BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2638|
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THIRD READING
Bill No: AB 2638
Author: Eng (D)
Amended: 7/5/12 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-3, 6/28/12
AYES: Wolk, DeSaulnier, Hernandez, Liu, Yee
NOES: Dutton, Fuller, La Malfa
NO VOTE RECORDED: Kehoe
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 50-27, 5/29/12 - See last page for vote
SUBJECT : State government: fiscal affairs
SOURCE : State Controller John Chiang
DIGEST : This bill requires the Board of Equalization
(BOE), and the Franchise Tax Board (FTB) to submit a new
report to the Legislature and DOF, on or before December 1
of each calendar year on the tax effect of tax expenditures
with an annual revenue loss of more than $5 million. BOE
and FTB shall include the most recent data to characterize
the economic, tax, and demographic profile of claimants of
tax expenditures over $5 million, as specified.
ANALYSIS : Existing law requires the Department of
Finance (DOF) to submit a tax expenditure report to the
Legislature each year by September 15th. Tax expenditures
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are defined to be "a credit, deduction, exclusion,
exemption, or any other tax benefit as provided by the
state." The report must include specified information.
As part of the Budget, DOF must provide to the Legislature
total recommended state general fund expenditures and
estimated, including any proposed, state general fund
revenues, including:
A five-year infrastructure plan,
An estimate of total general fund resources recommended
for the budget year and three following fiscal years, and
A projection of anticipated general fund expenditures for
the budget year and three following fiscal years.
This bill requires BOE, and the FTB to submit a new report
to the Legislature and DOF, on or before December 1 of each
calendar year on the tax effect of tax expenditures with an
annual revenue loss of more than $5 million. BOE and FTB
shall include the most recent data to characterize the
economic, tax, and demographic profile of claimants of tax
expenditures over $5 million, including:
An estimate or range of estimates for the state and local
revenue loss for the current and two subsequent fiscal
years, including partial sales tax exemptions when BOE
has obtained the information.
Anticipated revenue loss from the final fiscal committee
analysis of the act that established the tax expenditure,
adjusted for inflation, if available.
For sales and use tax expenditures, the report shall
identify to the extent possible, at a minimum, revenue loss
for the most recent tax year for which the full tax year
data is available and estimated revenue loss for the
current state fiscal year and subsequent fiscal year by
industry code. The report shall also include the following
information for each expenditure:
For the most recent fiscal year for which a full year of
data is available, Average, median, highest, and lowest
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amounts claimed by taxpayer gross sales, and amounts
claimed, rejected, and disallowed,
Usage data for the same or similar tax expenditure
adopted by other states with similar economics, business
entity types, and tax laws,
Any other distinguishing tax characteristics, including
other expenditures claimed.
BOE shall report the information required only to the
extent that it has the information, and may reflect BOE
staff estimates or taxpayers' self-reported data.
For personal income and corporation income and franchise
tax expenditures, the report shall identify the revenue
loss for each expenditure for the most recent taxable year
for which a full year of data is available, the current
fiscal year, and the budget year, in the following
categories:
The claimant's adjusted gross income,
The taxpayer's tax liability,
By region and industry code,
Average, median, highest, and lowest amounts claimed by
taxpayer bracket,
Amounts claimed and disallowed,
Usage data for the same or similar tax expenditure
adopted by other states with similar economics, business
entity types, and tax laws,
Any other distinguishing tax characteristics, including
other expenditures claimed.
This bill requires DOF's tax expenditure report to
additionally include the year of enactment of the tax
expenditure, and the anticipated revenue loss included in
the final fiscal committee analysis of the act that
established the tax expenditure, adjusted for inflation.
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The measure also specifies that partial tax exemptions
instead of partial year exemptions be included as part of
sales and use tax expenditures.
This bill also requires in the information that DOF must
submit to the Legislature with the budget an estimate of
the loss of revenue dues to the expenditure in the upcoming
fiscal year.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/8/12)
State Controller John Chiang (source)
American Federation of State, County and Municipal
Employees
California Federation of Teachers
California Labor Federation
California School Employees Association
California Tax Reform Association
Service Employees International Union, California
OPPOSITION : (Verified 8/8/12)
California Manufacturers and Technology Association
California Taxpayers Association
ARGUMENTS IN SUPPORT : Supporters argue that given the
state's massive budget deficit, this is a common sense bill
which seeks to shed increased light on and scrutinize state
tax expenditures which cost the state billions of dollars
every year. Furthermore, many of these tax expenditures
are no longer serving their intended purpose and only serve
to reduce state tax revenues.
ARGUMENTS IN OPPOSITION : Opponents argue, "The bill does
not require the use of dynamic revenue modeling that would
provide a credible estimate of the true impact of tax of
the true impact of tax expenditures on taxpayer behavior
and thus the impact on tax revenues. Reports based on only
static analysis would be misleading for policymakers and
should not be relied upon to make important tax policy
decisions."
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ASSEMBLY FLOOR : 50-27, 5/29/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani,
Gatto, Gordon, Hayashi, Roger Hern�ndez, Hill, Huber,
Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza,
Mitchell, Monning, Pan, Perea, V. Manuel P�rez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Beth Gaines, Garrick, Gorell, Grove, Hagman, Halderman,
Harkey, Jeffries, Jones, Knight, Logue, Mansoor, Miller,
Morrell, Nestande, Nielsen, Norby, Olsen, Silva, Smyth,
Valadao, Wagner
NO VOTE RECORDED: Cedillo, Fletcher, Hall
AGB:n 8/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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