BILL ANALYSIS �
AB 1717
Page 1
Date of Hearing: May 21, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1717 (Perea) - As Amended: April 2, 2014
Policy Committee: Utilities and
Commerce Vote: 9-0
Revenue and Taxation 9-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes a new point-of-sale system for collecting
and remitting specified fees, surcharges, and taxes applicable
to prepaid mobile telephony services (MTS).
FISCAL EFFECT
1)The state should realize a net state revenue gain of $8
million from 2011-12 revenues. In addition, there will likely
be a net local revenue gain in the $60 to $70 million range
for utility user taxes (UTT) not currently collected.
2)BOE projects annual administrative costs of over $11 million
for collection and implementation.
3)PUC projects administrative costs of $630,000 for the first
two years of implementation and $350,000 annual on-going
administrative costs.
COMMENTS
1)Purpose. According to the author, everyone who uses phone
service pays a small monthly fee as part of their bill to help
fund 911 and support other important state and local programs.
However, for the fastest growing segment of wireless users,
prepaid wireless services, there is no collection mechanism
for customers to pay these fees. Nearly 25% of all wireless
customers are now prepaid customers.
According to the author, the current system leaves state and
AB 1717
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local governments without a reliable, predictable means for
ensuring collection of these revenues. This bill will ensure
state and local governments receive the necessary resources
for 911 programs by developing a statewide mechanism to
include prepaid services in the already-established collection
of fees applied to wireless communication services.
2)Background . The state's current system for collecting taxes
and fees is based on monthly bills. Customers pay 911 fees
and state and local fees to fund telephone service for
low-income households, broadband for underserved areas, and
local government services.
According to the Wireless Association, the prepaid wireless
market is anticipated to grow at a rate of 10% per year.
3)Collection of fees and surcharges for prepaid wireless
services . Current law imposes a state 911 user surcharge on
intrastate communications service, administered by the
California Technology Agency; a PUC Reimbursement Fee to pay
for PUC operations, and several surcharges to pay for state
universal service programs administered by the PUC as follows:
a) California High Cost Fund A and B
b) Deaf and Disabled Telecommunications program
c) California Teleconnect Fund
d) California Advanced Services Fund
e) Lifeline Telephone Service
The BOE estimates state fees total 3.46 percent of
intrastate service. There are about 150 different Local 911
fees and User Utility Taxes (UUTs) assessed on service
provided within the jurisdiction of the city or county
imposing the tax. UUTs vary by jurisdiction but not all
cities and counties impose them.
Post-paid fees and surcharges are assessed as they are
reflected on customer bills after service is used. With
prepaid service, there is no specific billing process.
1)Similar Legislation. Last year, AB 300 (Perea) contained
provisions substantially similar to the current bill and would
have established a point-of-sale system for collecting and
remitting specified fees, surcharges, and taxes applicable to
prepaid MTS. AB 300 was vetoed, with the Governor noting the
collection system was duplicative, complex and would result in
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increased collection costs.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081