BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 223 (Leno)
Hearing Date: 05/09/2011 Amended: As Introduced
Consultant: Mark McKenzie Policy Vote: G&F 6-3
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BILL SUMMARY: SB 223 would authorize a county to impose a
voter-approved local assessment on the value of motor vehicles
registered within its jurisdiction at a rate that is equal to
the difference between the statewide rate of the vehicle license
fee (VLF) and 2% of a vehicle's market value.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Maximum local assessments
($2,288,250)($4,576,500)Local
(revenue gain)
DMV programming/admin $543 $112 Special*
(up-front costs paid by county, ongoing
costs
deducted from assessments collected)
Maximum tax revenue loss
$85,000General
from VLF taxpayer deductions
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* Motor Vehicle Account
Staff notes that the local assessment revenue gain and tax
revenue loss shown here are based upon approval of the
assessment in every county in the state at the maximum rate.
Actual costs and revenues would depend upon the number of
counties approving an assessment, the rate of the assessment,
and the number of vehicles registered in those counties. For
purposes of example, if only San Francisco (with 470,349
fee-paid vehicle registrations) approved an assessment of 2%
(1.35% local on top of the 0.65% VLF, annual local revenue gains
would be $68,479,589 and the estimated annual tax revenue loss
in the first year would be approximately $3.8 million. Tax
revenue losses are reimbursed to the General Fund in the
following year from revenues collected.
SB 223 (Leno)
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law imposes an annual vehicle license fee (in lieu of a
personal property tax) on all motor vehicles not otherwise
exempt. The VLF is calculated by multiplying the depreciated
value of the vehicle by a specified rate. Although the current
rate is 1.15 %, the rate had historically been 2% of a vehicle's
value up until 2004, and effective July 1, 2011, the rate will
revert to 0.65% when the temporary tax increases enacted in 2009
expire (AB3x 3 (Evans), Chapter 18 of 2009-10 Third
Extraordinary Session). The Governor has proposed asking the
voters to extend the current VLF rate of 1.15%, as well as the
other temporary tax increases enacted in 2009, for an additional
five years. To date, this effort has been unsuccessful.
SB 223 would authorize a county board of supervisors (including
the City and County of San Francisco), upon approval by a 2/3
vote of the board of supervisors and a majority of the
electorate, to impose an assessment on the value of motor
vehicles registered in the county. This local assessment rate
would be equal to the difference between 2% of a vehicle's value
and the rate levied by the state (except that a lower rate may
be imposed for low-emission vehicles), and revenues collected
would be for general purposes. A county would be required to
contract with the Department of Motor Vehicles (DMV) to collect
and administer the fee. The bill would require a county to pay
DMV for initial setup and programming costs, and DMV would
recover any ongoing administrative costs from assessment
revenues collected. An assessment approved by voters between
January 1 and June 30 would be operative the following January
1, and those approved between July 1 and December 31 would be
operative the following July.
Existing law provides that the VLF, which is effectively a
property tax on vehicles, is deductible for both the state and
federal income tax purposes. SB 223 would require DMV and the
Franchise Tax Board (FTB) to develop a reporting process that
enables the department to provide timely data to FTB indicating
the amount of assessments paid in each participating county. By
January 1 of the second year following the initial imposition of
the assessment, FTB would estimate the increased amount of tax
revenue loss due to deductibility of this additional assessment
SB 223 (Leno)
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for state purposes. The estimated state revenue loss for the
prior year would be deducted by DMV from the amount of fee
revenue collected and deposited in the General Fund.
FTB estimates a tax revenue loss as a result of increased VLF
tax deductions of approximately $85 million in 2013-14, $50
million in 2014-15, and $5.7 million in 2015-16. Deductions
claimed in a fiscal year would be reimbursed to the General Fund
from revenues collected by DMV in the next fiscal year. For
purposes of this estimate, FTB assumes all counties would begin
imposing the assessment at the maximum 2% rate on July 1 2013,
resulting in deductions being claimed on the 2013 tax return
that are filed in 2014. FTB estimates also assumes that the
statewide VLF rate would reset to 0.65% on June 30, 2011, a
total statewide vehicle value in of $339 billion, 50% of the
value of the assessment would result in a deduction, and a 5.5%
tax rate.
DMV would be required to administer the collection and
distribution of the fees on behalf of each county agency that
received voter approval to impose the new assessment. Initial
costs for programming the new fee into DMV's processing system
would be $543,165, with ongoing administrative costs of
$112,362. Adding counties that approve assessments later would
be relatively minor. Initial costs would be paid up front by
the agency imposing the assessment through a direct contract
with DMV. Ongoing administrative costs to DMV would be deducted
from fees collected prior to distribution to the local agency.
DMV notes a significant fiscal concern related to the discount
fees the department pays to credit card companies, based on the
vehicle transaction amount, for each registration renewal
processed online with a credit card. Total annual transaction
fees if all counties authorize the maximum assessment of 2%
would be approximately $14.5 million annually.