BILL ANALYSIS
AB 799
Page 1
ASSEMBLY THIRD READING
AB 799 (Leno)
As Amended May 27, 2005
Majority vote
LOCAL GOVERNMENT 5-2 REVENUE & TAXATION 4-3
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|Ayes:|Salinas, De La Torre, |Ayes:|Klehs, Chu, Jones, Koretz |
| |Lieber, Nation, Wolk | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Emmerson, Houston |Nays:|Walters, Canciamilla, |
| | | |DeVore |
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APPROPRIATIONS 13-5
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|Ayes:|Chu, Bass, Berg, | | |
| |Calderon, Mullin, | | |
| |Karnette, Klehs, Leno, | | |
| |Nation, Oropeza, | | |
| |Ridley-Thomas, Saldana, | | |
| |Yee | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Sharon Runner, Emmerson, | | |
| |Haynes, Nakanishi, | | |
| |Walters | | |
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SUMMARY : Authorizes the Board of Supervisors of the City and
County of San Francisco to impose a vehicle license fee (VLF) on
vehicles operated by residents of San Francisco.
Specifically, this bill :
1)Authorizes the Board of Supervisors of the City and County of
San Francisco (San Francisco), by a two-thirds vote of the
board, to place before its voters a measure to levy an
additional VLF rate on vehicles owned by residents for general
revenue purposes.
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2)Requires that the ordinance proposing the fee be submitted to
the electorate and approved by a majority of those voting.
3)Specifies that the total VLF rate, including any offset to
that rate, as provided, shall be 2% of the market value of the
vehicle.
4)Requires San Francisco to contract with the Department of
Motor Vehicles (DMV) to collect and administer the fee, and to
pay DMV for the initial setup and programming costs identified
by DMV.
5)Requires DMV to do all of the following:
a) Collect the local VLF pursuant to its contract with San
Francisco;
b) Deduct its costs from those fees;
c) Deduct the amount identified by the Franchise Tax Board
(FTB) as state revenue losses resulting from taxpayers
deducting the local VLF fees authorized by this bill for
purposes of the Personal Income Tax Law and the Corporation
Tax Law, and transmit that amount to the State Controller;
d) Deduct FTB's costs and transmit them to FTB; and,
e) Transmit the collected revenues minus costs to San
Francisco as soon as possible
6)Requires FTB to notify the State Controller of any state
revenue losses resulting from taxpayers deducting the local
VLF fees authorized by this bill for purposes of the Personal
Income Tax Law and the Corporation Tax Law.
EXISTING LAW imposes a VLF which is in lieu of a personal
property tax on all California motor vehicles at a rate of .65%
of the value of the vehicle.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)The additional VLF authorized by this measure would raise
approximately $60 million for San Francisco.
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2)DMV would incur one-time costs in the range of $250,000 to
reprogram software and implement accounting procedures for the
disbursement of additional registration fees, and ongoing
costs in the range of $100,000. DMV would be authorized to
deduct its costs from the amounts collected annually.
3)FTB estimates General Fund (GF) revenue losses of
approximately $4 million annually, beginning in the year
following the year of implementation, resulting from higher
taxpayer deductions of VLF payments under the Personal Income
Tax and Corporation Tax laws. The state GF revenue loss would
be reimbursed by San Francisco.
4)FTB would incur minor, absorbable administrative costs.
COMMENTS : The bill is intended to provide the City and County
of San Francisco with authorizing language to impose a
local-option vehicle license fee. The fee would be imposed at a
rate equal to the difference between the historical 2% state tax
rate and the current rate actually paid to the state by vehicle
owners (0.65%) - in other words, a tax rate of 1.35% on the
depreciated value of the San Francisco residents' vehicles. The
resulting total fee imposed on San Francisco residents would be
2%. The ordinance providing for this increase would have to be
approved by a two-thirds vote of the board of supervisors before
it can be placed on the ballot for voter approval by the
electorate of San Francisco. Since the revenue from the fee
would
be used for general revenue purposes, rather than a specified
purpose, the ordinance requires approval by a majority of those
voting. The fee would be administered by DMV under contract
with San Francisco, and DMV's costs would be recovered from
revenue generated by the fee.
Since the Internal Revenue Service considers the VLF to be in
the nature of a property tax, the VLF is deductible for both
federal and state income tax purposes. For those who itemize
deductions, up to 40% of the additional VLF would effectively be
borne by the state and federal governments in the form of
reduced income tax payments. The same would be true of a local
VLF such as that proposed by this bill. This bill requires FTB
to report these losses to the State Controller, and requires DMV
to deduct the amount of GF revenue loss estimated by FTB, as
AB 799
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well as any FTB administrative costs, prior to remitting the
funds to San Francisco, in the same manner the bill authorizes
DMV to recoup its own administrative costs. Additionally, the
bill requires the San Francisco Board of Supervisors to execute
a contract with DMV to pay for its initial setup and computer
programming cost, so that these initial costs, which will be
higher than DMV's ongoing administrative costs, will not have to
be reimbursed in arrears.
According to the author, the VLF is one of San Francisco's
largest sources of general-purpose tax revenues. These revenues
fund vital city programs, including public safety, public
health, social services, fire protection, public works and
cultural activities. If San Francisco chooses to use this VLF
option, an estimated $60 million would be brought in, above and
beyond what San Francisco currently receives. Any enactment of
San Francisco's local option VLF is applicable only up to 2% of
the depreciated value of residents' vehicles. This measure does
not apply in the event that the state rate meets or exceeds that
2%. The author asserts that by ensuring that the people of the
City and County have the ability to control their own revenues,
this proposal gives San Francisco voters a viable alternative to
cutting services at a time when the City and County is facing a
severe budget shortfall.
Analysis Prepared by : Mark McKenzie / L. GOV. / (916)
319-3958
FN: 0010849