1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JULY 28, 2015 10 11 12 13 14 15 LEGISLATIVE COMMITTEE 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board of Equalization: Fiona Ma, CPA 4 Chair 5 Jerome E. Horton Member 6 Sen. George Runner (Ret.) 7 Member 8 Diane L. Harkey Member 9 Yvette Stowers 10 Appearing for Betty T. Yee, State Controller 11 (per Government Code Section 7.9) 12 13 Joann Richmond Chief 14 Board Proceedings Division 15 16 For the Department: Michele Pielsticker Chief 17 Legislative and Research Division 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JULY 28, 2015 4 ---oOo--- 5 MR. HORTON: Ms. Richmond, what is our next 6 matter? 7 MS. RICHMOND: Our next matter on this 8 morning's agenda is the Legislative Committee. Ms. 9 Ma's the Chair of that committee. 10 Ms. Ma. 11 MS. MA: Okay, thank you. Ms. Pielsticker 12 is approaching the dais, and she will give us an 13 update on some of the legislation that we heard 14 earlier this year and the status of the -- those 15 items. 16 MS. PIELSTICKER: Yes. 17 Good morning, Madam Chair, Board Members. 18 Michele Pielsticker with the Legislative and 19 Research Division. I'm here to provide you with a 20 status update on all BOE sponsored and supported 21 bills introduced in 2015. 22 AB 8 -- 88 Gomez, which provides a Sales 23 and Use Tax exemption for public utilities Energy 24 Star refrigerator or clothes washer purchases that 25 are provided at no cost to low-income participants, 26 currently is in the Senate Appropriation Committee. 27 Since the bill was introduced, it has been 28 amended to narrow the definition of "appliance" to 3 1 Energy Star refrigerator and clothes washers, as 2 suggested in the BOE's bill analysis. And after the 3 bill was narrowed, the Research and Statistics 4 Section lowered its revenue estimate from a loss of 5 $12.8 million to $4.5 million. 6 AB 89 Allen, which provides a State only 7 sales and use tax exemption for items purchased by a 8 K-12 public school or a K-12 public school district 9 for use by that school or district, was held in the 10 Assembly Revenue and Taxation Committee. And 11 presumably that bill was held because the estimated 12 revenue loss is $76 million. 13 AB 203 Obernolte, which extends from 30 to 14 60 days the time by which the annual Fire Prevention 15 Fee assessment is due and payable as well as the 16 time period in which to file a petition for 17 redetermination, was moved to the Assembly inactive 18 file. But, the contents of AB 203 were amended into 19 AB 232, and the bill now awaits referral by the 20 Senate Rules Committee pursuant to Senate Rule 21 2910. 22 AB 203's companion bill SB 250 Gaines was 23 held in the Senate Appropriations Committee. The 24 bill's estimated revenue loss is $382,000, but all 25 of that revenue relates to foregone penalties and 26 interest as a result of greater taxpayer 27 compliance. 28 AB 405 Brough, which makes the interest 4 1 rate paid on overpayments the same as the rate paid 2 on late payments with respect to Board of 3 Equalization administered tax and fee programs, was 4 held in the Assembly Appropriations Committee. And, 5 once again, the bill's projected revenue loss is 6 $3.5 million for fiscal year '15-'16 and increases 7 to $30.1 million for fiscal year '18-'19. 8 AB 681 Ting, which modifies the BOE's 9 county assessment practices survey cycle, reduces 10 the time within which the Board of Equalization must 11 issue a survey report from two years to one year and 12 allows former assessors to provide feedback on the 13 survey of their former office. And that bill is in 14 the Senate Appropriations Committee. 15 While the bill has no revenue impact, BOE 16 staffing costs are expected to be $629,000 in fiscal 17 year 2016-'17 and $571,000 annually thereafter. 18 AB 815 Ridley-Thomas, which clarifies who 19 owes and pays the Oil Spill Prevention Fee, excludes 20 petroleum products derived from fee paid crude oil 21 and deletes unnecessary oil pipeline operator 22 registration requirements, was signed by the 23 Governor. 24 AB 1277 Brough, which increases from 1500 25 to $2300 the amount of levied funds the BOE's 26 Taxpayers' Rights Advocate is permitted to return to 27 a taxpayer when the taxpayer can demonstrate a 28 significant hardship, is on third reading in the 5 1 Senate, and the bill has not received any no 2 votes. 