SB 321: Motor vehicle fuel taxes: rates: adjustments.
- Session Year: 2015-2016
- House: Senate
- Latest Version Date: 2015-08-18
Existing law, as of July 1, 2010, exempts the sale of, and the storage, use, or other consumption of, motor vehicle fuel from specified sales and use taxes and increases the excise tax on motor vehicle fuel, as provided.
Existing law requires the State Board of Equalization, for the 201112 fiscal year and each fiscal year thereafter, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, to adjust the motor vehicle fuel tax rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the sales and use tax exemption on motor vehicle fuel, based on estimates made by the board. Existing law also requires, in order to maintain revenue for each year, the board to take into account actual net revenue gain or loss for the fiscal year ending prior to the rate adjustment date. Existing law requires this adjusted rate to be effective during the states next fiscal year.
This bill for the 201516 201617 fiscal year and each fiscal year thereafter would, instead require the board, on or before July 1, 2015, or board on March 1 of the fiscal year immediately preceding the applicable fiscal year, as specified, to adjust the rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the exemption, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous 4 fiscal years and the estimated fuel price for the current fiscal year, and continuing to take into account adjustments required by existing law to maintain revenue neutrality for each year.
This bill would also authorize, if, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the motor vehicle fuel tax will be significantly different than the estimates made by the board, the board to adjust the rate more frequently than annually, but no more frequently than every 6 months in order to reduce the potential volatility of the revenues.
Existing law, as of July 1, 2010, exempts the sale of, and the storage, use, or other consumption of, motor vehicle fuel from specified sales and use taxes and increases the excise tax on motor vehicle fuel, as provided.
Existing law requires the State Board of Equalization, for the 201112 fiscal year and each fiscal year thereafter, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, to adjust the motor vehicle fuel tax rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the sales and use tax exemption on motor vehicle fuel, based on estimates made by the board. Existing law also requires, in order to maintain revenue for each year, the board to take into account actual net revenue gain or loss for the fiscal year ending prior to the rate adjustment date. Existing law requires this adjusted rate to be effective during the states next fiscal year.
This bill for the 201516 fiscal year and each fiscal year thereafter would, instead require the board, on or before July 1, 2015, or March 1 of the fiscal year immediately preceding the applicable fiscal year, as specified, to adjust the rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the exemption, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous 4 fiscal years and the estimated fuel price for the current fiscal year, and continuing to take into account adjustments required by existing law to maintain revenue neutrality for each year.
This bill would also authorize, if, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the motor vehicle fuel tax will be significantly different than the estimates made by the board, the board to adjust the rate more frequently than annually, but no more frequently than every 6 months in order to reduce the potential volatility of the revenues.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law, as of July 1, 2010, exempts the sale of, and the storage, use, or other consumption of, motor vehicle fuel from specified sales and use taxes and increases the excise tax on motor vehicle fuel, as provided.
Existing law requires the State Board of Equalization, for the 201112 fiscal year and each fiscal year thereafter, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, to adjust the motor vehicle fuel tax rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the sales and use tax exemption on motor vehicle fuel, based on estimates made by the board. Existing law also requires, in order to maintain revenue neutrality for each year, the board to take into account actual net revenue gain or loss for the fiscal year ending prior to the rate adjustment date. Existing law requires this determined adjusted rate to be effective during the states next fiscal year.
This bill would, for the 201516 fiscal year and each fiscal year thereafter would, instead require the board, on or before July 1, 2015, or March 1 of the fiscal year immediately preceding the applicable fiscal year, as specified, to adjust the rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the exemption, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous 4 fiscal years and the estimated fuel price for the current fiscal year, and continuing to take into account adjustments required by existing law to maintain revenue neutrality. This bill would authorize, for rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the motor vehicle fuel tax, the board to make partial adjustments over up to 3 consecutive years to take into account the net revenue gain or loss of any fiscal year.
This bill would also authorize, if, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the motor vehicle fuel tax will be significantly different than the estimates made by the board, the board to adjust the rate more frequently than annually, but no more frequently than every 6 months in order to reduce the potential volatility of the revenues.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law, as of July 1, 2010, exempts the sale of, and the storage, use, or other consumption of, motor vehicle fuel from specified sales and use taxes and increases the excise tax on motor vehicle fuel, as provided.
Existing law requires the State Board of Equalization, for the 201112 fiscal year and each fiscal year thereafter, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, to adjust the motor vehicle fuel tax rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the sales and use tax exemption on motor vehicle fuel, based on estimates made by the board. Existing law also requires, in order to maintain revenue neutrality, the board to take into account actual net revenue gain or loss for the fiscal year ending prior to the rate adjustment date. Existing law requires this determined rate to be effective during the states next fiscal year.
This bill would, for the 201516 fiscal year and each fiscal year thereafter, instead require the board, on or before July 1, 2015, or March 1 of the fiscal year immediately preceding the applicable fiscal year, as specified, to adjust the rate in a manner as to generate an amount of revenue equal to the average amount of revenue loss attributable to the exemption over the next five fiscal years, exemption, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous 4 fiscal years and the estimated fuel price for the current fiscal year, and continuing to take into account adjustments required by existing law to maintain revenue neutrality. This bill would authorize, for rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the motor vehicle fuel tax, the board to make partial adjustments over up to 3 consecutive years to take into account the net revenue gain or loss of any fiscal year.
This bill would also authorize, if, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the motor vehicle fuel tax will be significantly different than the estimates made by the board, the board to adjust the rate more frequently than annually, but no more frequently than quarterly every 6 months in order to reduce the potential volatility of the revenues.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law, as of July 1, 2010, exempts the sale of, and the storage, use, or other consumption of, motor vehicle fuel from specified sales and use taxes and increases the excise tax on motor vehicle fuel, as provided.
Existing law requires the State Board of Equalization, for the 201112 fiscal year and each fiscal year thereafter, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, to adjust the motor vehicle fuel tax rate in a manner as to generate an amount of revenue equal to the amount of revenue loss attributable to the sales and use tax exemption on motor vehicle fuel, based on estimates made by the board. Existing law also requires, in order to maintain revenue neutrality, the board to take into account actual net revenue gain or loss for the fiscal year ending prior to the rate adjustment date. Existing law requires this determined rate to be effective during the states next fiscal year.
This bill would, for the 201516 fiscal year and each fiscal year thereafter, instead require the board, on or before July 1, 2015, or March 1 of the fiscal year immediately preceding the applicable fiscal year, as specified, to adjust the rate in a manner as to generate an amount of revenue equal to the average amount of revenue loss attributable to the exemption over the next five fiscal years, based on estimates made by the board, and continuing to take into account adjustments required by existing law to maintain revenue neutrality. This bill would authorize, for rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the motor vehicle fuel tax, the board to make partial adjustments over 3 consecutive years to take into account the net revenue gain or loss of any fiscal year.
This bill would also authorize, if, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the motor vehicle fuel tax will be significantly different than the estimates made by the board, the board to adjust the rate more frequently than annually, but no more frequently than quarterly in order to reduce the potential volatility of the revenues.
This bill would declare that it is to take effect immediately as an urgency statute.
(a)(1)A tax of eighteen cents ($0.18) is hereby imposed upon each gallon of fuel subject to the tax in Sections 7362, 7363, and 7364.
(2)If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by paragraph (1), on and after the date of the reduction, shall be recalculated by an amount so that the combined state rate under paragraph (1) and the federal tax rate per gallon equal twenty-seven cents ($0.27).
(3)If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.
(b)(1)On and after July 1, 2010, in addition to the tax imposed by subdivision (a), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364 in an amount equal to seventeen and three-tenths cents ($0.173) per gallon.
(2)(A)For the 201112 fiscal year to the 201415 201516 fiscal year, inclusive, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board, and that rate shall be effective during the states next fiscal year.
(B)For the 201516 fiscal year, the board shall, on or before July 1, 2015, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the 201516 fiscal year.
(C)
(B)For the 201617 fiscal year and each fiscal year thereafter, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the states next fiscal year.
(3)In order to maintain revenue neutrality for each year, beginning with the rate adjustment on or before March 1, 2012, the adjustment under paragraph (2) shall also take into account the extent to which the actual amount of revenues derived pursuant to this subdivision and, as applicable, Section 7361.1, the revenue loss attributable to the exemption provided by Section 6357.7 resulted in a net revenue gain or loss for the fiscal year ending prior to the rate adjustment date on or before March 1.
(4)If, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the tax imposed by this section will be significantly different than the estimates made by the board, the board may adjust the rate in paragraph (1) more frequently than annually, but no more frequently than every six months in order to reduce the potential volatility of the revenues.
(5)
(4)The intent of paragraphs (2) and (3) is to ensure that Chapter 6 of the Statutes of 2011, which added this subdivision and Section 6357.7, does not produce a net revenue gain in state taxes.
(6)
(5)It is the intent of the Legislature that the amendments made by the act adding this paragraph does not produce a net revenue gain in state taxes.
