BILL ANALYSIS
AB 2113
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Date of Hearing: April 7, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 2113 (Evans) - As Introduced: February 18, 2010
SUBJECT : Local taxation: personal income taxes: vehicle license
fees.
SUMMARY : Authorizes a board of supervisors of any county, by
ordinance, to place on the ballot a local personal income tax
(PIT) or local vehicle license fee (VLF), or both, in accordance
with all constitutional and statutory requirements.
Specifically, this bill :
1)Provides that a local PIT shall be subject to the following
conditions:
a) The local PIT shall be calculated as a percentage of tax
liability after reduction for personal exemption credits
shown on the state PIT return filed for a taxable year by a
resident of the county in which the local PIT is imposed;
and,
b) The local PIT shall be assessed and collected by the
Franchise Tax Board (FTB).
2)Provides that a local VLF on any vehicle, registered within
the county in which the local VLF is imposed, that is subject
to registration under the Vehicle Code, shall be subject to
the following conditions:
a) If the election in which the local VLF receives voter
approval occurs between January 1 and June 30, the local
VLF shall be imposed on and after the first January 1 that
follows that election; and,
b) If the election in which the local VLF receives voter
approval occurs between July 1 and December 30, the local
VLF shall be imposed on and after that first July 1 that
follows that election.
3)Specifies that each county shall only establish one countywide
local VLF rate.
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4)Provides that the local VLF shall be allowed as a deduction
for the state PIT and the corporation tax for the taxable year
within which the local VLF shall be paid or accrued.
5)Provides that the county shall fully reimburse the General
Fund (GF) from the revenues collected from the local VLF for
the revenue losses incurred because of the ability to deduct
the local VLF from the state PIT and the corporation tax.
6)Provides that the Department of Motor Vehicles (DMV) shall
administer the local VLF, and provides that the county shall
contract with the DMV to perform all functions incident to the
administration of the local VLF prior to the operative date of
any ordinance imposing a local VLF.
7)Provides that the contract with the DMV shall contain a
provision that the county shall reimburse the DMV for all
refunds, losses, and costs incurred in the administration and
operation of the local VLF.
8)Provides that the local VLF shall be assessed and collected in
the same manner as the fee imposed under the state's VLF law.
9)Creates the "Local Vehicle License Fee Account" (Local VLF
Account) in the General Fund, and specifies that amounts
collected shall be transmitted to the Treasurer and deposited
in the State Treasury to the credit of the local VLF Account,
and provides that moneys in the Local VLF account shall be
continuously appropriated to the Controller for allocation to
the county.
10)Repeals an existing prohibition against counties assessing a
tax upon the income, or any part thereof, of any person,
resident or nonresident.
11)Provides that a local ordinance that imposes a local PIT
shall become operative for taxable years beginning on or after
January 1 of the first calendar year following approval by the
voters of the county, provided written notice of that approval
is provided by the county elections official no later than
September 30 of the preceding calendar year.
12)Provides that each county shall only establish one countywide
local PIT.
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13)Provides that for each taxable year for which a local PIT is
operative, an additional tax on the tax liability after
reduction for personal exemption credits of a county resident
shall be imposed at the rate approved by the voters of the
county.
14)Provides that the local PIT shall be based on an individual's
county of residence.
15)Provides that a taxpayer shall specify the county or counties
of his or her residence for the taxable year when filing a
personal income tax return.
16)Provides that if a taxpayer resides in more than one county,
the taxpayer shall pay a proportionate share of the local PIT
of each county, and specifies that a proportionate share shall
be based on the percentage of time during the taxable year
that a taxpayer resides in each county.
17)Provides that the local PIT shall be treated as if it were
imposed under the law pertaining to State PIT.
18)Provides that the amounts paid for the local PIT shall not be
allowed as a deduction under this bill.
19)Provides that a county shall not adopt by ordinance any
credit or deduction against the local PIT.
20)Provides that the county shall contract with the FTB to
perform all functions incident to its administration and
operation of the local PIT, prior to the operative date of any
ordinance imposing a local PIT.
21)Provides that the contract shall contain a provision that the
county shall reimburse the FTB for all refunds, losses, and
costs incurred in its administration and operation of the
local PIT.
22)Provides that the county shall contract with the Employment
Development Department (EDD) to perform all functions incident
to its administration and operation of the local PIT, and
provides that the contract shall contain a provision that the
county shall reimburse the EDD for all refunds, losses, and
costs incurred in its administration and operation of the
local PIT.
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23)Provides for the order that the local PIT will be applied on
the taxpayer's tax return.
24)Provides that any information, information sources, or
enforcement remedies and capabilities available to the county
shall be made available to the FTB to be used in conjunction
with, or independent of, the information sources, or remedies
and capabilities available to the FTB for purposes of
administering the local PIT.
