BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1272
                                                                  Page  1

          Date of Hearing:   August 4, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    SB 1272 (Wolk) - As Amended:  August 2, 2010 

          Policy Committee:                             Revenue and  
          Taxation     Vote:                            6-3

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:

           SUMMARY  

          This requires any bill introduced after January 1, 2011 that  
          authorizes a personal income or corporation tax credit to  
          contain, among other provisions: (a) specified goals, purposes,  
          and objectives; (b) detailed performance indicators to measure  
          whether the credit is meeting those goals; and (c) a requirement  
          that the credit become inoperative seven years after its  
          enactment.
           
          FISCAL EFFECT  

          1)No direct impact on state revenues or costs to the GF, because  
            the bill only applies prospectively, and future legislation  
            could be drafted to include "notwithstanding" language.

          2)However, to the extent future Legislatures were to abide by  
            the sunset requirement, the bill could result in an unknown,  
            but potentially significant increases in revenues due to the  
            expiration of tax credits enacted after the effective date of  
            this bill.

           COMMENTS  
           
          1)Background  . State and federal income tax law provides for  
            various tax credits, deductions, exclusions, exemptions, and  
            other tax preferences that are collectively referred to as tax  
            expenditures. There are tax expenditure reporting  
            requirements, but no sunset requirements, in state law. As  
            matter of practice, however, most new tax credit bills contain  
            sunset language. 









                                                                  SB 1272
                                                                  Page  2

           2)Rationale  . The sponsor of the bill the California Labor  
            Federation, asserts that it brings much needed performance  
            review and oversight to tax expenditure programs in order to  
            make them more transparent and effective  

          3)Opponents  the California Chamber of Commerce and other  
            business groups, assert the bill would create uncertainty  
            regarding long-term tax planning, thereby reducing the  
            incentive effects of the measure. 

           4)Other Issues  . While the bill would codify in law policy  
            requiring sunsets for tax credits, as a practical matter, one  
            Legislature cannot bind the actions of future Legislatures,  
            and there is nothing to prevent future tax measures from  
            containing "notwithstanding" language to avoid the sunsets  
            required by this bill.

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081