Under existing law, a public utility is required to bill its customers for various taxes imposed by a public entity and remit the revenues from those taxes that are collected to the public entity. The Public Utilities Act provides that a public utility or other service supplier is not liable to any customer as a result of collecting these taxes, and grants various rights to, and imposes various requirements on, public utilities and other service suppliers with respect to the imposition, repeal, or collection of the taxes. Existing law, the Digital Infrastructure and Video Competition Act of 2006, establishes a procedure for the issuance of state franchises for the provision of video service, defined to include cable service and open-video systems, administered by the Public Utilities Commission.

This bill would explicitly define the term other service supplier for the purpose of those provisions to include, but not be limited to, a holder of a state franchise for the provision of video service.

Under existing law, a public utility is required to bill its customers for various taxes imposed by a public entity and remit the revenues from those taxes that are collected to the public entity. The Public Utilities Act provides that a public utility or other service supplier is not liable to any customer as a result of collecting these taxes, and grants various rights to, and imposes various requirements on, public utilities and other service suppliers with respect to the imposition, repeal, or collection of the taxes. Existing law, the Digital Infrastructure and Video Competition Act of 2006, establishes a procedure for the issuance of state franchises for the provision of video service, defined to include cable service and open-video systems, administered by the Public Utilities Commission.

This bill would explicitly define the term other service supplier for the purpose of those provisions to include, but not be limited to, a holder of a state franchise for the provision of video service.

Under existing law, the Public Utilities Commission is vested with regulatory authority over public utilities and other specified entities, including water corporations. Existing law authorizes the Public Utilities Commission, in establishing rates for water service, to establish separate charges for costs associated with customer service, facilities, and fixed and variable operating costs, as specified.

This bill would make nonsubstantive changes to these provisions.

Date of Hearing: June 29, 2016

ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE

Mike Gatto, Chair

SBPCA Bill Id:SB 1422

Author:(Glazer) – As Amended Ver:March 28, 2016

SENATE VOTE: 36-0

SUBJECT: Public utilities and other service suppliers: collection of local taxes

SUMMARY: Clarifies that cable service providers are included in the definition for other service providers, pursuant to existing law, which limits the liabilities and responsibilities of public utilities and other service providers collecting a utility user tax. Specifically, this bill:

1. Defines "other service supplier" to include, but not be limited to, a holder of a state franchise for the provision of video service, for the purposes of existing law which defines the duties and liabilities for public utilities and other service suppliers collecting a utility user tax (UUT).
2. Provides that this bill does not constitute a change in, but is declaratory of existing law.

EXISTING LAW:

1. Authorizes a city or county to levy a UUT on the consumption of electricity, gas, water, sewer, telephone, telegraph, and cable television services.
2. Provides, the following, for taxes enacted by a local jurisdiction imposed on the customers of public utilities or other services suppliers, where taxes are collected by the public utilities and other service suppliers and remitted to the local jurisdiction:
   1. Prohibits the public utility or other service supplier from having any duty to independently investigate or inquire concerning the validity of a local jurisdiction's tax ordinance;
   2. Prohibits a public utility or other services supplier from being liable to any customer as a consequence of collecting a tax of an invalid tax ordinance;
   3. Requires, if a local jurisdiction is ordered to refund the tax, that it be the sole responsibility of the local jurisdiction, unless a public utility or other service supplier is reimbursed for the cost, as specified;
   4. Prohibits a public utility or other service supplier from being named as a defendant in any action challenging the tax;
   5. Requires a local jurisdiction to notify the utility or service supplier in writing, if it adopts a new tax, or makes changes to an existing tax that would affect collection and remittance; and,
   6. Grants a utility or service provider at least 90 days after notification to begin collecting a new tax and at least 60 days after notification to implement a change in an existing tax.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

1. Author's Statement: According to the author, "This bill clarifies the definition of 'other service supplier' to include a cable or video service provider."
2. Utility User Tax (UUT): UUTs are excise taxes imposed by cities and counties on the consumption of utility services, including electricity, gas, water, sewer, telephone, sanitation, and cable television. Although a city or county can impose a UUT as a special tax, generating revenues that must be used for a specific purpose, nearly all UUTs are imposed as general taxes, which allow revenues to be used for any purpose. In the 2014-15 fiscal year, 159 cities and three counties reported collecting, in total, more than $2 billion in UUT revenues. In jurisdictions that impose a UUT, a utility service provider collects the tax through the bills it sends to utility customers and remits the revenues to the local government that imposed the tax.

