BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Kevin Murray, Chairman

                                           2533 (Leno)
          
          Hearing Date:  8/7/06           Amended: 4/17/06
          Consultant: Mark McKenzie       Policy Vote: Rev/Tax (7-0)
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          BILL SUMMARY:   AB 2533 would expand the sales and use tax  
          exemption that applies to the sale of specified original works  
          of art to also apply to art that is leased from one nonprofit  
          organization to another for a term of 35 years or more.
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                            Fiscal Impact (in thousands)

           Major Provisions         2006-07      2007-08       2008-09     Fund
           State sales/use tax loss          $28         $22       $19GF*
          Local sales/use tax loss          $10         $8        $7local
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          * NOTE: losses based on only known lease that would be impacted  
          by this expanded exemption (see staff comments).  Future losses  
          are unknown and depend upon the number and terms of future lease  
          agreements, but likely under $150,000 in any year.
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          STAFF COMMENTS:  Existing law provides an exemption from the  
          sales and use tax for sales of original works of art that are  
          purchased by a government entity, a nonprofit organization  
          operating a museum under contract for a government entity, a  
          tax-exempt nonprofit organization that purchased the art for  
          display in a public museum, or any donation of art to these  
          government entities or nonprofits.
          
          AB 2533 would expand this exemption to include the lease of  
          original works of art.  The expanded exemption would only apply  
          to lease agreements of 35 years or more between organizations  
          that qualify for the current exemption for art that would become  
          part of a permanent collection.  This bill would also clarify  
          that costume, dress, clothing, and personal adornment fall under  
          the definition of "works of art" for purposes of the exemption.   
          STAFF NOTES that AB 2533 specifies that the state will not  
          reimburse local agencies for sales and use tax revenue losses  
          pursuant to this bill.











          The Board of Equalization (BOE) staff notes that there is only  
          one known current agreement that would qualify for the expanded  
          sales and use tax exemption provided by this bill.  Last year,  
          the Autry National Center entered into a long-term collections  
          sharing agreement with the California Historical Society.  The  
          Autry Center would assume general curatorial control over a  
          collection of historical paintings and clothing in exchange for  
          a $3.5 million contribution to the California Historical Society  
          over a 15 year period.

          STAFF NOTES that, at the current 6.25% state sales and use tax  
          rate, this bill would result in a cumulative state sales and use  
          tax loss of approximately $219,000 over the 15 year term of this  
          agreement.  Future revenue impacts would be determined by the  
          provisions of any future qualifying lease agreements, but would  
          probably not exceed $150,000 in any given year.