BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 578 (Block) - Income and corporation taxes:  credit:   
          electric vehicle charging stations
          
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          |Version: April 13, 2015         |Policy Vote: GOV. & F. 6 - 1    |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 18, 2015      |Consultant: Robert Ingenito     |
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          This bill meets the criteria for referral to the Suspense File.




          


          Bill  
          Summary: SB 578 would enact a tax credit for firms that purchase  
          electric vehicle charging stations.


          Fiscal  
          Impact: The Franchise Tax Board (FTB) estimates that this bill  
          would result in a General Fund revenue loss of $1.3 million in  
          2015-16, $3.3 million in 2016-17, and $3.5 million in 2017-18.  
          FTB administrative costs have yet to be ascertained, but would  
          likely exceed $50,000 annually (General Fund). 


          Background: California law allows various income tax credits, deductions,  







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          and sales and use tax exemptions to provide incentives to (1)  
          compensate taxpayers that incur certain expenses, such as child  
          adoption, or (2) influence behavior, including business  
          practices and decisions. These incentives are typically enacted  
          to encourage specific taxpayer activity. The Department of  
          Finance is required to annually publish a list of tax  
          expenditures, currently totaling roughly $55 billion per year.
          California currently leads the nation with respect to both (1)  
          the number of electric vehicles, and (2) the number of charging  
          stations necessary to power them. Both numbers have grown  
          sharply, and is likely spurred by California's mandate to  
          require automakers to manufacture zero emission vehicles (ZEVs).  
          Specifically, California reportedly has nearly 6,600 public  
          Level 2 electric vehicle charging stations, and about 650 DC  
          fast-charging stations as of March, 2015, about four times as  
          many as any other state.


          Current federal law provides a credit for alternative fuel  
          vehicle refueling property that includes charging stations for  
          electric vehicles. This incentive originally expired at the end  
          of 2013, but was retroactively extended for one additional year.  
          The federal credit allows a 30 percent credit against income tax  
          for qualified alternative fuel vehicle refueling property  
          brought into service during the taxable year, generally capped  
          at $30,000. For consumers who purchase qualified residential  
          fueling equipment, the cap is $1,000. There is no counterpart in  
          current state law.




          Proposed Law: This bill would  
           enact a tax credit equal to 30 percent 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. FTB would be required to  
          prescribe regulations necessary to implement the credit.


          Staff  
          Comments: FTB's revenue estimate for this bill anticipates that  








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          approximately 140,000 qualified charging stations will be  
          installed in the State by 2020. To reach this goal,  
          approximately 23,000 charging stations would need to be  
          installed each year for the next six years. Media reports  
          suggest that several large-scale projects planned by various  
          firms could exceed the $30,000 maximum credit generation by a  
          single taxpayer. Using data from public release bulletins, FTB  
          assumes that approximately 25 percent of charging stations put  
          into service each year would generate a credit, resulting in an  
          estimated 5,750 charging stations. Public charging stations cost  
          approximately $2,500 and would generate an estimated $4.3  
          million in credits. FTB assumes that 80 percent of the credits  
          would be used in the year they are generated, while the other 20  
          percent would be carried over and used in subsequent tax years. 


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