3 SB 24, which revises the Cigarette and 4 Tobacco Products Licensing Act of 2003 to require 5 the licensure of electronic cigarette retailers and 6 requires the BOE to assess a civil penalty and 7 suspend or revoke a retailer license for specified 8 violations of the STAKE Act, was moved to inactive 9 file in the Senate. 10 SB 140 Leno, which also imposes licensing 11 requirement on e-Cigarettes, it adds tobacco product 12 definition to the Stop Tobacco Access to Kids 13 Enforcement Act that includes the electronic 14 nicotine delivery device such as an e-Cig, and 15 similarly requires the BOE to suspend or revoke a 16 retailer's Cigarette and Tobacco Product's Licensing 17 Act license for furnishing a tobacco product to a 18 minor, was held in the Assembly Government 19 Organizational -- Organization Committee. The bill 20 was held when the author declined to take 21 recommended Committee amendments to remove the 22 provision that defines an e-Cigarette as a tobacco 23 product. 24 The bill has been revived in the Second 25 Extraordinary Session related to health care, and 26 the new bill number is AB X 26 by Assemblymember 27 Cooper. Special session bill will bypass the 28 Assembly Governmental Organization Committee. 6 1 SB 321 Beall, which authorizes the BOE to 2 make specified adjustments to the motor vehicle fuel 3 gas tax swap rate using a five-year average fuel 4 price estimate is now in the Assembly Appropriations 5 Committee. 6 SB 357 Hall, which changes the method of 7 measuring rail car presence in California from car 8 days to mileage for purposes of the private railroad 9 car tax, was held in the Senate Appropriations 10 Committee. And that bill presumably was held 11 because it had an estimated revenue loss of 12 $506,000. 13 The SB 433 Berryhill, which requires the 14 Department of Finance, instead of the Board of 15 Equalization, to determine the excise tax rate 16 adjustment for motor vehicle fuel and diesel fuel 17 under the Fuel Tax Swap for the next five years, was 18 held in the Assembly Revenue and Taxation Committee. 19 But there are a few bills in the First 20 Extraordinary Session intended to address 21 transportation issues. Notably, SB X 17 Allen would 22 sunset the current diesel fuel sales to end use tax 23 provisions and set the diesel fuel sales and use tax 24 rate which is currently at 1.94 percent to 5.25 25 percent. 26 And SB X 11 Beall would increase the motor 27 vehicle fuel and diesel fuel taxes by 12 and 22 28 cents, respectively. And it would also remove the 7 1 requirement that the BOE set the tax rates on motor 2 vehicle fuel and diesel fuel every year to maintain 3 revenue neutrality. Instead, the bill requires the 4 BOE to calculate CCPI adjustments to the fixed rates 5 every three years. And that's something that's very 6 consistent with other -- our rule in other rate 7 adjustments. 8 SB 640 Beall, which authorizes a retailer 9 to make an irrevocable election to assign the right 10 to file a claim for refund of excess tax 11 reimbursement in the amount of a thousand dollars or 12 greater to a single customer, passed the Assembly 13 Revenue and Taxation Committee as amended to remove 14 the provision that requires an assignment from the 15 retailer in order for the customer to seek a direct 16 refund from the BOE. 17 And I would just note that initially when 18 the Board supported that bill, it had a $50,000 19 threshold. The bill has changed significantly with 20 a thousand dollar threshold. And in order for the 21 Board to continue to take a support position, that 22 bill would need to come back to the Board according 23 to our protocol. 24 So, as of right now, the Board does not 25 have a position on the bill. The bill is now in the 26 Assembly Appropriations Committee. 27 SB 661 Hill, which transfers assessment 28 jurisdiction for a commercial air carrier owned 8 1 personal property from local county assessors to the 2 State Board of Equalization, was held in the Senate 3 Appropriations Committee. 4 The bill's estimated costs are substantial 5 due to the need to hire staff skilled in airline 6 property appraisal. 7 And so, AB 1157 Nazarian continues to move 8 through the process. And that bill extends, for one 9 year, the current methodology for aircraft 10 assessment. And the parties continue to negotiate 11 as the year goes on. 12 SB 802 by the Senate Governance and Finance 13 Committee was the BOE's cleanup bill for the MTS 14 surcharge. Most of the provisions in SB 802 were 15 picked up by a budget trailer bill. We have one 16 small remaining provision. We've opted to just hold 17 SB 802 until January next year to avoid any 18 chaptering out issues or confusion. 