(a)(1)A tax of eighteen cents ($0.18) is hereby imposed upon each gallon of fuel subject to the tax in Sections 7362, 7363, and 7364.
(2)If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by paragraph (1), on and after the date of the reduction, shall be recalculated by an amount so that the combined state rate under paragraph (1) and the federal tax rate per gallon equal twenty-seven cents ($0.27).
(3)If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.
(b)(1)On and after July 1, 2010, in addition to the tax imposed by subdivision (a), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364 in an amount equal to seventeen and three-tenths cents ($0.173) per gallon.
(2)(A)For the 201112 fiscal year to the 201415 fiscal year, inclusive, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board, and that rate shall be effective during the states next fiscal year.
(B)For the 201516 fiscal year, the board shall, on or before July 1, 2015, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the 201516 fiscal year.
(C)For the 201617 fiscal year and each fiscal year thereafter, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the states next fiscal year.
(3)In order to maintain revenue neutrality, neutrality for each year, beginning with the rate adjustment on or before March 1, 2012, the adjustment under paragraph (2) shall also take into account the extent to which the actual amount of revenues derived pursuant to this subdivision and, as applicable, Section 7361.1, the revenue loss attributable to the exemption provided by Section 6357.7 resulted in a net revenue gain or loss for the fiscal year ending prior to the rate adjustment date on or before March 1.
(4)If, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the tax imposed by this section will be significantly different than the estimates made by the board, the board may adjust the rate in paragraph (1) more frequently than annually, but no more frequently than every six months in order to reduce the potential volatility of the revenues.
(5)The intent of paragraphs (2) and (3) is to ensure that Chapter 6 of the Statutes of 2011, which added this subdivision and Section 6357.7, does not produce a net revenue gain in state taxes.
(6)It is the intent of the Legislature that the amendments made by the act adding this paragraph does not produce a net revenue gain in state taxes. Revenue neutrality, as used in this section, does not refer to revenues generated in any particular fiscal year, but instead means that, over a reasonable period of fiscal years, the actual amount of revenues derived pursuant to this subdivision is equal to the estimated amount of revenue loss attributable to the exemption provided by Section 6357.7.
SEC. 2.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to avoid a significant and devastating decrease in the amount of funding available for the maintenance of Californias local streets and roads, it is necessary that this act take effect immediately.
(a)(1)A tax of eighteen cents ($0.18) is hereby imposed upon each gallon of fuel subject to the tax in Sections 7362, 7363, and 7364.
(2)If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by paragraph (1), on and after the date of the reduction, shall be recalculated by an amount so that the combined state rate under paragraph (1) and the federal tax rate per gallon equal twenty-seven cents ($0.27).
(3)If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.
(b)(1)On and after July 1, 2010, in addition to the tax imposed by subdivision (a), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364 in an amount equal to seventeen and three-tenths cents ($0.173) per gallon.
(2)(A)For the 201112 fiscal year to the 201415 fiscal year, inclusive, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board, and that rate shall be effective during the states next fiscal year.
(B)For the 201516 fiscal year, the board shall, on or before July 1, 2015, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the 201516 fiscal year.
(C)For the 201617 fiscal year and each fiscal year thereafter, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the states next fiscal year.
(3)In order to maintain revenue neutrality, beginning with the rate adjustment on or before March 1, 2012, the adjustment under paragraph (2) shall also take into account the extent to which the actual amount of revenues derived pursuant to this subdivision and, as applicable, Section 7361.1, the revenue loss attributable to the exemption provided by Section 6357.7 resulted in a net revenue gain or loss for the fiscal year ending prior to the rate adjustment date on or before March 1. For rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the tax imposed under this subdivision, the board may make partial adjustments over up to three consecutive years to take into account the net revenue gain or loss of any fiscal year.
(4)If, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the tax imposed by this section will be significantly different than the estimates made by the board, the board may adjust the rate in paragraph (1) more frequently than annually, but no more frequently than every six months in order to reduce the potential volatility of the revenues.
(5)The intent of paragraphs (2) and (3) is to ensure that Chapter 6 of the Statutes of 2011, which added this subdivision and Section 6357.7, does not produce a net revenue gain in state taxes.
(6)It is the intent of the Legislature that the amendments made by the act adding this paragraph does not produce a net revenue gain in state taxes. Revenue neutrality, as used in this section, does not refer to revenues generated in any particular fiscal year, but instead means that, over a reasonable period of fiscal years, the actual amount of revenues derived pursuant to this subdivision is equal to the estimated amount of revenue loss attributable to the exemption provided by Section 6357.7.
SEC. 2.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to avoid a significant and devastating decrease in the amount of funding available for the maintenance of Californias local streets and roads, it is necessary that this act take effect immediately.
(a)(1)A tax of eighteen cents ($0.18) is hereby imposed upon each gallon of fuel subject to the tax in Sections 7362, 7363, and 7364.
(2)If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by paragraph (1), on and after the date of the reduction, shall be recalculated by an amount so that the combined state rate under paragraph (1) and the federal tax rate per gallon equal twenty-seven cents ($0.27).
(3)If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.
(b)(1)On and after July 1, 2010, in addition to the tax imposed by subdivision (a), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364 in an amount equal to seventeen and three-tenths cents ($0.173) per gallon.
(2)(A)For the 201112 fiscal year to the 201415 fiscal year, inclusive, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board, and that rate shall be effective during the states next fiscal year.
(B)For the 201516 fiscal year, the board shall, on or before July 1, 2015, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the average amount of revenue loss attributable to the exemption provided by Section 6357.7 over the next five fiscal years, 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the 201516 fiscal year.
(C)For the 201617 fiscal year and each fiscal year thereafter, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the average amount of revenue loss attributable to the exemption provided by Section 6357.7 over the next five fiscal years, 6357.7, based on estimates made by the board that reflect the combined average of the actual fuel price over the previous four fiscal years and the estimated fuel price for the current fiscal year, and that rate shall be effective during the states next fiscal year.
(3)In order to maintain revenue neutrality, beginning with the rate adjustment on or before March 1, 2012, the adjustment under paragraph (2) shall also take into account the extent to which the actual amount of revenues derived pursuant to this subdivision and, as applicable, Section 7361.1, the revenue loss attributable to the exemption provided by Section 6357.7 resulted in a net revenue gain or loss for the fiscal year ending prior to the rate adjustment date on or before March 1. For rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the tax imposed under this subdivision, the board may make partial adjustments over up to three consecutive years to take into account the net revenue gain or loss of any fiscal year.
(4)If, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the tax imposed by this section will be significantly different than the estimates made by the board, the board may adjust the rate in paragraph (1) more frequently than annually, but no more frequently than quarterly every six months in order to reduce the potential volatility of the revenues.
(5)The intent of paragraphs (2) and (3) is to ensure that Chapter 6 of the Statutes of 2011, which added this subdivision and Section 6357.7, does not produce a net revenue gain in state taxes.
(6)It is the intent of the Legislature that the amendments made by the act adding this paragraph does not produce a net revenue gain in state taxes. Revenue neutrality, as used in this section, does not refer to revenues generated in any particular fiscal year, but instead means that, over a reasonable period of fiscal years, the actual amount of revenues derived pursuant to this subdivision is equal to the estimated amount of revenue loss attributable to the exemption provided by Section 6357.7.
SEC. 2.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to avoid a significant and devastating decrease in the amount of funding available for the maintenance of Californias local streets and roads, it is necessary that this act take effect immediately.
(a)(1)A tax of eighteen cents ($0.18) is hereby imposed upon each gallon of fuel subject to the tax in Sections 7362, 7363, and 7364.
(2)If the federal fuel tax is reduced below the rate of nine cents ($0.09) per gallon and federal financial allocations to this state for highway and exclusive public mass transit guideway purposes are reduced or eliminated correspondingly, the tax rate imposed by paragraph (1), on and after the date of the reduction, shall be recalculated by an amount so that the combined state rate under paragraph (1) and the federal tax rate per gallon equal twenty-seven cents ($0.27).
(3)If any person or entity is exempt or partially exempt from the federal fuel tax at the time of a reduction, the person or entity shall continue to be so exempt under this section.
(b)(1)On and after July 1, 2010, in addition to the tax imposed by subdivision (a), a tax is hereby imposed upon each gallon of motor vehicle fuel, other than aviation gasoline, subject to the tax in Sections 7362, 7363, and 7364 in an amount equal to seventeen and three-tenths cents ($0.173) per gallon.
(2)(A)For the 201112 fiscal year and each to the 201415 fiscal year thereafter, inclusive, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the amount of revenue loss attributable to the exemption provided by Section 6357.7, based on estimates made by the board, and that rate shall be effective during the states next fiscal year.
(B)For the 201516 fiscal year, the board shall, on or before July 1, 2015, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the average amount of revenue loss attributable to the exemption provided by Section 6357.7 over the next five fiscal years, based on estimates made by the board, and that rate shall be effective during the 201516 fiscal year.