25)Provides that when requested by resolution of the board of
supervisors of any county, the FTB shall permit any duly
authorized officer or employee of the county, or other person
designated by that resolution, to examine all the PIT records
of the FTB pertaining to the ascertainment of those local PIT
to be collected for the county by the FTB pursuant to the
contract.
26)Provides that the resolution by the board of supervisors
shall certify that any person designated by the resolution,
other than an officer or employee, meets all of the following
conditions:
a) Has an existing contract with the county to examine
those PIT records;
b) Is required by that contract to disclose information
contained in, or derived from, those PIT records only to an
officer or employee of the county who is authorized by the
resolution to examine the information; and,
c) Is prohibited by that contract from retaining the
information contained in, or derived from, those PIT
records, after that contract has expired.
27)Provides that information obtained by examination of the FTB
records shall be used only for purposes related to the
collection of local PIT by the FTB pursuant to the contract,
or for purposes related to other governmental functions of the
county as set forth in the resolution.
28)Provides that the FTB may prescribe all rules and regulations
as necessary and proper to administer this chapter.
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29)Provides that adoption, amendment, or repeal of regulations
by the FTB as prescribed to administer this chapter is
exempted from the rulemaking provisions of the Administrative
Procedure Act.
30)Creates the "Local Personal Income Tax Account" (Local PIT
Account) in the GF, and provides that amounts collected shall
be transmitted to the Treasurer and deposited in the State
Treasury to the credit of the Local PIT Account, and provides
that moneys in the Local PIT account shall be continuously
appropriated to the Controller for allocation to each county.
31)Requires the FTB to annually prepare wage withholding tables
to be used by employers for purposes of withholding tables to
be used by employers for purposes of withholding both state
PITs and local PITs on wages paid, and to make these tables
available to the EDD.
32)Requires an employer who pays wages to a resident employee to
withhold from those wages both state PITs and local PITs.
33)Defines "resident" to mean any individual who lives or is
located in a county on more than a temporary or transient
basis.
EXISTING LAW :
1)Provides for a state personal income tax based on taxable
income for every resident of the state who is not a part-year
resident.
2)Provides that, notwithstanding any statute, ordinance,
regulation, rule or decision to the contrary, no city, county,
city and county, governmental subdivision, district, public
and quasi-public corporation, municipal corporation, whether
incorporated or not or whether chartered or not, shall levy or
collect or cause to be levied or collected any tax upon the
income, or any part thereof, of any person, resident or
nonresident.
3)Provides for a state license fee to be imposed for the
privilege of operating a vehicle on the public highways.
4)Provides, under Article XI, Section 15 of the California
Constitution, that vehicle license fees collected by the state
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are allocated to cities, counties, and cities and counties,
less the costs of collection and any refunds.
5)Provides that a county may impose a local vehicle license fee
surcharge, if the ordinance or resolution proposing the
surcharge is adopted by two-thirds of the voters of the
county, and
if the board of supervisors finds that:
a) There is traffic congestion within the county that can
be alleviated by the operation
of public transit and that the cost of funding public transit
exceeds the revenues to be collected from a vehicle license
fee surcharge; and,
b) The imposition of the vehicle license fee surcharge will
reduce the need for any public transit fare increases
during the period that the vehicle license fee surcharge is
in effect.
6)Prohibits, under the California Constitution, the Legislature
from imposing taxes for local purposes, but allows the
Legislature to authorize local governments to impose them, and
requires money appropriated from state funds to a local
government for its local purpose to be used as provided by
law.
FISCAL EFFECT : Unknown
COMMENTS :
1)AB 2113 authorizes a board of supervisors of any county, by
ordinance, to place on the ballot a local PIT or local VLF, or
both. If approved by voters in accordance with all
constitutional and statutory requirements, the bill provides
for the mechanism of how collection and administration of the
local PIT and local VLF would be handled by the FTB and DMV,
respectively.
2)According to the author, this bill is needed for three
reasons: First, because of the current economic situation,
the state may be unable to continue paying the historic share
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for basic
services at the level to which Californians have grown
accustomed, and therefore local governments should be given
options for creating new revenue streams to stabilize revenues
for services and programs that are administered locally.
Second, by expanding local revenue authority, local control is
maintained because the local governments will have the option
to pursue increased revenues that meet the unique local needs
of the community. Finally, by allowing a county, pursuant to
the will of the voters, to impose a personal income tax or a
local vehicle license fee, it will decrease the reliance of
the local government on sales tax, especially from big box
retail and auto malls, thus limiting the fiscalization of land
use. The author notes that a local personal income tax would
provide incentives for local governments to focus on raising
capital by attracting high paying jobs.
