period ending August 31. This return will show the ad valorem
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property tax levied on qualified heavy equipment property and
the reimbursement collected in total for the prior 12 months.
If a qualified renter collected more in reimbursement than the
tax that was levied, the renter must pay the BOE the excess
reimbursement to be deposited into the General Fund (GF).
FISCAL EFFECT:
1) Significant one-time costs to BOE in excess of $250,000 to
develop infrastructure and processes needed for implement the
proposed property tax reimbursement program for heavy
equipment rentals.
2) Possible minor GF revenue increases in the event that a
heavy equipment renter is reimbursed an amount in excess of
actual personal property tax owed, which under this bill
would result in the renter paying the difference into the GF.
COMMENTS:
1)Purpose. According to the author, this bill is intended to
authorize heavy equipment rental companies to separately state
an amount for property tax reimbursement and protect these
companies from future legal challenges over this separately
stated charge.
2)Background. Under existing law, personal property used in a
trade or business is generally taxable. Property owners must
file an annual property statement with the county assessor to
report the cost of the property, and the assessor values the
personal property at its current fair market value. Generally,
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the assessor determines the current fair market value based on
the property's acquisition cost with adjustments for inflation
and depreciation.
Personal property intended for rent in the regular course of
business that is not rented on the January 1 lien date is
exempt from taxation for the upcoming fiscal year (July 1 to
June 30). That property is regarded as business inventory on
that particular day, even if the property is rented in the
regular course of business for the other 364 days of the year.
According to the Legislative Analyst's Office, this results in
heavy equipment renters paying property taxes on around 60
to75% of their rental stock.
According to the author's office, heavy equipment rental
companies face certain administrative challenges when
complying with the property tax on personal property. This
includes complex paperwork requirements and disagreements with
county assessors across multiple jurisdictions about the
assessed value of rental property.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
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