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California State Association of Counties

CSAC Bulletin Article

Government Finance and Operations 04/08/2011

April 8, 2011 Jean Kinney Hurst Geoffrey Neill

Unreimbursed Tax Exemptions

AB 865 (Nestande) – Oppose Unless Amended
As Introduced on February 17, 2011

AB 865, by Assembly Member Brian Nestande, would extend by 17 years the property tax exemption for newly constructed active solar energy systems.

Counties have no quarrel with the Legislature exempting these projects, which can add significant value to nearly valueless land, from property taxes. However, AB 865 fails to reimburse local agencies for the resulting revenue loss, as provided in statute. Unilaterally using county revenue to favor these projects during times of such fiscal stress seems ill-considered at best. If favoring these projects is an issue of statewide concern, as passing this bill would indicate, then the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute. 

The Legislature seems unable to resolve the state’s ongoing budget deficit with a balanced approach of program reductions and revenues. A budget solution that relies solely on cuts can only result in catastrophic effects on counties. Over the past three years, counties have laid off thousands of employees, furloughed many more, and eliminated services, despite growing needs in safety net services, all in response to historic declines in their major revenue sources. To, at the same time, further erode county revenues with unreimbursed exemptions such as the one contemplated in AB 865 adds insult to grievous injury.

The Assembly Revenue and Taxation Committee will consider AB 865 at its meeting on Monday, April 11.


AB 1007 (Cook) – Oppose Unless Amended
As Introduced on February 18, 2011

AB 1007, by Assembly Member Paul Cook, would exempt purchases of clothes, shoes, sports equipment, and school supplies from the state and local sales and use taxes during three days of each year.

If the state chooses to use its own funds to favor these purchases of clothes, shoes, sports equipment, paper, pens, and the rest during three days in August over the same purchases on other days of the year, counties will not complain. However, counties do take issue with the Legislature unilaterally using county revenues to do so. If favoring these projects is an issue of statewide concern, as passing this bill would indicate, then the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute. 

The Assembly Revenue and Taxation Committee will consider AB 1007 at its meeting on Monday, April 11.


AB 1376 (Nestande) – Neutral
As Amended on April 4, 2011

AB 1376, by Assembly Member Brian Nestande, would exempt from sales and use taxes purchases of anything used for the construction of a renewable energy generation facility. The author recently amended the bill to specify that the exemption does not apply to local sales and use taxes or to transactions and use taxes, removing CSAC’s opposition.

The Assembly Revenue and Taxation Committee will consider AB 1376 at its hearing on Monday, April 11.

Election Reimbursement

SB 106 (Blakeslee) – Support
As Introduced on January 13, 2011

SB 106, by Senator Sam Blakeslee, would change statute to say that the state shall pay the costs of legislative vacancy special elections.

A statute to this effect was in effect for many years up through the end of 2008. Since the beginning of 2009, counties have spent at least $20 million to fill eleven vacancies, and more vacancies will need to be filled later this year. SB 106 would cover elections held between January 1, 2009, and April 19, 2011.

The Senate Appropriations Committee is likely to consider SB 106 at its hearing on Monday, April 11.


SB 141 (Price) – Support
As Amended on March 17, 2011

SB 141, by Senator Curren Price, is exactly like SB 106, above, except that it does not specify a reimbursement period from January 1, 2009, to April 19, 2011.

The Senate Appropriations Committee will consider SB 141 at its hearing on Monday, April 11.

Use Tax Collection

AB 155 (Calderon) – Support
As Amended on March 3, 2011

AB 155, by Assembly Member Charles Calderon, would redefine “retailer engaged in business in this state” to include sister companies where one of them designs or solicits sales within the state and another actually sells those products.

The bill aims specifically at companies like Amazon.com. What most consumers think of as “Amazon” is actually a group of commonly controlled companies, only one of which makes actual sales. Other members of the group, Amazon.com’s sister companies, are located within California. They perform activities such as designing Amazon’s Kindle reader and conducting consumers’ searches for products Amazon.com sells.

Under current law, the liability for remitting use taxes for these transactions rests with the consumers, who have an opportunity to announce such liabilities on their personal income tax filings, but who rarely do. This change aims to reduce the use tax gap caused by the increasing use of the internet by Californians to purchase goods. As such, AB 155 attempts to collect taxes that Californians currently owe but do not pay. A portion of these uncollected taxes would benefit counties.