19 And then, finally, SB 803, the BOE's 20 property tax cleanup bill, is in the Assembly 21 Appropriations Committee. 22 And that concludes my presentation. Thank 23 you. 24 MS. MA: Okay. Any questions, Members? 25 MR. HORTON: Thank you, Chair Ma. 26 SB 357, is there a way that we can begin to 27 sort of work on this and some of the other 28 legislation, under the leadership of Member Ma, to 9 1 see if we can find some solutions to the 2 appropriation issues that seem to continue with some 3 of the bills? 4 And particularly this one, possibly 5 language that provides a revenue neutral where the 6 existing revenue that is being collected remains the 7 same if we just change the methodology to make it 8 simple and more appropriate or something of that 9 nature. 10 MS. PIELSTICKER: I will tell you that -- 11 that staff worked very hard to -- to find the -- a 12 way of calculating the revenue loss that would 13 reflect reality as far as what the bill would do. 14 And we really -- we struggled, and $506,000 was 15 where we sit. And we, of course, want to be as 16 forthright as we can with the revenue estimates; and 17 in so doing, sometimes that means we just have a 18 greater revenue loss than we would like. 19 MR. HORTON: With the -- the revenue 20 neutrality would call for the industry to concur 21 with a revenue adjustment similar to the swap 22 philosophy that allows it to remain -- the 23 revenue -- the revenue received by the State to 24 remain the same as the previous three years, or 25 something of that nature, which would offset the 26 561. 27 I don't know if that's -- the benefit of 28 the legislation itself is worth that for the 10 1 industry, but it very well may be because of the -- 2 the convenience and the produc -- the productivity 3 of being able to -- to -- to utilize the language in 4 the bill. 5 MS. PIELSTICKER: I -- I will certainly 6 mention that to them. And perhaps I can follow up 7 with you, Mr. Chair, after the committee hearing 8 to -- to flesh that out a bit. 9 MR. HORTON: Yeah. I mean I would defer to 10 Member Ma. 11 MR. RUNNER: Actually, on that, on that 12 bill. 13 MS. MA: Mr. Runner. 14 MR. RUNNER: Yeah. We had conversations 15 with sponsors trying to figure out a way to get 16 there. And I think our staff did a great job trying 17 to figure out how to -- how to find it and how to 18 readjust it. And I think the sponsor -- I think 19 it's a -- it's a -- it's a reasonable issue for the 20 sponsors to come back and take a look at. 21 I think part of the problem was there was 22 is a one-time cost that happened in the first year 23 because we had to redo some data issues, I think 24 computer issues, too, that created -- 25 MS. PIELSTICKER: It was actually a 26 one-time savings in the first year. But 27 unfortunately that savings was not ongoing. 28 MR. RUNNER: Okay. 11 1 MS. PIELSTICKER: Yeah. 2 MR. RUNNER: So -- so what I think they 3 were -- they were, I think, attempting to do that. 4 I think we can always go back to them in that -- in 5 that process. But I think -- I think everybody 6 worked really diligently. 7 MR. HORTON: Oh, yeah. 8 MR. RUNNER: But, you know, there's always 9 another way to look at it. 10 MS. MA: And 560 -- $506,000 is very 11 minuscule in the big picture. So I think maybe we 12 could perhaps get to it for next year if the author 13 wants to carry it or -- 14 MR. HORTON: Mm-hmm. 15 MS. MA: -- another sponsor. 16 Ms. Harkey. 17 MS. HARKEY: Well, often times things are 18 in Appropriations just to die, as we know. And it 19 may not even have a cost and they go through 20 Appropriations. 21 So, it just depends on who wants this to 22 happen and who doesn't. And it's up to the 23 Legislature. But if we were really -- if this is 24 very important, then, you know, a little friendly 25 nudge is probably appropriate. 26 MS. MA: Okay. Any other questions, 27 Members? 28 Okay. Seeing none, this committee is 12 1 adjourned. 2 ---oOo--- 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on July 28, 2015 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 13 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: August 11, 2015 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL 22 Hearing Reporter 23 24 25 26 27 28 14