In the statute establishing protections for public utilities and other service providers that collect UTTs, the term "other service providers" is not defined. Some cable service providers worry that the absence of a definition of "other service providers" creates ambiguity that could allow current law to be misinterpreted as excluding cable operators from the protections that apply to public utilities. They want the Legislature to amend state law to explicitly include cable operators.

1. Prior Legislation:

AB 3155 (Martinez), Chapter 939, Statutes of 1996: Created the UTT liability protection for utilities and other service providers. Legislative records indicate that it was the intent of the Legislature to include cable providers within the definition of other service providers. According the Assembly Floor Analysis of AB 3155, AB 3155 was "sponsored by the Telecommunications Energy Utility Roundtable, a consortium of energy and telecommunications companies that were brought together by Cal-Tax." The analysis also states that "investor owned 'public' utilities and cable providers sponsored the contents of [AB 3155]."

REGISTERED SUPPORT / OPPOSITION:

Support

California Cable & Telecommunications Association (Sponsor)

California Chamber of Commerce

California Taxpayers Association

Opposition

None on file.

Analysis Prepared by: Darion Johnston / U. & C. / (916) 319-2083

Date of Hearing: June 15, 2016

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Susan Talamantes Eggman, Chair

SBPCA Bill Id:SB 1422

Author:(Glazer) – As Amended Ver:March 28, 2016

SENATE VOTE: 36-0

SUBJECT: Public utilities and other service suppliers: collection of local taxes.

SUMMARY: Clarifies that cable service providers are included in the definition for other service providers, pursuant to existing law, which limits the liabilities and responsibilities of public utilities and other service providers collecting a utility user tax. Specifically, this bill:

1. Defines "other service supplier" to include, but not be limited to, a holder of a state franchise for the provision of video service, for the purposes of existing law which defines the duties and liabilities for public utilities and other service suppliers collecting a utility user tax (UUT).
2. Provides that this bill does not constitute a change in, but is declaratory of existing law.

EXISTING LAW:

1. Authorizes a city or county to levy a UUT on the consumption of electricity, gas, water, sewer, telephone, telegraph, and cable television services.
2. Provides, the following, for taxes enacted by a local jurisdiction imposed on the customers of public utilities or other services suppliers, where taxes are collected by the public utilities and other service suppliers and remitted to the local jurisdiction:
   1. Prohibits the public utility or other service supplier from having any duty to independently investigate or inquire concerning the validity of a local jurisdiction's tax ordinance;
   2. Prohibits a public utility or other services supplier from being liable to any customer as a consequence of collecting a tax of an invalid tax ordinance;
   3. Requires, if a local jurisdiction is ordered to refund the tax, that it be the sole responsibility of the local jurisdiction, unless a public utility or other service supplier is reimbursed for the cost, as specified;
   4. Prohibits a public utility or other service supplier from being named as a defendant in any action challenging the tax;
   5. Requires a local jurisdiction to notify the utility or service supplier in writing, if it adopts a new tax, or makes changes to an existing tax that would affect collection and remittance; and,
   6. Grants a utility or service provider at least 90 days after notification to begin collecting a new tax and at least 60 days after notification to implement a change in an existing tax.

FISCAL EFFECT: None

COMMENTS:

1. Bill Summary. Existing law provides protections to public utilities and other service suppliers that collect UUTs that local governments impose on utility customers. Current law does not define "other service provider," however, the analysis provided for enacting legislation [AB 3155 (Martinez) of 1996 and SB 2143 (Hurtt) of 1996] suggests the legislative intent of the protections' applicability to video service providers. This bill specifies that the definition of other service supplier includes video service providers, and states that this change is declaratory of existing law. This bill is sponsored by the California Cable & Telecommunications Association.
2. Author's Statement. According to the author, "Senate Bill 1422 seeks to clarify the definition of “other service supplier” to include a cable or video service provider. The bill would not constitute a change in current law, but would be declaratory of existing law."
3. UUT. Under current law, a city may impose a UUT on the consumption of utility services, including, but not be limited to, electricity, gas, water, sewer, telephone, sanitation and cable television. The city determines the rate of the tax and the use of its proceeds. UUTs can be imposed as a special tax dedicated for a specific purpose, or a general tax to be used for whatever purpose the city council decides. Additionally, a county may levy a UUT on the consumption of electricity, gas, water, sewer, telephone, telegraph and cable television services in the unincorporated area. The city or county determines the rate of the tax and the use of its proceeds. UUTs are collected by the utility as part of its regular billing, and then remitted to the city or county.

