BILL ANALYSIS
AB 2564
Page 1
Date of Hearing: April 15, 2010
ASSEMBLY COMMITTEE ON BUDGET
Bob Blumenfield, Chair
AB 2564 (Swanson) - As Amended: March 25, 2010
SUBJECT : State Budget: Tax Expenditures
SUMMARY : Requires the budget to include information relating
to tax expenditures. Specifically, this bill :
1)Requires the budget to include a section that specifies:
a) A comprehensive list of tax expenditures exceeding $5
million in annual cost;
b) An estimate or range of estimates, for the state and
local revenue loss for the current fiscal year and the two
subsequent fiscal years. As relating to sales and use tax
expenditures. The estimate must include partial year
exemptions and all other tax expenditures when obtained by
the Board of Equalization;
c) As relating to personal income tax expenditures, the
number of taxpayers affected and returns filed for the most
recent tax year for which full year data is available; and,
d) As relating to corporation tax and sales tax
expenditures, the number of returns filed or business
entities affected for the most recent tax year for which
full year data is available.
2)Defines "tax expenditure" as a credit, deduction, exclusion,
exemption, or any other tax benefit as provided for by the
state.
EXISTING LAW :
1)Requires the Department of Finance to report to the
Legislature annually, no later than September 15th, on all of
the following:
a) A comprehensive list of tax expenditures exceeding $5
million in annual cost;
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b) The statutory authority for each credit, deduction,
exclusion, exemption, or any other tax benefit.
c) A description of the legislative intent for each tax
expenditure, when available;
d) The sunset date for each tax expenditure, if applicable;
e) A brief description of the beneficiaries of the tax
expenditure;
f) An estimate or range of estimates for the state and
local revenue loss for the current fiscal year, and the two
subsequent fiscal years. As relating to sales and use tax
expenditures, the estimate must include partial year
exemptions and all other tax expenditures when obtained by
the Board of Equalization;
g) As relating to personal income tax expenditures, the
number of taxpayers affected and returns filed for the most
recent tax year for which full year data is available;
h) As relating to corporation tax and sales tax
expenditures, the number of returns filed or business
entities affected for the most recent tax year for which
full year data is available;
i) A listing of any comparable federal tax benefits;
j) A description of any tax expenditure evaluation or
compilation of information completed by any state agency
since the last report made pursuant to this section; and,
aa) Defines "tax expenditure" as a credit, deduction,
exclusion, exemption, or any other tax benefit as provided
for by the state.
2)Requires the Governor to submit, within the first 10 days of
each calendar year, a budget for the ensuing fiscal year
(Article IV, section 12 of the California Constitution).
3)Requires the Governor's Budget to include a complete plan and
itemized statement of all proposed expenditures and all
estimated revenues for the ensuing fiscal year. It must also
contain a comparison for those proposed "budget year"
expenditures and revenues with the actual revenue and
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expenditure amounts for the previous completed fiscal year and
the estimated revenue and expenditures for the current year.
4)Requires the budget to include a section that specifies the
percentage and amount of General Fund (GF) revenue that must
be set aside for schools and Community Colleges pursuant to
Proposition 98.
FISCAL EFFECT : Minor absorbable costs to include this
information, already compiled by the Department of Finance
(DOF), in the budget document.
COMMENTS : The author states the intent of this bill is to
highlight the cost of tax expenditures to the state every year,
and generate discussion about the expenditures as part of the
budget process. This bill, however, may not achieve the outcome
of focusing the budget discussion on those specific issues. The
idea of spurring discussion on this important issue is a good
one, but simply adding another page, chart, or table to a nearly
1,500 page document does not provide a context or discussion
point for the budget. The information is likely to get lost
within the immense budget document, rather than become a point
of focus.
Additionally, the information the author is seeking is already
published every year by the DOF. Government Code 13305 requires
a report with all the requested information, plus some
additional details. The existing report contains significant
narrative descriptions, not typical of the information currently
included in the budget document. Simplified charts of all tax
expenditures and their estimated revenue loss may be more
appropriate for inclusion in the Governor's Budget.
The report is currently required to be provided no later than
September 15th of each year. By changing the timing of the
report, it could be far more beneficial to the budget process
than duplicating it in the Governor's Budget. Requiring the
report to be submitted by February 1st of each year would
provide the information during budget discussions, allowing
discussions regarding tax expenditures to be spurred when the
opportunity is ideal for budget adjustments. The Committee may
wish to consider amending the due date for the report in
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Government Code 13305 rather than duplicate that information
within the Governor's Budget.
REGISTERED SUPPORT / OPPOSITION :
Support
None of file.
Opposition
None on file.
Analysis Prepared by : Adam Dondro / BUDGET / (916) 319-2099