BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 508
Author: Wolk (D)
Amended: 6/20/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-2, 3/30/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, La Malfa
NO VOTE RECORDED: Fuller
SENATE APPROPRIATIONS COMMITTEE : 5-3, 4/11/11
AYES: Kehoe, Alquist, Pavley, Price, Steinberg
NOES: Walters, Emmerson, Runner
NO VOTE RECORDED: Lieu
SENATE FLOOR : 23-17, 4/25/11
AYES: Alquist, Calderon, Corbett, De Le�n, DeSaulnier,
Evans, Hancock, Hernandez, Kehoe, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Vargas, Wolk, Yee
NOES: Anderson, Berryhill, Blakeslee, Cannella, Correa,
Dutton, Emmerson, Fuller, Gaines, Harman, Huff, La Malfa,
Runner, Strickland, Walters, Wright, Wyland
ASSEMBLY FLOOR : 45-30, 8/29/11 - See last page for vote
SUBJECT : Income and corporation taxes: credits:
information and
operative limitations
SOURCE : Author
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DIGEST : This bill requires any bills enacting tax
preferences to include specified information and a 10 year
sunset.
Assembly Amendments extend the sunset from seven years to
10 years and make other clarifying changes.
ANALYSIS : California law allows various income tax
credits, deductions, and sales and use tax exemptions to
provide incentives to compensate taxpayers that incur
certain expenses, such as child adoption, or to influence
behavior, including business practices and decisions, such
as research and development credits and geographically
targeted economic development area credits. The
Legislature typically enacts such tax incentives to
encourage taxpayers to do something that but for the tax
credit, they will not do. The Department of Finance is
required to annually publish a list of tax expenditures.
This bill provides that any bill that enacts a credit
against the Personal Income Tax Law or Corporation Tax Law
for taxable years beginning on or after January 1, 2012,
contain:
Specific goals, purposes, and objectives that the tax
credit will achieve.
Detailed performance indicators for the Legislature to
use when measuring whether the tax credit met its
specific goals, purposes, and objectives.
Data collection requirements to enable the Legislature to
determine whether the tax credit is meeting, failing to
meet, or exceeding its goals, purposes, and objectives.
The requirements shall include specific data and baseline
data to be collected and remitted in each year the credit
is effective, and the specific taxpayers, state agencies,
or other entities required to collect and remit data.
A 10 year sunset.
This bill also makes findings regarding tax preferences
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generally and their current fiscal impact on federal and
state governments.
Prior Legislation
This bill is identical to SB 1272 (Wolk), 2009-10 Session,
which Governor Schwarzenegger vetoed, stating:
"I am returning Senate Bill 1272 without my signature.
While the sponsors seem intent on eliminating measures
that will generate jobs and stimulate the economy, the
average California taxpayer would probably be better
served if the Legislature were willing to automatically
sunset every new spending entitlement, program
expansion and business mandate after 7 years.
For this reason, I am unable to sign this bill."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Future tax credit unknown, potentially
significant increase General
limitations in tax revenues to the extent that
the bill
limits the duration of future tax
expenditures
SUPPORT : (Verified 7/6/11) (per the Assembly
Appropriations Committee of 7/6/11) (unable to reverify at
time of writing)
California Labor Federation
OPPOSITION : (Verified 7/6/11) (per the Assembly
Appropriations Committee of 7/6/11) (unable to reverify at
time of writing)
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BIOCOM
California Bankers Association
California Chamber of Commerce
California Taxpayers Association
California Manufacturers and Technology Association
TechAmerica
ARGUMENTS IN SUPPORT : According to the author, "Today's
public finance system in California requires major reform.
While I have pursued changing our budgeting system to apply
performance measurements for spending programs, I am trying
to do the same with SB 508, which applies a
performance-based methodology to future tax expenditures
enacted by the state. There is no good reason not to
evaluate tax expenditure programs with the same rigor that
we use when judging spending decisions, especially when
California's tax preference portfolio now exceeds $47
billion, equal to half of our total revenue. While we
cannot change existing tax preferences, we can at least
start keeping better track of future ones."
ARGUMENTS IN OPPOSITION : Some opponents to this bill
state that mandatory sunsets for tax expenditures are
inappropriate and unfair when similar requirements do not
apply to spending programs. Others state that the seven
year standard is arbitrary; while sunset provisions and
performance review are important, a firm's investment
horizon and the tax credits themselves vary from case to
case, and the same, fixed sunset period should not apply to
tax incentives which may require different periods of time
to accomplish its purposes.
ASSEMBLY FLOOR : 45-30, 8/29/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Carter, Cedillo, Chesbro,
Davis, Dickinson, Eng, Feuer, Fong, Gatto, Gordon,
Hayashi, Roger Hern�ndez, Hill, Huber, Hueso, Huffman,
Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning,
Pan, Perea, Portantino, Skinner, Solorio, Swanson,
Torres, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
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Fletcher, Furutani, Beth Gaines, Galgiani, Garrick,
Grove, Hagman, Halderman, Harkey, Jeffries, Jones,
Knight, Logue, Mansoor, Miller, Morrell, Nestande,
Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner,
Wieckowski
NO VOTE RECORDED: Campos, Fuentes, Gorell, Hall, V. Manuel
P�rez
AGB:do 8/30/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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