(C)For the 201617 fiscal year and each fiscal year thereafter, the board shall, on or before March 1 of the fiscal year immediately preceding the applicable fiscal year, adjust the rate in paragraph (1) in that manner as to generate an amount of revenue that will equal the average amount of revenue loss attributable to the exemption provided by Section 6357.7 over the next five fiscal years, based on estimates made by the board, and that rate shall be effective during the states next fiscal year.
(3)In order to maintain revenue neutrality for each year, beginning with the rate adjustment on or before March 1, 2012, the adjustment under paragraph (2) shall also take into account the extent to which the actual amount of revenues derived pursuant to this subdivision and, as applicable, Section 7361.1, the revenue loss attributable to the exemption provided by Section 6357.7 resulted in a net revenue gain or loss for the fiscal year ending prior to the rate adjustment date on or before March 1. For rate adjustments made after January 1, 2015, in order to reduce the potential volatility of the revenues generated by the tax imposed under this subdivision, the board may make partial adjustments over three consecutive years to take into account the net revenue gain or loss of any fiscal year.
(4)If, due to clear changes in either fuel prices or consumption in the state, the board makes a determination that the amount of revenue being generated by the tax imposed by this section will be significantly different than the estimates made by the board, the board may adjust the rate in paragraph (1) more frequently than annually, but no more frequently than quarterly in order to reduce the potential volatility of the revenues.
(4)
(5)The intent of paragraphs (2) and (3) is to ensure that the act adding Chapter 6 of the Statutes of 2011, which added this subdivision and Section 6357.7 6357.7, does not produce a net revenue gain in state taxes.
SEC. 2.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to avoid a significant and devastating decrease in the amount of funding available for the maintenance of Californias local streets and roads, it is necessary that this act take effect immediately.
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Date
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Status
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| Sep 1, 2015 | Ordered to third reading. |
| Jun 15, 2015 | Referred to Com. on REV. & TAX. |
| Jul 13, 2015 | July 13 set for first hearing. Placed on REV. & TAX. suspense file. |
| Aug 17, 2015 | (Received at desk July 17 pursuant to JR 61(a)(10)) |
| Aug 17, 2015 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 9. Noes 0.) (July 13). |
| Aug 18, 2015 | Read second time and amended. Re-referred to Com. on APPR. |
| Aug 26, 2015 | From committee: Do pass. Ordered to consent calendar. (Ayes 17. Noes 0.) (August 26). |
| Aug 27, 2015 | Read second time. Ordered to consent calendar. |
| Sep 1, 2015 | From consent calendar on motion of Assembly Member Holden. |
| Jun 2, 2015 | In Assembly. Read first time. Held at Desk. |
| Sep 10, 2015 | In Senate. Concurrence in Assembly amendments pending. |
| Sep 10, 2015 | Read third time. Passed. Ordered to the Senate. |
| Sep 10, 2015 | Read third time. Passed. (Ayes 80. Noes 0. Page 3095.) Ordered to the Senate. |
| Sep 11, 2015 | Ordered to inactive file on request of Senator Beall. |
| Jun 15, 2016 | From inactive file on motion of Senator Beall. |
| Jun 15, 2016 | Ordered to unfinished business. |
| Jun 27, 2016 | Ordered to inactive file on request of Senator Beall. |
| Feb 23, 2015 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
| Jun 1, 2015 | Read third time. Passed. (Ayes 40. Noes 0.) Ordered to the Assembly. |
| Jun 1, 2015 | Read third time. Passed. (Ayes 40. Noes 0. Page 1188.) Ordered to the Assembly. |
| May 28, 2015 | Read second time. Ordered to third reading. |
| May 27, 2015 | Read third time and amended. |
| May 27, 2015 | Ordered to second reading. |
| May 5, 2015 | Read second time. Ordered to third reading. |
| May 4, 2015 | From committee: Be ordered to second reading pursuant to Senate Rule 28.8. |
| Apr 28, 2015 | Set for hearing May 4. |
| Apr 23, 2015 | Read second time and amended. Re-referred to Com. on APPR. |
| Apr 22, 2015 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (April 15). |
| Apr 22, 2015 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0. Page 618.) (April 15). |
| Apr 7, 2015 | Set for hearing April 15. |
| Mar 26, 2015 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on GOV. & F. |
| Mar 5, 2015 | Referred to Com. on GOV. & F. |
| Feb 24, 2015 | From printer. May be acted upon on or after March 26. |
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Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Sep 10, 2015 | SB 321 Beall Senate Third Reading By TING | Assembly Floor |
Passed |
|
| Aug 26, 2015 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Jul 13, 2015 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
|
| Jun 1, 2015 | Senate 3rd Reading SB321 Beall | Senate Floor |
Passed |
|
| Apr 15, 2015 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Governance and Finance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| (Verified9 | ** Against | Sep 10, 2015 |
| Alpine County Board of Supervisors | ** Support | Sep 10, 2015 |
| American Public Works Association | ** Support | Sep 10, 2015 |
| American Public Works Association, California Chapters | ** Support | Sep 10, 2015 |
| Associated General Contractors | ** Support | Sep 10, 2015 |
| Bay Area Rapid Transit District | ** Support | Sep 10, 2015 |
| board of equalization | ** Support | Sep 10, 2015 |
| California Alliance for Jobs | ** Support | Sep 10, 2015 |
| California Association of Councils of Government | ** Support | Sep 10, 2015 |
| California State Association Of Counties | ** Support | Sep 10, 2015 |
| California State Council Of Laborers | ** Support | Sep 10, 2015 |
| California Transit Association | ** Support | Sep 10, 2015 |
| California Transportation Commission | ** Support | Sep 10, 2015 |
| City | ** Support | Sep 10, 2015 |
| City Goleta | ** Support | Sep 10, 2015 |
| City of Crescent City | ** Support | Sep 10, 2015 |
| City of Eureka | ** Support | Sep 10, 2015 |
| City of Goleta | ** Support | Sep 10, 2015 |
| City Of Livermore | ** Support | Sep 10, 2015 |
| City Of Lomita | ** Support | Sep 10, 2015 |
| City of Moreno | ** Support | Sep 10, 2015 |
| City of Rolling Hills Estates | ** Support | Sep 10, 2015 |
| City of West Hollywood | ** Support | Sep 10, 2015 |
| County Association of Governments of San Mateo County | ** Support | Sep 10, 2015 |
| County of Alpine | ** Support | Sep 10, 2015 |
| County of Contra Costa | ** Support | Sep 10, 2015 |
| County Of Los Angeles | ** Support | Sep 10, 2015 |
| County Of Mono | ** Support | Sep 10, 2015 |
| County of Monterey | ** Support | Sep 10, 2015 |
| County of Santa Cruz | ** Support | Sep 10, 2015 |
| Glendale City Employees Association | ** Support | Sep 10, 2015 |
| Glendale, City Of | ** Support | Sep 10, 2015 |
| Kern Council Of Governments | ** Support | Sep 10, 2015 |
| League Of California Cities | ** Support | Sep 10, 2015 |
| Los Angeles County Board of Supervisors | ** Support | Sep 10, 2015 |
| Metropolitan Transportation Commission | ** Support | Sep 10, 2015 |
| Orange County Transportation Authority | ** Support | Sep 10, 2015 |
| Organization Of Smud Employees | ** Support | Sep 10, 2015 |
| Page L | ** Support | Sep 10, 2015 |
| Page M | ** Support | Sep 10, 2015 |
| Page N | ** Support | Sep 10, 2015 |
| Planning And Conservation League | ** Support | Sep 10, 2015 |
| Roseville, City Of | ** Support | Sep 10, 2015 |
| Rural County Representatives of California | ** Support | Sep 10, 2015 |
| Sacramento Metropolitan Chamber of Commerce | ** Support | Sep 10, 2015 |
| San Bernardino Public Employees Association | ** Support | Sep 10, 2015 |
| San Diego Association Of Governments | ** Support | Sep 10, 2015 |
| San Diego County Court Employees Association | ** Support | Sep 10, 2015 |
| San Francisco Bay Area Rapid Transit District | ** Support | Sep 10, 2015 |
| San Joaquin Valley Regional Transportation Planning Agencies | ** Support | Sep 10, 2015 |
| San Jose, City Of | ** Support | Sep 10, 2015 |
| San Luis Obispo Council of Governments | ** Support | Sep 10, 2015 |
| San Luis Obispo County Employees Association | ** Support | Sep 10, 2015 |
| Santa Clara County Board of Supervisors | ** Support | Sep 10, 2015 |
| Santa Clara Valley Transportation Authority | ** Support | Sep 10, 2015 |
| Saratoga, City Of | ** Support | Sep 10, 2015 |
| Self-Help Counties Coalition | ** Support | Sep 10, 2015 |
| Town Of Los Altos Hills | ** Support | Sep 10, 2015 |
| Transportation Agency For Monterey County | ** Support | Sep 10, 2015 |
| Transportation Authority Of Marin | ** Support | Sep 10, 2015 |
| Transportation California | ** Support | Sep 10, 2015 |
| United Contractors | ** Support | Sep 10, 2015 |
| Urban Counties Caucus | ** Support | Sep 10, 2015 |
| Ventura County Transportation Commission | ** Support | Sep 10, 2015 |
SB 321
Page 6
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
UNFINISHED BUSINESS
Bill No: SB 321
Amended: 8/18/15
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/15/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 40-0, 6/1/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block, Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak, Wieckowski, Wolk
ASSEMBLY FLOOR: 80-0, 9/10/15 - See last page for vote
SUBJECT: Motor vehicle fuel taxes: rates: adjustments
DIGEST: This bill modifies the method by which the State Board of Equalization (BOE) annually adjusts the motor vehicle "fuel tax swap" rate to take into account a five-year average of fuel prices, thereby smoothing perceived revenue volatility.
