BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 578 |Hearing |5/6/15 |
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|Author: |Block |Tax Levy: |Yes |
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|Version: |4/13/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
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INCOME AND CORPORATION TAXES: CREDIT: ELECTRIC VEHICLE CHARGING
STATIONS
Enacts a tax credit for firms to purchase electric vehicle
charging stations.
Background and Existing Law
California law allows various income tax credits, deductions,
sales and use tax exemptions to provide incentives to compensate
taxpayers that incur certain expenses, such as child adoption,
or to influence behavior, including business practices and
decisions, such as research and development credits. The
Legislature typically enacts such tax incentives to encourage
taxpayers to do something that but for the tax credit, they
would not do. The Department of Finance is required to annually
publish a list of tax expenditures, currently totaling around
$51 billion per year.
As an alternative to gasoline-based vehicles, California has the
most electric vehicles, and the charging stations necessary to
fuel them, than any other state in the nation. Both have grown
significantly in recent years, which news reports attribute to
California's mandate to require automakers to manufacture zero
emission vehicles (ZEVs). According to PlugShare, California
has 6,597 public Level 2 electric vehicle charging stations, and
652 DC fast-charging stations as of March, 2015, about four
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times as many as any other state. Among the more advanced DC
charging stations, there are three competing standards for quick
charging electric cars: the Japanese-designed CHAdeMO system
favored by Nissan, Mitsubishi and Kia; Tesla's proprietary
Supercharger standard currently only used by Tesla's own plug-in
cars; and the Combined Charging System (CCS), a standard
supported by a total of seven different U.S. and European
automakers which was designed to be the new de facto standard
for all North American and European electric cars.
Proposed Law
Senate Bill 578 enacts tax credits under the Personal Income Tax
and Corporation Tax Law equal to 30% of the cost for taxpayers
purchasing any Level 2 or direct current fast charging electric
vehicle station. The charging station must be placed in service
on or after January 1, 2016, and must be depreciable, thereby
limiting the credit to business taxpayers. The credit cannot
exceed $30,000 per year.
State Revenue Impact
Pending.
Comments
1. Purpose of the bill . According to the author, "SB 578
provides businesses a non-refundable tax credit of 30% of the
cost of purchasing electric vehicle charging stations, up to
$30,000. The credit applies to level 2 and direct current fast
chargers. In 2014, California set a goal of placing at least 1
million zero emission and near zero emission vehicles on the
road by January 1, 2023. While many incentives exist for the
purchase of electric vehicles (EVs), the state does not provide
the same incentives to ensure the infrastructure needed to
charge those vehicles. A May 2013 study by the Center for
Sustainable Energy California found that 77% of the electric
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vehicle owners surveyed expressed dissatisfaction with the
public charging infrastructure. The study additionally found
that only 37% of respondents had access to workplace charging.
The ability to charge at work can potentially double the portion
of an EV drivers' commute that is fueled only by electricity and
help reduce "range anxiety" among existing and potential EV
owners. SB 578 encourages businesses to help meet the
increasing demand for electric vehicle charging stations by
providing employers with tax credits; this helps employers,
employees, our green economy and the state's environment.
Ensuring access to publically accessible charging stations
will help motivate Californians to purchase electric vehicles,
thus helping to meet the state's goal of 1 million zero emission
vehicles while reducing greenhouse gas emissions."
2. Sure, but will it work ? Tax benefits directed at specific
industries do two things: First, they reward behavior that
would have occurred without the subsidy, so-called "deadweight
loss." Some firms will install electric vehicle charging
stations without a tax credit. In these instances, the state
receives no marginal benefit, and transfers wealth from purposes
it would otherwise spend money on for government purposes to the
firm. Second, the bill may lead to more charging stations in
California that wouldn't have without the credit, giving owners
of electric vehicles more access to recharging stations, and
potentially pushing more consumers to buy electric vehicles
instead of those that burn fossil fuels. A successful tax
credit would lead to more electric vehicle charging stations at
the margin than its deadweight loss, but no tax credit has yet
conclusively demonstrated that its benefits outweigh its costs.
News reports indicate significant growth in electric vehicle
chargers in the last year, which begs question of whether a
government subsidy in the form of a tax credit is necessary when
the market is already working well. Additionally, electric
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vehicle charging firms already market charging stations to
businesses as a way of drawing more customers, further
indicating that a functioning market exists. The Committee may
wish to consider the effectiveness of a tax credit on a market
that appears to be growing.
3. Options . SB 578 currently enacts a tax credit for any firm
installing either a Level 2 or newer DC fast chargers. However,
if the Committee wanted to more specifically tailor the credit,
or pursue more efficient alternatives, it could amend SB 578 to:
Limit the credit only to small business under a
specified threshold of annual gross receipts.
Provide the credit only for more costly, but quicker
charging, DC stations.
Limit the credit to original returns, or
Change the bill into a rebate program or a sales tax
exemption, thereby providing a direct discount at the time
of purchase, which is usually a more direct and efficient
incentive than tax credits, which can only be monetized by
firms with net income in the current taxable year.
4. More to know ? Last year, the Legislature enacted SB 1335
(Leno), which required introduced legislative bills enacting tax
credits to contain:
Specific goals, purposes, and objectives that the tax
credit will achieve.
Detailed performance indicators for the Legislature to
use when measuring whether the tax credit met its specific
goals, purposes, and objectives.
Data collection requirements to enable the Legislature
to determine whether the tax credit is meeting, failing to
meet, or exceeding its goals, purposes, and objectives.
The requirements shall include specific data and baseline
data to be collected and remitted in each year the credit
is effective, and the specific taxpayers, state agencies,
or other entities required to collect and remit data.
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SB 578 enacts its tax credit without specifying these items,
compelling no reporting of information to determine whether the
measure is effective. The Committee may wish to consider
whether SB 578 should include provisions called for by SB 1335.
5. Checklist . Eagle Lodge West is annual gathering of
professional tax attorneys, FTB and Board of Equalization
attorneys and legislative tax staff intended to foster dialogue
and discussion on difficult tax issues. Last year, a part of
the conference drafted a checklist called "general
considerations for drafting credit statutes," which attempts to
focus on more technical aspects of tax credits important for
implementation and to prevent the need for subsequent clean-up
bills. While SB 578 includes many items on the checklist, the
measure doesn't speak to:
Carryover period,
Documentation requirements,
FTB regulations necessary to implement the credit,
A mechanism to reclaim, or "claw back," the credit in
case the business who claims it subsequently sells the
charger or moves it out of state,
Rules for pass-through entities like Limited Liability
Companies or "S" Corporations,
Denial of business expense deduction for the same costs
that generate the credit,
Ability to reduce regular tax below tentative minimum
tax.
6. Sunset ? California tax law contains many specific provisions
for specified groups or individuals, and the Legislature can
generally enact them by majority vote of both houses; however,
should a future Legislature wish to limit or repeal any of these
laws, Section Three of Article XIIIA of the California
Constitution generally requires a 2/3 vote. One way to compel
an assessment in the future of SB 578's effects is to insert a
sunset provision, which repeals the law at a specified future
date. Those seeking to extend the law will have to convince a
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future Legislature to extend the provision using information
gathered during the bill's effective period. The Committee may
wish to consider inserting a sunset provision into SB 578.
Support and Opposition
Support : Building Owners and Managers Association; California
Apartment Association; California Building Industry Association;
California Business Properties Association; California Chamber
of Commerce; California Grocers Association; California
Retailers Association; Commercial Real Estate Development
Association, NAIOP of California; International Council of
Shopping Center.
Opposition : Unknown.
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