BILL ANALYSIS Ó SB 1422 Page 1 Date of Hearing: June 29, 2016 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Mike Gatto, Chair SB 1422 (Glazer) - As Amended March 28, 2016 SENATE VOTE: 36-0 SUBJECT: Public utilities and other service suppliers: collection of local taxes SUMMARY: Clarifies that cable service providers are included in the definition for other service providers, pursuant to existing law, which limits the liabilities and responsibilities of public utilities and other service providers collecting a utility user tax. Specifically, this bill: 1)Defines "other service supplier" to include, but not be limited to, a holder of a state franchise for the provision of video service, for the purposes of existing law which defines the duties and liabilities for public utilities and other service suppliers collecting a utility user tax (UUT). 2)Provides that this bill does not constitute a change in, but is declaratory of existing law. EXISTING LAW: SB 1422 Page 2 1)Authorizes a city or county to levy a UUT on the consumption of electricity, gas, water, sewer, telephone, telegraph, and cable television services. 2)Provides, the following, for taxes enacted by a local jurisdiction imposed on the customers of public utilities or other services suppliers, where taxes are collected by the public utilities and other service suppliers and remitted to the local jurisdiction: a) Prohibits the public utility or other service supplier from having any duty to independently investigate or inquire concerning the validity of a local jurisdiction's tax ordinance; b) Prohibits a public utility or other services supplier from being liable to any customer as a consequence of collecting a tax of an invalid tax ordinance; c) Requires, if a local jurisdiction is ordered to refund the tax, that it be the sole responsibility of the local jurisdiction, unless a public utility or other service supplier is reimbursed for the cost, as specified; d) Prohibits a public utility or other service supplier from being named as a defendant in any action challenging the tax; e) Requires a local jurisdiction to notify the utility or service supplier in writing, if it adopts a new tax, or makes changes to an existing tax that would affect SB 1422 Page 3 collection and remittance; and, f) Grants a utility or service provider at least 90 days after notification to begin collecting a new tax and at least 60 days after notification to implement a change in an existing tax. FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel. COMMENTS: 1)Author's Statement: According to the author, "This bill clarifies the definition of 'other service supplier' to include a cable or video service provider." 2)Utility User Tax (UUT): UUTs are excise taxes imposed by cities and counties on the consumption of utility services, including electricity, gas, water, sewer, telephone, sanitation, and cable television. Although a city or county can impose a UUT as a special tax, generating revenues that must be used for a specific purpose, nearly all UUTs are imposed as general taxes, which allow revenues to be used for any purpose. In the 2014-15 fiscal year, 159 cities and three counties reported collecting, in total, more than $2 billion in UUT revenues. In jurisdictions that impose a UUT, a utility service provider collects the tax through the bills it sends to utility customers and remits the revenues to the local government that imposed the tax. In the statute establishing protections for public utilities and other service providers that collect UTTs, the term "other service providers" is not defined. Some cable service providers worry that the absence of a definition of "other service providers" creates ambiguity that could allow current SB 1422 Page 4 law to be misinterpreted as excluding cable operators from the protections that apply to public utilities. They want the Legislature to amend state law to explicitly include cable operators. 3)Prior Legislation: AB 3155 (Martinez), Chapter 939, Statutes of 1996: Created the UTT liability protection for utilities and other service providers. Legislative records indicate that it was the intent of the Legislature to include cable providers within the definition of other service providers. According the Assembly Floor Analysis of AB 3155, AB 3155 was "sponsored by the Telecommunications Energy Utility Roundtable, a consortium of energy and telecommunications companies that were brought together by Cal-Tax." The analysis also states that "investor owned 'public' utilities and cable providers sponsored the contents of [AB 3155]." REGISTERED SUPPORT / OPPOSITION: Support California Cable & Telecommunications Association (Sponsor) California Chamber of Commerce California Taxpayers Association SB 1422 Page 5 Opposition None on file. Analysis Prepared by:Darion Johnston / U. & C. / (916) 319-2083