Assembly Amendments delay the operative date of this bill from the 2015–16 fiscal year to the 2016–17 fiscal year and remove the provision allowing the BOE to adjust the rate more than once a year.
Existing law:
Defines "motor vehicle fuel" under the Motor Vehicle Fuel Tax (MVFT) Law as gasoline and aviation gasoline. The term does not include jet fuel, diesel fuel, kerosene, liquefied petroleum gas, natural gas in liquid or gaseous form, alcohol, or racing fuel.
Imposes, under the MVFT Law, an excise tax upon each gallon of fuel.
Provides, on and after July 1, 2010, a partial SUT exemption for "motor vehicle fuel".
Provides for the annual adjustment of the MVFT excise tax rate. Specifically, for the 2011-12 fiscal year (FY) and each FY thereafter, the BOE must adjust the rate so as to generate revenues equal to the amount of revenue loss attributable to the partial sales and use tax (SUT) exemption for motor vehicle fuel. This calculation is made annually by March 1, based on estimates made by the BOE, and the adjusted rate applies to the immediately following FY.
Provides for a "true up" process to maintain revenue neutrality. Specifically, beginning with the rate adjustment calculated on or before March 1, 2012, the adjustment must also take into account the extent to which actual revenues derived resulted in a net revenue gain or loss for the FY ending prior to the rate adjustment date.
This bill:
Provides, for the 2016-17 FY and each FY thereafter, the BOE shall, on or before March 1 of the FY immediately preceding the applicable FY, adjust the motor vehicle fuel excise tax rate so as to generate revenues equal to the amount of revenue loss attributable to the partial SUT exemption, based on estimates made by the BOE reflecting the combined average of the actual fuel price over the previous four FYs and the estimated fuel price for the current FY, and that rate shall be effective during the state's next FY.
Provides legislative intent that the amendments made by this bill shall not produce a net revenue gain in state taxes.
Background
In 2010, the Legislature enacted two “fuel tax swap” measures that changed the imposition and rates of state taxes on gasoline and diesel fuel, and required the BOE to annually determine the appropriate excise tax rate adjustments to maintain revenue neutrality (ABX8-6, Committee on Budget, Chapter 11) and (SB 70, Committee on Budget and Fiscal Review, Chapter 9). The gasoline tax changes became operative on July 1, 2010, and the diesel fuel tax changes on July 1, 2011.
The fuel tax swap was partly enacted, to allow the use of additional existing transportation revenue for highway purposes, including General Obligation bond debt service, where that debt service was related to transportation projects.
The swap bills exempted sales and purchases of gasoline from the state sales and use tax rate. To offset the revenue loss related to this partial exemption, the law increased the gasoline excise tax rate from $0.18 per gallon to $0.353 per gallon. Conversely, the measure reduced the diesel fuel excise tax rate from $0.18 to $0.13 per gallon, but increased the sales and use tax rate on diesel fuel sales to offset the loss related from the reduction, resulting in the following rates:
1.87%, effective July 1, 2011,
2.17%, effective July 1, 2012,
1.94%, effective July 1, 2013,
1.75%, effective July 1, 2014, and thereafter.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Assembly Appropriations Committee, the bill will result in minor and absorbable administrative costs to BOE and have an insignificant impact to state revenue.
American Public Works Association
Associated General Contractors
Bay Area Rapid Transit District
Board of Equalization
California Alliance for Jobs
California Association of Councils of Government
California State Association of Counties
California State Council of Laborers
California Transit Association
California Transportation Commission
City of Camarillo
City of Crescent City
City of Eureka
City of Fountain Valley
City of Glendale
City Goleta
City of Indian Wells
City of Lakewood
City of Livermore
City of Lomita
City of Moreno
City of Rolling Hills Estates
City of Roseville
City of San Jose
City of Saratoga
City of West Hollywood
City/County Association of Governments of San Mateo County
County of Alpine
County of Contra Costa
County of Los Angeles
County of Mono
County of Monterey
County of Santa Cruz
Glendale City Employees Association
Kern Council of Governments
League of California Cities
Metropolitan Transportation Commission
Orange County Transportation Authority
Organization of SMUD Employees
Planning and Conservation League
Rural County Representatives of California
Sacramento Metropolitan Chamber of Commerce
San Bernardino Public Employees Association
San Diego Association of Governments (SANDAG)
San Diego County Court Employees Association
San Joaquin Valley Regional Transportation Planning Agencies
San Luis Obispo Council of Governments
San Luis Obispo County Employees Association
Santa Clara Valley Transportation Authority
Self-Help Counties Coalition
Town of Los Altos Hills
Transportation Agency for Monterey County
Transportation Authority of Marin
Transportation California
United Contractors
Urban Counties Caucus
Ventura County Transportation Commission
None received
ARGUMENTS IN SUPPORT: According to the author, “Current law, known as the "gas tax swap", requires the BOE to annually adjust the state gasoline excise tax rate in order to collect roughly the same amount of revenue as the state would have collected if it still charged a sales tax on gasoline. The BOE does so by forecasting gasoline prices for the year. Difficulty in forecasting gas prices inevitably results in over- or under-collecting revenue and requires future adjustments to compensate for any discrepancy. That reconciliation leads to volatility and big swings in the amount of tax collected from year to year.
This volatility is bad for taxpayers who experience big swings in prices at the pump, and for state and local governments, who face uncertainty when preparing multiyear budgets.
SB 321 reduces this volatility by changing the way the BOE estimates gas prices. It requires BOE to base next year's gas price estimate on an average of the previous four years' actual prices (as opposed to its current one year model).”
ASSEMBLY FLOOR: 80-0, 9/10/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
Prepared by: Myriam Bouaziz / GOV. & F. / (916) 651-4119
9/10/15 23:22:50
**** END ****
SB 321
Page 4
SENATE THIRD READING
SB 321
(Beall)
As Amended August 18, 2015
Majority vote
SENATE VOTE: 40-0
Committee |
Votes |
Ayes |
Noes |
Revenue & Taxation |
9-0 |
Ting, Brough, Dababneh, Gipson, Roger Hernández, Mullin, Patterson, Quirk, Wagner |
|
Appropriations |
17-0 |
Gomez, Bigelow, Bloom, Bonta, Calderon, Chang, Gordon, Eggman, Gallagher, Eduardo Garcia, Holden, Jones, Quirk, Rendon, Wagner, Weber, Wood |
|
SUMMARY: Modifies the method by which the State Board of Equalization (BOE) annually adjusts the motor vehicle "fuel tax swap" rate to take into account a five-year average of fuel prices, thereby smoothing perceived revenue volatility. Specifically, this bill:
Provides, for the 2016-17 fiscal year (FY) and each FY thereafter, the BOE shall, on or before March 1 of the FY immediately preceding the applicable FY, adjust the motor vehicle fuel excise tax rate so as to generate revenues equal to the amount of revenue loss attributable to the partial sales and use tax (SUT) exemption provided by Revenue and Taxation Code (R&TC) Section 6357.7, based on estimates made by the BOE reflecting the combined average of the actual fuel price over the previous four FYs and the estimated fuel price for the current FY, and that rate shall be effective during the state's next FY.
Provides legislative intent that the amendments made by this bill shall not produce a net revenue gain in state taxes.
EXISTING LAW:
Defines "motor vehicle fuel" under the Motor Vehicle Fuel Tax (MVFT) Law as gasoline and aviation gasoline. (R&TC Section 7326.) The term does not include jet fuel, diesel fuel, kerosene, liquefied petroleum gas, natural gas in liquid or gasesous form, alcohol, or racing fuel.
Imposes, under the MVFT Law, an excise tax upon each gallon of fuel.
Provides, on and after July 1, 2010, a partial SUT exemption for "motor vehicle fuel", as defined in R&TC Section 7326.