The Assembly Revenue and Taxation Committee put AB 155 on its suspense file at its meeting on Monday, April 4.


SB 234 (Hancock) – Support
As Introduced on February 9, 2011

SB 234, by Senator Loni Hancock, would expand the definition of retailers that must collect sales tax to include any retailer upon which federal law and the commerce clause of the U.S. Constitution allow the state to impose that duty. It also removes a specific exclusion from the definition.

The bill aims specifically at internet and mail order companies who predicate their business on avoiding collecting taxes from Californians. Because the companies have no direct physical presence in California, they are therefore not currently required to collect sales and use taxes from Californians who buy items from them. Under current law, the liability for remitting these taxes rests with the consumers, who have an opportunity to announce such liabilities on their personal income tax filings, but who rarely do.

SB 234 aims to reduce the use tax gap caused by the increasing use of the internet by Californians to purchase goods. As such, SB 234 attempts to collect taxes that Californians currently owe but do not pay. A portion of these uncollected taxes would benefit counties.

The Senate Appropriations Committee will consider SB 234 at its hearing on Monday, April 11.

Transaction and Use Tax Increments

AB 686 (Huffman) – Support
As Amended on March 9, 2011

AB 686, by Assembly Member Jared Huffman, would allow counties and cities to set their transactions and use taxes in increments of an eighth of a percent, instead of a quarter.

Under AB 686, county and city tax increases and extensions will still need to comply with all constitutional voting requirements. However, allowing local agencies to more precisely set their tax rates will give them more flexibility in matching the tax rate with a community’s specific need.

The Assembly Revenue and Taxation Committee put AB 155 on its suspense file at its meeting on Monday, April 4.

Regulation Notification

AB 213 (Silva) – Support
As Introduced on January 31, 2011

AB 213, by Assembly Member Jim Silva, would require state agencies, when they consider it appropriate, to mail or email proposed regulations to local agencies they are likely to affect.

Currently, agencies are required to allow a formal period for public comment when adopting, amending, or repealing regulations. Forty-five days before closing that period, agencies must provide certain notices of the action, for instance mailings to affected small businesses and posting on their website. Assembly Member Silva carried a similar bill last year, AB 1957, which the Assembly Appropriations Committee failed to pass.

The Assembly Business, Professions and Consumer Protection Committee passed AB 213 unanimously at its hearing on Tuesday, April 5.

Universal Service

SB 3 (Padilla) – Support
As Amended on March 29, 2011

SB 3, by Senator Alex Padilla, would extend by one year, to 2014, authority for the CPUC to use the California High-Cost Fund-B to support telephone and broadband services in high-cost service areas, primarily rural. It would also explicitly require contributions to the fund from users of Voice over Internet Protocol (VoIP).

The high-cost funds, A and B, subsidize the cost of providing telecommunication services to rural and hard-to-reach parts of the state. Surcharges on all telephone bills fund these programs and help ensure that access to telecommunication is universal.

The Senate Energy, Utilities, and Communications Committee passed SB 3 unanimously at its hearing on Tuesday, April 5, and it now moves to the Senate Appropriations Committee.

Ballot Measure Fiscal Impacts

AB 1021 (Gordon) – Support
As Introduced on February 18, 2011

AB 1021, by Assembly Member Rich Gordon, would require voter notification when proposed ballot measures would increase net costs by over $1 million per year.

Voters love to decide policy using California’s expansive and inflexible initiative system. Current law requires the Attorney General and the Legislative Analyst to prepare summaries that help voters decide whether to place items on the ballot and whether to pass them when they are on the ballot. These summaries include fiscal effects.

AB 1021 would require these summaries to notify voters when a ballot measure would establish or expand a program costing more than $1 million without providing for new revenue or offsetting savings. Many ballot measures impose costs on counties, and many others that cost the state money put pressure on state funding for programs counties provide on the state’s behalf. Voters should be clearly notified of the effects of their decisions.

The Assembly Elections and Redistricting Committee will consider AB 1021 at its hearing on Tuesday, April 12.

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April 8, 2011 Jean Kinney Hurst Geoffrey Neill

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August 30, 2012

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