In California, 159 cities and three counties impose a UUT, collecting, in total, more than
$2 billion UUT revenues. In most jurisdictions, UUTs provide vital funding for municipal or county services. Reduced funding by the state and other sources of funding for local governments over the last several decades have increased the popularity of UUTs, which are most commonly used to fund police, fire, parks, and libraries.

1. Arguments in Support. Supporters argue that this bill provides clarification in existing law that exempts utilities and other service suppliers from liability for the collection of taxes that were improperly authorized by local governments.
2. Arguments in Opposition. None on file.
3. Double-Referral. This bill is double-referred to the Utilities and Commerce Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Cable & Telecommunications Association [SPONSOR]

California Chamber of Commerce

California Taxpayers Association

Opposition

None on file

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958

 CONSENT  

Bill No: SB 1422

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/27/16

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

SUBJECT:

SOURCE: Author

DIGEST: This bill clarifies that cable service providers are covered by a state law that limits public utilities and other service providers’ duties and liabilities with regard to collecting local utility taxes.

ANALYSIS: Existing law establishes several limits on a public utility or other service supplier’s duties and liabilities with regard to collecting utility users taxes (UUTs) and other taxes that local governments impose on utility consumers (AB 3155, Martinez, Chapter 939, Statutes of 1996). Specifically, to protect utility service suppliers from litigation over taxes that they collect (but don't impose) and to ensure that utility providers have enough time to process any local modifications to local utility taxes, existing law:

1. Specifies that the public utility or service supplier is not liable to any customer for collecting the tax, regardless of whether the tax has been declared illegal, and has no duty to inquire with the local agency about the tax's validity.
2. Directs that a local jurisdiction is solely responsible for refunding the tax if it is ordered to do so, although the utility or service supplier may assist the local jurisdiction if the local jurisdiction reimburses the cost of assistance.
3. Prohibits a public utility or other service supplier from being named as a defendant in any action challenging the tax.
4. Requires a local jurisdiction to notify the utility or service supplier in writing if it adopts a new tax, or makes changes to an existing tax that would affect collection and remittance.
5. Grants a utility or service provider at least 90 days after notification to begin collecting a new tax and at least 60 days after notification to implement a change in an existing tax.

This bill:

1. Defines the term “other service suppliers” as including a holder of a state franchise for the provision of video service for the purposes of the statute that limits public utility or other service suppliers’ duties and liabilities with regard to collecting utility taxes.
2. Declares that its provisions do not constitute a change in, but are declaratory of, existing law.

Background

UUTs are excise taxes imposed by cities and counties on the consumption of utility services, including electricity, gas, water, sewer, telephone, sanitation, and cable television. Although a city or county can impose a UUT as a special tax, generating revenues that must be used for a specific purpose, nearly all UUTs are imposed as general taxes, which allow revenues to be used for any purpose. In the 2014-15 fiscal year, 159 cities and three counties reported collecting, in total, more than $2 billion in UUT revenues. In jurisdictions that impose a UUT, a utility service provider collects the tax through the bills it sends to utility customers and remits the revenues to the local government that imposed the tax.

In the statute that establishes protections for public utilities and other service providers that collect local utility taxes, the term “other service providers” is not defined. Some cable service providers worry that the absence of a definition of “other service providers” creates ambiguity that could allow current law to be misinterpreted as excluding cable operators from the protections that apply to public utilities. They want the Legislature to amend state law to explicitly include cable operators.