Provides for the annual adjustment of the MVFT excise tax rate. Specifically, for the 2011-12 FY and each FY thereafter, the BOE must adjust the rate so as to generate revenues equalling the amount of revenue loss attibutable to the partial SUT exemption for motor vehicle fuel. This calculation is made annually by March 1, based on estimates made by the BOE, and the adjusted rate applies to the immediately following FY.
Provides for a "true up" process to maintain revenue neutrality. Specifically, beginning with the rate adjustment calculated on or before March 1, 2012, the adjustment must also take into account the extent to which actual revenues derived resulted in a net revenue gain or loss for the FY ending prior to the rate adjustment date.
FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable administrative costs to BOE; insignificant impact to state revenue.
COMMENTS:
The author has provided the following statement in support of this bill:
Current law, known as the "gas tax swap", requires the BOE to annually adjust the state gasoline excise tax rate in order to collect roughly the same amount of revenue as the state would have collected if it still charged a sales tax on gasoline. The BOE does so by forecasting gasoline prices for the year. Difficulty in forecasting gas prices inevitably results in over- or under-collecting revenue and requires future adjustments to compensate for any discrepancy. That reconciliation leads to volatility and big swings in the amount of tax collected from year to year.
This volatility is bad for taxpayers who experience big swings in prices at the pump, and for state and local governments, who face uncertainty when preparing multiyear budgets.
SB 321 reduces this volatility by changing the way the BOE estimates gas prices. It requires BOE to base next year's gas price estimate on an average of the previous four years' actual prices (as opposed to its current one year model).
Revenue and Taxation Committee Staff Comments
The fuel tax swap: In 2010, the Legislature enacted two "fuel tax swap" measures that modified the state taxation of both gasoline and diesel fuels. [AB 6 X8 (Budget Committee), Chapter 11, Statutes of 2010 and SB 70 (Budget and Fiscal Review Committee), Chapter 9, Statutes of 2010.] The gasoline tax changes became operative on July 1, 2010, while the diesel fuel tax changes became operative on July 1, 2011. According to the Senate Governance and Finance Committee, the fuel tax swap was enacted partly to allow the use of additional existing transportation revenue for highway purposes, including General Obligation bond debt service, where that debt service was related to transportation projects.
The taxation of gasoline: The "fuel tax swap" exempted gasoline from the state General Fund SUT rate. To offset the revenue loss from this partial SUT exemption, the Legislature increased the gasoline excise tax rate from $0.18 per gallon to $0.353 per gallon.
The taxation of diesel fuel: In contrast, the diesel fuel excise tax rate was reduced under the "fuel tax swap", from $0.18 per gallon to $0.13 per gallon. The Legislature correspondingly increased the SUT rate on diesel fuel to offset lost excise tax revenues, resulting in the following rates:
1.87% effective July 1, 2011;
2.17% effective July 1, 2012;
1.94% effective July 1, 2013; and,
1.75% effective July 1, 2014, and thereafter.
Revenue neutrality: The "fuel tax swap" provisions require the BOE to maintain revenue neutrality so that the revenues derived from the increased gasoline excise tax and the increased SUT on diesel equals the revenues that would have been derived had the gasoline SUT partial exemption and the diesel fuel excise tax reduction, respectively, never occurred. Thus, R&TC Sections 7360 and 60050 require the BOE annually to adjust the gasoline and diesel fuel excise tax rates, respectively, either upward or downward, to maintain revenue neutrality. This calculation requires BOE staff to develop a forecast of both consumption and price for both gasoline and diesel fuel. To this end, BOE staff works closely with the Department of Finance (DOF) and adopts the DOF's consumption forecasts.
The BOE notes that its annual rate calculations also take into account the statutory "true up" requirements, which specify a one-year look back period to determine the difference between what was estimated for the previous FY and what was actually collected.
What would this bill do? This bill would modify the method by which the BOE annually adjusts the motor vehicle "fuel tax swap" rate to take into account a five-year average of fuel prices, thereby smoothing perceived revenue volatility.
Smoothing things out: Advocates of this bill contend that this bill would address the potentially "jarring" fluctuations in excise tax revenues by basing price projections on multi-year historical price data. Proponents further contend that this increased revenue stability would benefit both consumers, who pay the tax, and state and local agencies that rely on the revenues to build and maintain California's transportation infrastructure.
There is evidence to suggest that this methodology would smooth out revenue fluctuations to a certain degree. For example, in the last four FYs, the actual excise tax rate has fluctuated from a low of $0.357 in FY 2011-12 to a high of $0.395 in FY 2013-14, representing a delta of $0.038 per gallon. Had the five-year smoothing methodology been employed over this same time period, the state would have experienced a high of $0.363 in FY 2014-15 and a low of $0.333 in FY 2012-13, representing a delta of $0.03 per gallon.
The smoothing function of the five-year methodology comes into even starker relief when applied to the current FY. As a result of lower fuel prices, BOE staff recommended a motor vehicle fuel excise tax rate of $0.285 per gallon. The BOE members subsequently voted to increase staff's recommended excise tax rate to $0.300 effective July 1, 2015. However, had the BOE used a five-year smoothing methodology, it would have arrived at a per-gallon excise tax rate of $0.326. Thus, this bill will, at least in the short term, "artificially" prop up excise tax revenues received by the state. Of course, assuming fuel prices increase in the future, this methodology may also serve artificially to constrain revenues in the not-so-distant future.
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0001937
Date of Hearing: August 26, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 321
(Beall) – As Amended August 18, 2015
Policy Committee: |
Revenue and Taxation |
Vote: |
9 - 0 |
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill modifies, for FY 2016-17 and each FY thereafter, the method by which the Board of Equalization (BOE) annually adjusts the motor vehicle fuel (gasoline) tax swap to reflect a combined five-year average of fuel prices instead of single-year fuel prices when determining the motor vehicle fuel excise tax, reducing revenue volatility. The bill stipulates the change in methodology is not intended to produce a net revenue gain.
FISCAL EFFECT:
Minor and absorbable administrative costs to BOE; insignificant impact to state revenue.
COMMENTS:
1) Purpose. The fuel tax swap was enacted in 2010, partly to allow the use of additional existing transportation revenue to fund transportation projects. The tax swap requires BOE to annually adjust the state gasoline excise tax rate to ensure the state collects approximately the same amount of revenue from the excise tax as it would have collected under the previous sales tax. The rate adjustment requires BOE to forecast gasoline prices and consumption for each coming year, often leading to over- or under-collection of revenue as a result of price volatility and requiring further adjustment to reconcile discrepancies.
The author and supporters contend the adjustments can cause significant volatility in the amount of revenue collected from gasoline sales, leading to state and local budgeting difficulties, and cause uncertainty for consumers over prices at the pump. This bill is intended to smooth that volatility by requiring BOE to base the gas price estimate on an average of the previous four years' actual prices and the estimated price for the current year. Actual pricing data over the past five years suggest this methodology would have reduced excise tax volatility, albeit moderately.
2) Short-Term Stability, Long-Term Revenue Neutrality. The fuel tax swap requires BOE to maintain revenue neutrality, and this bill reaffirms that requirement while expanding the look-back period. As a result, excise tax adjustments will begin to lag behind actual fluctuations in price and consumption. In periods of declining prices and/or consumption, prior periods of higher demand may artificially inflate the revenue forecast and lead to higher excise taxes, while in periods of rising prices and/or consumption, prior periods of weaker demand may artificially constrain the revenue forecast and lead to lower excise taxes. Over time, these effects will offset, and BOE expects the overall revenue impact to be neutral.
Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081
SB 321
Page 6
Date of Hearing: July 13, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
SB 321
(Beall) – As Amended May 27, 2015
Majority vote. Fiscal committee.
SENATE VOTE: 40-0
SUBJECT: Motor vehicle fuel taxes: rates: adjustments
SUMMARY: Modifies the method by which the State Board of Equalization (BOE) annually adjusts the motor vehicle "fuel tax swap" rate to take into account a five-year average of fuel prices, thereby smoothing perceived revenue volatility. Specifically, this bill:
Provides, for the 2015-16 fiscal year (FY), the BOE shall, on or before July 1, 2015, adjust the motor vehicle fuel excise tax rate so as to generate revenues equal to the amount of revenue loss attributable to the partial sales and use tax (SUT) exemption provided by Revenue and Taxation Code (R&TC) Section 6357.7, based on estimates made by the BOE reflecting the combined average of the actual fuel price over the previous four FYs and the estimated fuel price for the current FY, and that rate shall be effective during the 2015-16 FY.
Provides, for the 2016-17 FY and each FY thereafter, the BOE shall, on or before March 1 of the FY immediately preceding the applicable FY, adjust the motor vehicle fuel excise tax rate so as to generate revenues equal to the amount of revenue loss attributable to the partial SUT exemption provided by R&TC Section 6357.7, based on estimates made by the BOE reflecting the combined average of the actual fuel price over the previous four FYs and the estimated fuel price for the current FY, and that rate shall be effective during the state's next FY.
