BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1272 (Wolk)
Hearing Date: 05/03/2010 Amended: 04/21/2010
Consultant: Mark McKenzie Policy Vote: Rev&Tax 3-2
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BILL SUMMARY: SB 1272 would require any bill introduced on or
after January 1, 2011 that would authorize a new tax credit to
include the following:
Specific goals, purposes, and objectives that the tax credit
is designed to achieve.
Detailed performance indicators to allow for measuring
achievement of stated goals.
Annual data collection requirements to enable a determination
of whether the credit is meeting, exceeding, or failing to
meet the stated goals.
A seven-year sunset of the credit provisions.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Future tax credit limitations Unknown, potentially
significant increase in General
tax revenues to the extent that the bill
limits
the duration of future tax expenditures
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STAFF COMMENTS:
Existing state and federal laws provide various tax credits and
other tax benefits designed to provide relief for taxpayers who
incur certain expenses, such as those related to child adoption,
or to influence behavior, including business practices and
decisions by providing benefits such as research credits or
economic development area hiring credits. These benefits
generally are designed to provide incentives for taxpayers to
perform various actions or activities that they may not
otherwise undertake. Although the Department of Finance
annually reports to the Legislature on tax expenditures
exceeding $5 million annually, the data that is reported in
insufficient to measure whether the incentive of a tax credit is
successful in achieving a desired purpose or objective. Staff
notes that tax credits may generally be enacted by a majority
vote of the Legislature, but repealing or applying a sunset to
an existing credit requires a 2/3 vote of the Legislature
because doing so would result in an increase in tax revenues.
SB 1272 applies to tax expenditures enacted on or after January
1, 2011 by applying specified requirements to any new personal
income tax or corporate tax credits, including a mandatory
seven-year sunset. Staff notes that this Legislature cannot
affirmatively bind future ones under County of Los Angeles v.
State of California (1984) 153 Cal.App.3d 568, 573. SB 1272
would therefore only apply contingently to future measures. To
the extent a future Legislature honors the provisions of this
bill, however, there could be unknown and potentially
significant revenue gains by limiting the duration of future tax
expenditures.
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SB 1272 (Wolk)
The Franchise Tax Board estimates that bill does not have an
impact on revenue or the department because any impact would be
related to future legislation.
Staff notes that ACA 6 (Calderon), which is pending a vote on
the Assembly Floor, would amend the Constitution to limit the
operative period for new or amended tax credits to seven years
from the date of enactment.