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 ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 13, 2015 |Policy Vote: GOV. & F. 6 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- 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, SB 578 (Block) Page 1 of ? 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 SB 578 (Block) Page 2 of ? 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. -- END --