Provides that if, due to clear changes in either fuel prices or consumption in California, the BOE determines that the amount of revenue being generated by the excise tax will be significantly different than the estimates made by the BOE, the BOE may adjust the rate more frequently than annually, but no more frequently than every six months in order to reduce the potential volatility of the revenues.
Provides legislative intent that the amendments made by this bill shall not produce a net revenue gain in state taxes.
EXISTING LAW:
Defines "motor vehicle fuel" under the Motor Vehicle Fuel Tax (MVFT) Law as gasoline and aviation gasoline. (R&TC Section 7326.) The term does not include jet fuel, diesel fuel, kerosene, liquefied petroleum gas, natural gas in liquid or gasesous form, alcohol, or racing fuel. (Id.)
Imposes, under the MVFT Law, an excise tax upon each gallon of fuel. (R&TC Section 7360.)
Provides, on and after July 1, 2010, a partial SUT exemption for "motor vehicle fuel", as defined in R&TC Section 7326. (R&TC Section 6357.7.)
Provides for the annual adjustment of the MVFT excise tax rate. Specifically, for the 2011-12 FY and each FY thereafter, the BOE must adjust the rate so as to generate revenues equalling the amount of revenue loss attibutable to the partial SUT exemption for motor vehicle fuel. This calculation is made annually by March 1, based on estimates made by the BOE, and the adjusted rate applies to the immediately following FY. (R&TC Section 7360(b)(2).)
Provides for a "true up" process to maintain revenue neutrality. Specifically, beginning with the rate adjustment calculated on or before March 1, 2012, the adjustment must also take into account the extent to which actual revenues derived resulted in a net revenue gain or loss for the FY ending prior to the rate adjustment date. (R&TC Section 7360(b)(3))
FISCAL EFFECT: Unknown
COMMENTS:
The author has provided the following statement in support of this bill:
Current law, known as the "gas tax swap", requires the BOE to annually adjust the state gasoline excise tax rate in order to collect roughly the same amount of revenue as the state would have collected if it still charged a sales tax on gasoline. The BOE does so by forecasting gasoline prices for the year. Difficulty in forecasting gas prices inevitably results in over- or under-collecting revenue and requires future adjustments to compensate for any discrepancy. That reconciliation leads to volatility and big swings in the amount of tax collected from year to year.
This volatility is bad for taxpayers who experience big swings in prices at the pump, and for state and local governments, who face uncertainty when preparing multiyear budgets.
SB 321 reduces this volatility by changing the way the BOE estimates gas prices. It requires BOE to base next year's gas price estimate on an average of the previous four years' actual prices (as opposed to its current one year model). It also allows BOE to adjust the tax rate more frequently than annually in cases where extreme changes in fuel prices will clearly affect predicted versus actual revenue.
This bill is supported by the California Transit Association, which notes the following:
This bill would help smooth the volatility of gasoline tax revenue by altering the administrative process utilized by BOE to adjust the excise tax on gasoline. Specifically, this bill would require BOE to base its projected gas price estimate on an average of the previous four years' actual prices and the estimated price for the current year; and allow BOE to adjust the excise tax rate more frequently than annually in cases where fuel prices will clearly affect projected versus actual revenue. The California Transit Association believes these improvements to the process would greatly reduce the volatility of the gasoline tax, reducing greatly impacts to cities and counties.
This bill is supported by the BOE, which notes the following in its staff analysis:
Effect of the bill: "This bill is intended to reduce potential volatility of the revenues generated by the gasoline tax by specifying the forecast method for fuel prices and allowing more frequent excise tax rate adjustments."
No administrative difficulties with the forecast provisions: "Under the current fuel tax swap rate calculation, the two main components are the forecast and the true-up. The forecast is comprised of two factors: fuel price and fuel consumption quantity. The BOE's rate adjustments are expected to be revenue neutral and any out-year adjustments are intended to maintain revenue neutrality. Since this bill provides specifics to assist with the forecast of fuel prices, and adjustments as needed, it maintains the goal of revenue neutrality. Therefore, BOE staff does not foresee administrative difficulty with the forecast portion of the fuel tax swap rate adjustments."
Committee Staff Comments
The fuel tax swap: In 2010, the Legislature enacted two "fuel tax swap" measures that modified the state taxation of both gasoline and diesel fuels. [ABx8 6 (Committee on Budget), Chapter 11, Statutes of 2010 and SB 70 (Committee on Budget and Fiscal Review), Chapter 9, Statutes of 2010.] The gasoline tax changes became operative on July 1, 2010, while the diesel fuel tax changes became operative on July 1, 2011. According to the Senate Committee on Governance and Finance, the fuel tax swap was enacted partly to allow the use of additional existing transportation revenue for highway purposes, including General Obligation bond debt service, where that debt service was related to transportation projects.
The taxation of gasoline: The "fuel tax swap" exempted gasoline from the state General Fund SUT rate. To offset the revenue loss from this partial SUT exemption, the Legislature increased the gasoline excise tax rate from $0.18 per gallon to $0.353 per gallon.
The taxation of diesel fuel: In contrast, the diesel fuel excise tax rate was reduced under the "fuel tax swap", from $0.18 per gallon to $0.13 per gallon. The Legislature correspondingly increased the SUT rate on diesel fuel to offset lost excise tax revenues, resulting in the following rates:
1.87% effective July 1, 2011;
2.17% effective July 1, 2012;
1.94% effective July 1, 2013; and,
1.75% effective July 1, 2014, and thereafter.
Revenue neutrality: The "fuel tax swap" provisions require the BOE to maintain revenue neutrality so that the revenues derived from the increased gasoline excise tax and the increased SUT on diesel equals the revenues that would have been derived had the gasoline SUT partial exemption and the diesel fuel excise tax reduction, respectively, never occurred. Thus, R&TC Sections 7360 and 60050 require the BOE annually to adjust the gasoline and diesel fuel excise tax rates, respectively, either upward or downward, to maintain revenue neutrality. This calculation requires BOE staff to develop a forecast of both consumption and price for both gasoline and diesel fuel. To this end, BOE staff works closely with the Department of Finance (DOF) and adopts the DOF's consumption forecasts.
The BOE notes that its annual rate calculations also take into account the statutory "true up" requirements, which specify a one-year look back period to determine the difference between what was estimated for the previous FY and what was actually collected.
The resulting rates: Since the enactment of the fuel tax swap, the BOE has adjusted the gasoline excise tax rate to maintain the required revenue neutrality through incremental increases and decreases as follows:
July 1, 2011: Increase of $0.004;
July 1, 2012: Increase of $0.003;
July 1, 2013: Increase of $0.035;
July 1, 2014: Decrease of $0.035; and,
July 1, 2015: Decrease of $0.060.
The diesel fuel excise tax rate, in turn, has been adjusted as follows:
July 1, 2012: Decrease of $0.03;
July 1, 2013: Retain July 1, 2012 rate;
July 1, 2014: Increase of $0.01; and,
July 1, 2015: Increase of $0.02.
What would this bill do? This bill would modify the method by which the BOE annually adjusts the motor vehicle "fuel tax swap" rate to take into account a five-year average of fuel prices, thereby smoothing perceived revenue volatility.1 Specifically, this bill contains the following three provisions:
For the 2015-16 FY, the BOE would be required, on or before July 1, 2015, to adjust the motor vehicle fuel excise tax rate so as to generate revenues equal to the amount of revenue loss attributable to the partial SUT exemption, based on estimates reflecting the combined average of the actual fuel price over the previous four FYs and the estimated fuel price for the current FY. This rate would be effective during the 2015-16 FY.
For the 2016-17 FY and each FY thereafter, the BOE would be required, on or before March 1 of the FY immediately preceding the applicable FY, to adjust the motor vehicle fuel excise tax rate based on estimates reflecting the same combined average of the actual fuel price over the previous four FYs and the estimated fuel price for the current FY. This rate would then apply during the state's next FY.
Finally, this bill provides that if, due to clear changes in either fuel prices or consumption in the state, the BOE determines that the amount of revenue being generated by the excise tax will be significantly different than the estimates made by the BOE, the BOE may adjust the rate more frequently than annually, but no more frequently than every six months in order to reduce the potential volatility of the revenues.
Smoothing things out: Advocates of this bill contend that this bill would address the potentially "jarring" fluctuations in excise tax revenues by basing price projections on multi-year historical price data. Proponents further contend that this increased revenue stability would benefit both consumers, who pay the tax, and state and local agencies that rely on the revenues to build and maintain California's transportation infrastructure.
There is evidence to suggest that this methodology would smooth out revenue fluctuations to a certain degree. For example, in the last four FYs, the actual excise tax rate has fluctuated from a low of $0.357 in FY 2011-12 to a high of $0.395 in FY 2013-14, representing a delta of $0.038 per gallon. Had the five-year smoothing methodology been employed over this same time period, the state would have experienced a high of $0.363 in FY 2014-15 and a low of $0.333 in FY 2012-13, representing a delta of $0.03 per gallon.
