BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 357 (Dutton)
Hearing Date: 05/26/2011 Amended: 05/10/2011
Consultant: Brendan McCarthy Policy Vote: GO 8-2, EQ 4-0
_________________________________________________________________
____
BILL SUMMARY: SB 357 requires state agencies that are adopting
regulations to estimate the lost revenue to the state as a
result of provisions of the proposed regulation that would make
equipment obsolete.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Economic analysis Unknown costs, likely in the
Special *
hundreds of thousands annually
* Air Pollution Control Fund.
_________________________________________________________________
____
STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Under the Administrative Procedures Act, state agencies adopting
regulations must conduct certain analyses of the impacts of the
proposed regulation and follow specific procedures for allowing
public input and review of the proposed regulation. In
particular, state agencies are required to analyze the potential
impact of a proposed regulation on businesses or job creation in
the state and potential financial impacts on state agencies.
Under state and federal tax law, businesses are generally
allowed to depreciate equipment purchases over the equipment's
useful life. In other words, the full tax deduction for the
purchase of a piece of equipment cannot be claimed in the year
of purchase; the deduction is spread over the useful life of the
equipment.
SB 357 requires state agencies, when estimating the cost of a
specific regulations, to estimate potential losses in state
SB 357 (Dutton)
Page 1
revenues due regulations that make equipment obsolete, where
that equipment would otherwise have remaining depreciable life.
(If a regulation would make a piece of equipment obsolete, the
owner can immediately deduct the remaining depreciable value of
the equipment in that tax year, rather than over the remaining
years of useful life. Presumably, this would reduce tax revenues
in the current year, with an offsetting increase in later
years.)
While state agencies are already required to perform certain
analyses of the economic impacts of regulations, this bill adds
a new requirement that has the potential to be costly. Some
state agencies adopt regulations that are based on performance
standards, rather than prohibiting or mandating the use of
specific equipment. In those cases, the state agencies may have
limited data about the existing equipment that businesses use to
comply with any existing regulations. In such cases, state
agencies will have to conduct significant amounts of additional
research to understand the equipment currently in use, the
typical useful life of that equipment, and the extent to which
the regulation will actually make such equipment obsolete. The
costs to conduct those analyses are unknown, but could be in the
millions per year, depending on the specific regulations adopted
and the particular circumstances of the regulated industries.
SB 643 (Correa) requires state agencies adopting regulations
relating to building standards to disclose the estimated costs
and benefits of the proposed regulation at the outset of the
process for adopting the regulation. That bill will be heard in
this committee.
The proposed Committee amendments limit the requirements of the
bill to regulations adopted by the Air Resources Board under AB
32 (Nunez, 2006).