Amended in Senate March 26, 2015

Senate Bill No. 321

Introduced by Senator Beall

February 23, 2015

An act to amend Section 7360 of the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 321, as amended, Beall. Motor vehicle fuel taxes: rates: adjustments.

Existing law, as of July 1, 2010, exempts the sale of, and the storage, use, or other consumption of, motor vehicle fuel from specified sales and use taxes and increases the excise tax on motor vehicle fuel, as provided.

Existing law requires the State Board of Equalization, for the 2011-12 fiscal year and each fiscal year thereafter, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, to adjust the motor vehicle fuel tax rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the sales and use tax exemption on motor vehicle fuel, based on estimates made by the board. Existing law also requires, in order to maintain revenue neutrality, the board to take into account actual net revenue gain or loss for the fiscal year ending prior to the rate adjustment date. Existing law requires this determined rate to be effective during the state’s next fiscal year.

This bill would, for the 2015-16 fiscal year and each fiscal year thereafter, instead require the board, on or before July 1, 2015, or March 1 of the fiscal year immediately preceding the applicable fiscal year, as specified, to adjust the rate in a manner as to generate an amount of revenue equal to the begin delete average end delete amount of revenue loss attributable to the begin delete exemption over the next five fiscal years, end delete begin insert exemption, end insert based on estimates made by the board begin insert that reflect the combined average of the actual fuel price over the previous 4 fiscal years and the estimated fuel price for the current fiscal year end insert , and continuing to take into account adjustments required by existing law to maintain revenue neutrality. This bill would authorize, for rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the motor vehicle fuel tax, the board to make partial adjustments over begin insert up to end insert 3 consecutive years to take into account the net revenue gain or loss of any fiscal year.

This bill would also authorize, if, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the motor vehicle fuel tax will be significantly different than the estimates made by the board, the board to adjust the rate more frequently than annually, but no more frequently than begin delete quarterly end delete begin insert every 6 months end insert in order to reduce the potential volatility of the revenues.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 7360 of the Revenue and Taxation Code
is amended to read:

7360.  

(a) (1) A tax of eighteen cents ($0.18) is hereby imposed
upon each gallon of fuel subject to the tax in Sections 7362, 7363,
and 7364.

(2) If the federal fuel tax is reduced below the rate of nine cents
($0.09) per gallon and federal financial allocations to this state for
highway and exclusive public mass transit guideway purposes are
reduced or eliminated correspondingly, the tax rate imposed by
paragraph (1), on and after the date of the reduction, shall be
recalculated by an amount so that the combined state rate under
paragraph (1) and the federal tax rate per gallon equal twenty-seven
cents ($0.27).

(3) If any person or entity is exempt or partially exempt from
the federal fuel tax at the time of a reduction, the person or entity
shall continue to be so exempt under this section.

(b) (1) On and after July 1, 2010, in addition to the tax imposed
by subdivision (a), a tax is hereby imposed upon each gallon of
motor vehicle fuel, other than aviation gasoline, subject to the tax
in Sections 7362, 7363, and 7364 in an amount equal to seventeen
and three-tenths cents ($0.173) per gallon.

(2) (A) For the 2011-12 fiscal year to the 2014-15 fiscal year,
inclusive, the board shall, on or before March 1 of the fiscal year
immediately preceding the applicable fiscal year, adjust the rate
in paragraph (1) in that manner as to generate an amount of revenue
that will equal the amount of revenue loss attributable to the
exemption provided by Section 6357.7, based on estimates made
by the board, and that rate shall be effective during the state’s next
fiscal year.

(B) For the 2015-16 fiscal year, the board shall, on or before
July 1, 2015, adjust the rate in paragraph (1) in that manner as to
generate an amount of revenue that will equal the begin delete average end delete amount
of revenue loss attributable to the exemption provided by Section
begin delete 6357.7 over the next five fiscal years, end delete begin insert 6357.7, end insert based on estimates
made by the board begin insert that reflect the combined average of the actual
fuel price over the previous four fiscal years and the estimated
fuel price for the current fiscal year end insert , and that rate shall be effective
during the 2015-16 fiscal year.

(C) For the 2016-17 fiscal year and each fiscal year thereafter,
the board shall, on or before March 1 of the fiscal year immediately
preceding the applicable fiscal year, adjust the rate in paragraph
(1) in that manner as to generate an amount of revenue that will
equal the begin delete average end delete amount of revenue loss attributable to the
exemption provided by Section begin delete 6357.7 over the next five fiscal
years, end delete begin insert 6357.7, end insert based on estimates made by the board begin insert that reflect
the combined average of the actual fuel price over the previous
four fiscal years and the estimated fuel price for the current fiscal
year end insert , and that rate shall be effective during the state’s next fiscal
year.

(3) In order to maintain revenue neutrality, beginning with the
rate adjustment on or before March 1, 2012, the adjustment under
paragraph (2) shall also take into account the extent to which the
actual amount of revenues derived pursuant to this subdivision
and, as applicable, Section 7361.1, the revenue loss attributable
to the exemption provided by Section 6357.7 resulted in a net
revenue gain or loss for the fiscal year ending prior to the rate
adjustment date on or before March 1. For rate adjustments made
after January 1, 2015, in order to reduce the potential volatility of
the revenues generated by the tax imposed under this subdivision,
the board may make partial adjustments over begin insert up to end insert three
consecutive years to take into account the net revenue gain or loss
of any fiscal year.

(4) If, due to clear changes in either fuel prices or consumption
in the state, the board makes a determination that the amount of
revenue being generated by the tax imposed by this section will
be significantly different than the estimates made by the board,
the board may adjust the rate in paragraph (1) more frequently
than annually, but no more frequently than begin delete quarterly end delete begin insert every six
months end insert in order to reduce the potential volatility of the revenues.

(5) The intent of paragraphs (2) and (3) is to ensure that Chapter
6 of the Statutes of 2011, which added this subdivision and Section
6357.7, does not produce a net revenue gain in state taxes.

begin insert (6) end insert begin insert   end insert begin insert It is the intent of the Legislature that the amendments made
by the act adding this paragraph does not produce a net revenue
gain in state taxes. Revenue neutrality, as used in this section, does
not refer to revenues generated in any particular fiscal year, but
instead means that, over a reasonable period of fiscal years, the
actual amount of revenues derived pursuant to this subdivision is
equal to the estimated amount of revenue loss attributable to the
exemption provided by Section 6357.7. end insert

SEC. 2.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to avoid a significant and devastating decrease in the
amount of funding available for the maintenance of California’s
local streets and roads, it is necessary that this act take effect
immediately.