The smoothing function of the five-year methodology comes into even starker relief when applied to the current FY. As a result of lower fuel prices, BOE staff recommended a motor vehicle fuel excise tax rate of $0.285 per gallon. The BOE members subsequently voted to increase staff's recommended excise tax rate to $0.300 effective July 1, 2015. However, had the BOE used a five-year smoothing methodology, it would have arrived at a per-gallon excise tax rate of $0.326. Thus, this bill will, at least in the short term, "artificially" prop up excise tax revenues received by the state. Of course, assuming fuel prices increase in the future, this methodology may also serve artificially to constrain revenues in the not-so-distant future.
The proverbial ship has sailed: This bill currently requires the BOE to adjust the motor vehicle fuel excise tax rate for FY 2015-16 by July 1, 2015 using the newly prescribed methodology. Given that this bill's urgency clause was deleted with the most recent set of amendments, this bill, if enacted, will become operative on January 1, 2016. Moreover, the BOE has already set the excise tax rates for the current 2015-16 FY. Thus, the Committee may wish to consider deleting the provisions applicable to FY 2015-16, thereby applying the bill prospectively to FYs 2016-17 and beyond.
Twice a year? This bill would authorize the BOE to adjust the rate more frequently than annually. The Committee may wish to consider whether this authority is advisable given the inherent administrative hassle (for both retailers and the BOE) of changing the excise tax rate for fuel.
Related legislation: SB 433 (Berryhill) would transfer responsibility for calculating the annual rate adjustments under the "fuel tax swap" from the BOE to the DOF. SB 433 (Berryhill) will be heard by this Committee today.
REGISTERED SUPPORT / OPPOSITION:
Support
Alpine County Board of Supervisors
American Public Works Association, California Chapters
Associated General Contractors
California Alliance for Jobs
California Association of Councils of Government
California State Association of Counties
California State Council of Laborers
California Transit Association
City of Camarillo
City of Glendale
City of Goleta
City of West Hollywood
County of Contra Costa
County of Mono
County of Santa Cruz
League of California Cities
Los Angeles County Board of Supervisors
Orange County Transportation Authority
Organization of SMUD Employees
Planning and Conservation League
Rural County Representatives of California
San Bernardino Public Employees Association
San Diego Association of Governments
San Diego County Court Employees Association
San Francisco Bay Area Rapid Transit District
San Joaquin Valley Regional Transportation Planning Agencies
San Luis Obispo Council of Governments
San Luis Obispo County Employees Association
Santa Clara County Board of Supervisors
Santa Clara Valley Transportation Authority
Self-Help Counties Coalition
Transportation California
United Contractors
Urban Counties Caucus
Opposition
None on file
Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098
1 This bill would make no changes to the method for calculating the diesel fuel excise tax rate.
SB 321
Page 4
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: SB 321
Amended: 5/27/15
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/15/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Motor vehicle fuel taxes: rates: adjustments
DIGEST: This bill changes the methodology used to determine the fuel tax rates.
Senate Floor Amendments of 5/27/15 remove the urgency clause from the bill.
Existing law:
Requires the Board of Equalization (BOE) to annually adjust the gasoline and diesel fuel excise tax rates either upward or downward. For gasoline, the BOE determines: (a) whether the sales and use tax revenue loss related to the partial exemption was fully offset by the adjusted rate, and (b) the projected sales and use tax revenue loss for the next fiscal year, considering forecasted gasoline prices and consumption. For diesel fuel, the BOE determines: (a) whether the revenue gain from the increased sales and use tax rate on diesel fuel sales and purchases was fully offset by the adjusted diesel fuel excise tax rate, and (b) the projected sales and use tax revenue gain for the next fiscal year, considering forecasted diesel fuel prices and consumption. By March 1 each year, the BOE must determine the rate adjustments, and the adjusted rate applies on the following July 1.
Requires BOE to maintain revenue neutrality, so that the revenues derived from the increased gasoline excise tax and the increased diesel sales and use tax equals the revenues that would have been derived had the gasoline sales and use tax partial exemption and the diesel fuel excise tax reduction, respectively, not occurred.
Requires BOE Members approve these rates annually in a public meeting.
This bill:
Requires BOE to adjust the excise tax rate based on a five-year average that relies on fuel price data, from the immediately preceding four years and estimated fuel prices for the current fiscal year, to generate a forecasted fuel price that is weighted primarily by known fuel price data. That adjusted rate must be determined by July 1, 2015, and that rate would be effective for fiscal year (FY) 2015-16.
Requires BOE follow the same estimate methodology as above, but the rate be adjusted by March 1 of the fiscal year immediately preceding the applicable fiscal year, beginning FY 2016-17.
Allows BOE to adjust the rate before March 1, but not sooner than six months between the intervening adjustments, if changes in either fuel prices or consumption in the state occur.
Background
In 2010, the Legislature enacted two “fuel tax swap” measures that changed the imposition and rates of state taxes on gasoline and diesel fuel, and required the BOE to annually determine the appropriate excise tax rate adjustments to maintain revenue neutrality (ABX8-6, Committee on Budget, Chapter 11) and (SB 70, Committee on Budget and Fiscal Review, Chapter 9). The gasoline tax changes became operative on July 1, 2010, and the diesel fuel tax changes on July 1, 2011.
The fuel tax swap was partly enacted, to allow the use of additional existing transportation revenue for highway purposes, including General Obligation bond debt service, where that debt service was related to transportation projects.
The swap bills exempted sales and purchases of gasoline from the state sales and use tax rate. To offset the revenue loss related to this partial exemption, the law increased the gasoline excise tax rate from $0.18 per gallon to $0.353 per gallon. Conversely, the measure reduced the diesel fuel excise tax rate from $0.18 to $0.13 per gallon, but increased the sales and use tax rate on diesel fuel sales to offset the loss related from the reduction, resulting in the following rates:
•1.87%, effective July 1, 2011,
•2.17%, effective July 1, 2012,
•1.94%, effective July 1, 2013,
•1.75%, effective July 1, 2014, and thereafter.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
Associated General Contractors
California Alliance for Jobs
California Association of Councils of Government
California State Association of Counties
California Transit Association
California Transportation Commission
City of Crescent City
City of Lakewood
City of Rolling Hills Estates
City of Saratoga
County of Los Angeles
Glendale City Employees Association
League of California Cities
Orange County Transportation Authority
Organization of SMUD Employees
Rural County Representatives of California
San Bernardino Public Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Santa Clara Valley Transportation Authority
Self-Help Counties Coalition
State Board of Equalization
Transportation Agency for Monterey County
Transportation California
Urban Counties Caucus
OPPOSITION: (Verified 5/29/15)
None received
ARGUMENTS IN SUPPORT: According to the author, “The Board of Equalization (BOE) annually adjusts the price-based portion of the excise tax on gasoline in order to collect roughly the same amount of revenue, as the state would have collected if it still charged a sales tax on gasoline. Difficulty in forecasting gas prices inevitably results in either over- or under-collecting revenue and future adjustments must reconcile this discrepancy. The reconciling adjustment, or “true up,” leads to volatility from year to year. Uncertainty, in future revenue puts a significant strain on state and local governments when preparing their multiyear transportation budgets. SB 321 makes changes to the administrative process, for setting the price-based excise tax in order to give BOE the tools necessary to reduce the overall volatility of this revenue.”
Prepared by: Myriam Bouaziz / GOV. & F. / (916) 651-4119
5/31/15 13:51:22
**** END ****
SB 321
Page 4
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: SB 321
Amended: 4/23/15
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/15/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Motor vehicle fuel taxes: rates: adjustments
DIGEST: This bill changes the methodology used to determine the fuel tax rates.
Existing law:
Requires the Board of Equalization (BOE) to annually adjust the gasoline and diesel fuel excise tax rates either upward or downward. For gasoline, the BOE determines: (1) whether the sales and use tax revenue loss related to the partial exemption was fully offset by the adjusted rate, and (2) the projected sales and use tax revenue loss for the next fiscal year, considering forecasted gasoline prices and consumption. For diesel fuel, the BOE determines: (1) whether the revenue gain from the increased sales and use tax rate on diesel fuel sales and purchases was fully offset by the adjusted diesel fuel excise tax rate, and (2) the projected sales and use tax revenue gain for the next fiscal year, considering forecasted diesel fuel prices and consumption. By March 1 each year, the BOE must determine the rate adjustments, and the adjusted rate applies on the following July 1.
Requires BOE to maintain revenue neutrality, so that the revenues derived from the increased gasoline excise tax and the increased diesel sales and use tax equals the revenues that would have been derived had the gasoline sales and use tax partial exemption and the diesel fuel excise tax reduction, respectively, not occurred.
Requires BOE Members approve these rates annually in a public meeting.