3)AB 1342 (Evans), a similar measure, was heard by the Committee
on April 22, 2009, and passed by a 5-2 vote. The premise
behind both AB 1342 and this bill is to give revenue raising
authority to counties for both a local VLF and a local PIT, if
voters approve. However, there are major differences between
the two bills, especially in the administration and collection
of the local VLF and local PIT, and the provisions that
provide for reimbursement of the General Fund from the
revenues collected from the local VLF. Staff notes that the
author, in AB 2113, has taken many amendments to address
concerns raised by the FTB in its analysis of AB 1342. As of
April 1, 2010, the FTB does not have a current analysis or
position on AB 2113.
Several concerns raised by the FTB in their January 4, 2010,
analysis of AB 1342 are still relevant to this bill. For
example, AB 2113 provides that the FTB will be reimbursed for
their administrative expenses from implementing the provisions
of the bill out of the moneys collected through the local PIT,
meaning there will be a lag in reimbursement to FTB. This
requires the FTB to front the start-up costs of the
administration of the bill at a time when FTB lacks sufficient
budget and resources, especially in light of recent budget
adjustments to the FTB.
Another concern raised by the FTB is that the first county to
enact the tax would incur the entire cost for implementation
while counties that enact the tax at a later date would not be
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charged the startup costs paid by the earlier enacting county.
The Committee may wish to ask the author to specify how costs
should be allocated among the counties that do enact a local
PIT.
4)AB 2113 provides that the local PIT and local VLF will be
imposed on "residents" and defines "residents" to mean "any
individual who lives or is located in a county on more than a
temporary or transient basis." The difficulty with this
definition, however, is that a landowner may not actually
reside in the county that he or she owns property, and
therefore would not have to pay the local VLF or local PIT.
That landowner still requires the services of the local
government for public safety and other local needs. The
Committee may wish to discuss whether the application of the
local PIT and local VLF shall apply more broadly, and whether
the bill's definition of "resident" is adequate to capture the
intended audience.
5)Support Arguments : Counties currently have very little
revenue authority, but are responsible for providing many of
California's most important programs. According to the
California State Association of Counties (CSAC), "the result
of decades of increasing requirements from the state and
federal governments on the one hand and increasingly
restricted revenue authority has been a county structure that,
in some cases, cannot sufficiently meet its residents' needs.
And "in the absence of revenue authority, the state has become
the largest revenue source for many counties, despite the fact
that it is notoriously unpredictable." CSAC writes that "AB
2113 offers an appropriate realignment of program
responsibility and revenue authority, currently a key but
missing characteristic of the California tax system."
The California Professional Firefighters (CPF) in their
support letter write that the effect of local revenue
restrictions over the last 30 years has been a local
government finance system that is reliant on state dollars,
which is especially serious for local public safety services,
given that local governments have been forced to make cuts in
services as a result of strained budgets. CPF notes that "AB
2113 facilitates bringing the conversation back to the voters
to decide how to fund local investments."
6)Opposition Arguments : California's taxation system is
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extremely complicated. Many Californians lack the
understanding of where their tax dollars go and what these
dollars fund, especially when the taxation occurs at different
levels of government. AB 2113 will insert an additional layer
into California's complicated tax structure, thus potentially
making an already confusing system even more complicated for
taxpayers to understand.
Additionally, voters have a "taxation threshold" in terms of
supporting additional taxes and fees. This bill might have an
impact on other local ballot measures that would raise taxes,
either at the county or city level, and the voters within that
area may "max out" on local taxes to a point that it is
detrimental to other local ballot measures that are dedicated
to fund specific local needs or local projects.
In their joint opposition letter, Cal-Tax, the California
Bankers Association, the California Manufacturers and
Technology Association, and Tech America write that their
opposition stems from the extension of fee and taxation
authority to local governments because of two reasons: first,
the administrative difficulty placed on taxpayers, businesses,
and the agencies required to implement the provisions of the
bill, and second, the increasing taxation burden felt by
Californians, especially in light of the increase in VLF and
state income tax contained in the 2009-10 budget. Both the
Alliance of Automobile Manufacturers and the California New
Car Dealers Association believe that this bill will increase
costs on California motorists during a time when the poor
economic climate is already impacting residents.
7)This bill is double-referred to the Committee on Revenue and
Taxation.
REGISTERED SUPPORT / OPPOSITION :
Support
California Professional Firefighters
California State Association of Counties
California Tax Reform Association
Opposition
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AAA of Northern California
Alliance of Automobile Manufacturers
Automobile Club of Southern California
California Bankers Association
California Chamber of Commerce
California Manufacturers and Technology Association
California New Car Dealers Association
Cal-Tax
Family Winemakers of California
Howard Jarvis Taxpayers Association
TechAmerica
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958