Comments

Purpose of the bill. State law seeks to ensure that public utilities and other service suppliers are not subject to legal liability or other negative consequences for collecting utility user taxes that a local agency may be imposing on consumers improperly. Because the statute does not define the term “other service suppliers,” advocates for some cable operators and other video service providers worry that it is ambiguous whether these statutory protections apply to a company that holds a state franchise to provide video service. Legislative histories of both the bill that enacted the protections for utility service providers (AB 3155, Martinez, Chapter 939, Statutes of 1996) and a bill that contained an earlier version of those protections (SB 2143, Hurtt, 1996) strongly suggest that the Legislature intended to apply the protections to video service providers. Committee and floor analyses of these two bills indicate that cable companies were included among the sponsors of those bills and parenthetically cite cable companies as an example of “service suppliers.” Despite this legislative history, there remains some risk that the statutory language could be misinterpreted to exclude cable operators and other video service providers. This bill eliminates any uncertainty by explicitly defining “other service suppliers” as including video service providers.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 4/27/16)

California Cable & Telecommunications Association

California Taxpayers Association

OPPOSITION: (Verified 4/27/16)

None received

Prepared by:

4/29/16 12:39:27

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

Public utilities and other service suppliers: collection of local taxes

Clarifies that cable service providers are covered by a state law that limits public utilities and other service providers’ responsibilities for collecting utility user taxes.

Background

Utility users taxes (UUTs) are excise taxes imposed by cities and counties on the consumption of utility services, including electricity, gas, water, sewer, telephone, sanitation, and cable television. Although a city or county can impose a UUT as a special tax, generating revenues that must be used for a specific purpose, nearly all UUTs are imposed as general taxes, which allow revenues to be used for any purpose. In the 2014-15 fiscal year, 159 cities and 3 counties reported collecting, in total, more than $2 billion in UUT revenues. In jurisdictions that impose a UUT, a utility service provider collects the tax through the bills it sends to utility customers and remits the revenues to the local government that imposed the tax.

State law establishes several limits on a public utility or other service supplier’s duties and liabilities with regard to collecting UUTs and other taxes that local governments impose on utility consumers (AB 3155, Martinez, 1996). Specifically, to protect utility service suppliers from litigation over taxes that they collect (but don't impose) and to ensure that utility providers have enough time to process any local modifications to utility users taxes, state law:

• Specifies that the public utility or service supplier is not liable to any customer for collecting the tax, regardless of whether the tax has been declared illegal, and has no duty to inquire with the local agency about the tax's validity.
• Directs that a local jurisdiction is solely responsible for refunding the tax if it is ordered to do so, although the utility or service supplier may assist the local jurisdiction if the local jurisdiction reimburses the cost of assistance.
• Prohibits a public utility or other service supplier from being named as a defendant in any action challenging the tax.
• Requires a local jurisdiction to notify the utility or service supplier in writing if it adopts a new tax, or makes changes to an existing tax that would affect collection and remittance.
• Grants a utility or service provider at least 90 days after notification to begin collecting a new tax and at least 60 days after notification to implement a change in an existing tax.

In the statute that establishes these protections for public utilities and other service providers, the term “other service providers” is not defined. Some cable service providers worry that the absence of a definition of “other service providers” creates ambiguity that could allow current law to be misinterpreted as excluding cable operators from the protections that apply to public utilities. They want the Legislature to amend state law to explicitly include cable operators.

Proposed Law

Senate Bill 1422, for the purposes of the statute that limits public utility or other service suppliers’ duties and liabilities with regard to collecting utility taxes, defines the term “other service suppliers” as including a holder of a state franchise for the provision of video service. The bill declares that its provisions do not constitute a change in, but are declaratory of, existing law.

State Revenue Impact

No estimate.

Comment

Purpose of the bill. State law seeks to ensure that public utilities and other service suppliers are not subject to legal liability or other negative consequences for collecting utility user taxes that a local agency may be imposing on consumers improperly. Because the statute does not define the term “other service suppliers,” advocates for some cable operators and other video service providers worry that it is ambiguous whether these statutory protections apply to a company that holds a state franchise to provide video service. Legislative histories of both the bill that enacted the protections for utility service providers (AB 3155, Martinez, 1996) and a bill that contained earlier version of those protections (SB 2143, Hurtt, 1996) strongly suggest that the Legislature intended to apply the protections to video service providers. Committee and floor analyses of these two bills indicate that cable companies were included among the sponsors of those bills and parenthetically cite cable companies as an example of “service suppliers.” Despite this legislative history, there remains some risk that the statutory language could be misinterpreted to exclude cable operators and other video service providers. SB 1422 eliminates any uncertainty by explicitly defining “other service suppliers” as including video service providers.

Support and Opposition

(4/21/16)

Support: California Cable and Telecommunications Association.

Opposition: Unknown.

-- END --