This bill:
Requires BOE to adjust the excise tax rate based on a five-year average that relies on fuel price data, from the immediately preceding four years and estimated fuel prices for the current fiscal year, to generate a forecasted fuel price that is weighted primarily by known fuel price data. That adjusted rate must be determined by July 1, 2015, and that rate would be effective for fiscal year (FY) 2015-16.
Requires BOE follow the same estimate methodology as above, but the rate be adjusted by March 1 of the fiscal year immediately preceding the applicable fiscal year, beginning FY 2016-17.
Allows BOE to adjust the rate before March 1, but not sooner than six months between the intervening adjustments, if changes in either fuel prices or consumption in the state occur.
Contains an urgency clause, and becomes effective immediately.
Background
In 2010, the Legislature enacted two “fuel tax swap” measures that changed the imposition and rates of state taxes on gasoline and diesel fuel, and required the BOE to annually determine the appropriate excise tax rate adjustments to maintain revenue neutrality (ABX8-6, Committee on Budget, Chapter 11) and (SB 70, Committee on Budget and Fiscal Review, Chapter 9). The gasoline tax changes became operative on July 1, 2010, and the diesel fuel tax changes on July 1, 2011.
The fuel tax swap was partly enacted, to allow the use of additional existing transportation revenue for highway purposes, including General Obligation bond debt service, where that debt service was related to transportation projects.
The swap bills exempted sales and purchases of gasoline from the state sales and use tax rate. To offset the revenue loss related to this partial exemption, the law increased the gasoline excise tax rate from $0.18 per gallon to $0.353 per gallon. Conversely, the measure reduced the diesel fuel excise tax rate from $0.18 to $0.13 per gallon, but increased the sales and use tax rate on diesel fuel sales to offset the loss related from the reduction, resulting in the following rates:
1.87%, effective July 1, 2011,
2.17%, effective July 1, 2012,
1.94%, effective July 1, 2013,
1.75%, effective July 1, 2014, and thereafter.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
Associated General Contractors
California Alliance for Jobs
California Association of Councils of Government
California State Association of Counties
California Transit Association
California Transportation Commission
City of Crescent City
City of Lakewood
City of Rolling Hills Estates
City of Saratoga
County of Los Angeles
Glendale City Employees Association
League of California Cities
Orange County Transportation Authority
Organization of SMUD Employees
Rural County Representatives of California
San Bernardino Public Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Santa Clara Valley Transportation Authority
Self-Help Counties Coalition
State Board of Equalization
Transportation Agency for Monterey County
Transportation California
Urban Counties Caucus
None received
ARGUMENTS IN SUPPORT: According to the author, “The Board of Equalization (BOE) annually adjusts the price-based portion of the excise tax on gasoline in order to collect roughly the same amount of revenue, as the state would have collected if it still charged a sales tax on gasoline. Difficulty in forecasting gas prices inevitably results in either over- or under-collecting revenue and future adjustments must reconcile this discrepancy. The reconciling adjustment, or “true up,” leads to volatility from year to year. Uncertainty, in future revenue puts a significant strain on state and local governments when preparing their multiyear transportation budgets. SB 321 makes changes to the administrative process, for setting the price-based excise tax in order to give BOE the tools necessary to reduce the overall volatility of this revenue.”
Prepared by: Myriam Bouaziz / GOV. & F. / (916) 651-4119
5/15/15 10:02:30
**** END ****
SB 321 (Beall) 3/26/15 Page 3 of 3
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No: |
SB 321 |
Hearing Date: |
4/15/15 |
Author: |
Beall |
Tax Levy: |
No |
Version: |
3/26/15 |
Fiscal: |
Yes |
Consultant: |
Bouaziz |
||
MOTOR VEHICLE FUEL TAXES: RATES: ADJUSTMENTS
Changes the methodology used to determine the fuel tax rates.
Background and Existing Law
In 2010, the Legislature enacted two “fuel tax swap” measures that changed the imposition and rates of state taxes on gasoline and diesel fuel, and require the Board of Equalization (BOE) to annually determine the appropriate excise tax rate adjustments to maintain revenue neutrality (ABx8 6, Assembly Committee on Budget, 2010) and (SB 70, Senate Committee on Budget and Fiscal Review). The gasoline tax changes became operative on July 1, 2010, and the diesel fuel tax changes on July 1, 2011.
The fuel tax swap was partly enacted, to allow the use of additional existing transportation revenue for highway purposes, including General Obligation bond debt service, where that debt service was related to transportation projects.
The swap bills exempted sales and purchases of gasoline from the state sales and use tax rate. To offset the revenue loss related to this partial exemption, the law increased the gasoline excise tax rate from $0.18 per gallon to $0.353 per gallon. Conversely, the measure reduced the diesel fuel excise tax rate from $0.18 to $0.13 per gallon, but increased the sales and use tax rate on diesel fuel sales to offset the loss related from the reduction, resulting in the following rates:
1.87%, effective July 1, 2011,
2.17%, effective July 1, 2012,
1.94%, effective July 1, 2013,
1.75%, effective July 1, 2014, and thereafter.
The fuel tax swap provisions require BOE to maintain revenue neutrality, so that the revenues derived from the increased gasoline excise tax and the increased diesel sales and use tax equals the revenues that would have been derived had the gasoline sales and use tax partial exemption and the diesel fuel excise tax reduction, respectively, not occurred.
To maintain revenue neutrality, state law requires BOE to annually adjust the gasoline and diesel fuel excise tax rates either upward or downward. For gasoline, the BOE determines: (1) whether the sales and use tax revenue loss related to the partial exemption was fully offset by the adjusted rate, and (2) the projected sales and use tax revenue loss for the next fiscal year, considering forecasted gasoline prices and consumption. For diesel fuel, the BOE determines: (1) whether the revenue gain from the increased sales and use tax rate on diesel fuel sales and purchases was fully offset by the adjusted diesel fuel excise tax rate, and (2) the projected sales and use tax revenue gain for the next fiscal year, considering forecasted diesel fuel prices and consumption. By March 1 each year, the BOE must determine the rate adjustments and the adjusted rate applies on the following July 1.
Proposed Law
Senate Bill 321 amends the method BOE uses to adjust the excise tax on fuel. Specifically, AB 321 does the following:
For Fiscal Year (FY) 2015-16, requires BOE to adjust the excise tax rate based on a five-year average that relies on fuel price data, from the immediately preceding four years and estimated fuel prices for the current fiscal year, to generate a forecasted fuel price that is weighted primarily by known fuel price data. That adjusted rate must be determined by July 1, 2015, and that rate would be effective for 2015-16.
Beginning 2016-17, BOE would follow the same estimate methodology as above, but the rate would be adjusted by March 1 of the fiscal year immediately preceding the applicable fiscal year.
For true-up rate adjustments made after January 1, 2015, BOE can make partial adjustments over a three-year period, to take into account the net revenue gain or loss of any fiscal year in order to reduce potential revenue volatility.
If changes in either fuel prices or consumption in the state occur, the BOE may adjust the rate before March 1, but not sooner than six months between the intervening adjustments.
This bill contains an urgency clause, and becomes effective immediately.
State Revenue Impact
None.
Comments
1. Purpose of the bill. According to the author, “The Board of Equalization (BOE) annually adjusts the price-based portion of the excise tax on gasoline in order to collect roughly the same amount of revenue, as the state would have collected if it still charged a sales tax on gasoline. Difficulty in forecasting gas prices inevitably results in either over- or under-collecting revenue and future adjustments must reconcile this discrepancy. The reconciling adjustment, or “true up,” leads to volatility from year to year. Uncertainty, in future revenue puts a significant strain on state and local governments when preparing their multiyear transportation budgets. SB 321 makes changes to the administrative process, for setting the price-based excise tax in order to give BOE the tools necessary to reduce the overall volatility of this revenue.”
2. Reduction in volatility. SB 321 attempts to reduce the volatility of revenues received by local governments. The fuel price component has the biggest impact on the fuel excise tax calculation. The current methodology for forecasting the fuel price component is problematic because, it does not take into account historical data using only projections. This bill would use 4 years of historical data, which is expected to result in a reduction of wide excise tax rate swings, and make transportation budgeting less difficult for local governments. Additionally, when there is a wide excise tax rate swing, the bill allows the swing to be paid over a three year period, reducing its impact.
3. Related legislation. SB 433 (Berryhill) would require the Department of Finance, instead of the BOE, to determine the annual excise tax rate adjustment for gasoline and diesel fuel under the “fuel tax swap” provisions.
4. Urgency clause. Regular legislation takes effect on the January 1 following its passage, but urgency bills take effect as soon as they're passed, signed, and chaptered. The California Constitution allows urgency statutes that are "necessary for immediate preservation of the public peace, health, or safety." SB 321 contains an urgency clause explaining the need for the bill to take effect immediately.
Support and Opposition
(4/9/15)
Support: California State Association of Counties; California Transportation Commission; City of San Jose; League of California Cities; Rural County Representatives of California; San Bernardino Associated Governments (SANDAG); Urban Counties Caucus.
Opposition: Unknown.
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