BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1485 (Kehoe) - Fuel taxes: blended fuels.
Amended: April 19, 2012 Policy Vote: T&H 9-0
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Mark McKenzie
SUSPENSE FILE.
Bill Summary: SB 1485 would authorize producers of blended fuel
to receive a refund of motor vehicle fuel taxes paid after
January 1, 2011 on the gasoline that is ultimately used to
produce a blended fuel, as specified.
Fiscal Impact:
Estimated costs of approximately $288,000 (Motor Vehicle
Fuel Tax Fund) in 2012-13 to pay refunds of excise taxes
paid from January 1, 2011 through June 30, 2012.
Ongoing estimated costs of $194,000 annually (Motor Vehicle
Fuel Tax Fund), beginning in 2012-13, for continued refunds
of excise taxes.
Background: Under the Motor Vehicle Fuel Tax (MVFT) Law, the
state currently imposes an excise tax of $0.357 per gallon on
the removal of gasoline at the refinery or terminal rack. The
MVFT is comprised of an excise tax of $0.18 per gallon and a
surtax of $.0177 which is adjusted annually pursuant to the gas
tax swap to ensure revenue neutrality based upon the amount of
state sales tax that would have been paid if the General Fund
portion of the sales and use tax on gasoline were in place. On
July 1 of this year, the total excise tax rate will increase to
$0.36 per gallon to maintain the revenue neutrality provisions
of the gas tax swap. Existing law authorizes a refund of MVFT
paid by any person who buys and uses the gasoline for purposes
other than operating a motor vehicle upon the public highways of
the state. To receive the refund, a taxpayer must submit a
claim form to the State Controller's Office (SCO).
E85 is an alcohol fuel blend that nominally contains 85% ethanol
and 15% gasoline by volume. Alcohol fuel containing no more
than 15% gasoline or diesel fuel, including E85, is subject to
SB 1485 (Kehoe)
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the Use Fuel Tax (UFT), which is imposed at a rate of $.09 per
gallon at the point of retail sale. The SCO has determined that
E85 producers are not entitled to a refund of motor vehicle fuel
taxes paid on gasoline that is combined with alcohol to produce
E85 because the final "use" of the fuel is for operating a
vehicle on the public highways.
Proposed Law: SB 1485 would expressly authorize a refund of MVFT
paid when a person buys and uses motor vehicle fuel for the
purpose of producing a blended fuel that will be used to operate
motor vehicles upon the state's public highways, provided the
UFT is paid at the point of retail sale.
Staff Comments: The bill would apply to refund claims submitted
on or after January 1, 2011 for which the person shows that the
applicable fuel tax has been paid. According to data provided
by the Board of Equalization, an estimated 675,000 gallons of
gasoline was purchased for production of blended alcohol fuels
below the rack from January 1, 2011 through March 31, 2012.
Based upon this volume, staff estimates that producers of
alcohol fuel would be eligible for up to $288,000 in refunds for
the retroactive period specified in the bill (January 1, 2011
through the end of the 2011-12 fiscal year). Assuming an
effective date in the first quarter of the 2012-13 fiscal year,
SB 1485 would result in ongoing costs to the Motor Vehicle Fuel
Tax Fund of up to $194,000 per year, beginning in 2012-13.
Recommended Amendments: Staff recommends the following technical
amendment:
Page 3, line 21, insert the word "tax" after "fuel."