Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law provides various exemptions from those taxes, including an exemption for items and materials when used to modify a vehicle for physically handicapped persons. Existing law also exempts from those taxes, in the case of a sale of a modified vehicle for physically handicapped persons to a disabled person who is eligible to be issued a distinguishing license plate or placard for parking purposes, the gross receipts attributable to that portion of the vehicle that has been so modified. Existing regulations implementing those provisions provide that physically handicapped persons include disabled persons, as specified, which existing law defines as, among others, persons with a diagnosed disease or disorder which substantially impairs or interferes with mobility.

Existing federal law provides various benefits to disabled veterans, including assistance with the purchase of an automobile and adaptive equipment. Existing federal law defines an eligible person, for purposes of that benefit, as, among others, certain veterans with specified disabilities, including a severe burn injury, if the disability is the result of an injury incurred or disease contracted in or aggravated by active military, naval, or air service. Existing federal regulations implementing those provisions define severe burn injuries as deep partial thickness or full thickness burns resulting in scar formation that cause contractures and limit motion of one or more extremities or the trunk and preclude effective operation of an automobile.

This bill, on and after July 1, 2020, and before July 1, 2030, would specify that, for purposes of the exemptions described above, physically handicapped persons include eligible persons with a severe burn injury, as those terms are defined in existing federal law.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law requires the state to reimburse counties and cities for revenue losses caused by the enactment of sales and use tax exemptions.

This bill would provide that, notwithstanding Section 2230 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse any local agencies for sales and use tax revenues lost by them pursuant to this bill.

This bill would take effect immediately as a tax levy.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1257

Author:(Salas)

As Amended Ver:August 30, 2019

Majority vote. Tax levy

SUMMARY:

Expands the existing sales and use tax (SUT) exemption for materials used to modify a vehicle for physically handicapped persons by including within the definition of "physically handicapped persons" individuals with a severe burn injury, as defined.

The Senate Amendments:

1. Recast and expand the existing SUT exemption for materials used to modify a vehicle for physically handicapped persons.
2. Provide that, on and after July 1, 2020, and before July 1, 2030, "physically handicapped persons" includes eligible persons with a severe burn injury, as those terms are defined in 38 United States Code Section 3901(1).
3. Make other technical and clarifying changes.

COMMENTS:

Current law provides a SUT exemption for items and materials when used to modify a vehicle for physically handicapped persons. This bill would expand this exemption by providing that the term "physically handicapped persons" shall include eligible persons with a severe burn injury, as those terms are defined in federal law. This expansion, however, would only apply on and after July 1, 2020, and before July 1, 2030.

According to the Author:

California is privileged to be a home to more veterans than any other state in the country. Within this group are approximately 390,864 disabled veterans according to the U.S. Department of Veterans Affairs. It is important that California take care of its veterans and eliminate any barrier that may prevent current or former servicemembers from living a fulfilling life. Physically disabled veterans often require add-on equipment to help them safely enter, exit, or operate a motor vehicle.

Arguments in Support:

This bill is supported by the Kern County Board of Supervisors, which notes:

California is home to over 1.6 million veterans, with over 38,000 living in Kern County and 29% of Kern's veterans living with some form of disability. Currently, the United States Department of Veterans Affairs operates an Automobile Adaptive Equipment (AAE) program, which provides physically disabled veterans with necessary adaptive automotive equipment to safely operate their vehicles. As part of the AAE program, the VA also provides reimbursement for this equipment. However, according to the VA, sales tax on adaptive equipment is not reimbursable.

Arguments in Opposition:

None provided.

FISCAL COMMENTS:

According to the Senate Appropriations Committee, the California Department of Tax and Fee Administration (CDTFA) estimates that this bill will result in an annual revenue loss of up to $255,000, with up to $118,000 coming from the General Fund. Due to data limitations, the department's revenue estimate includes exemptions related to disabilities that were not service connected; consequently, its revenue estimate is likely overstated, and should be considered an upper bound. CDTFA would incur minor and absorbable administrative costs to revise publications and one regulation.

VOTES:

ASM REVENUE AND TAXATION: 11-0-0

YES: Burke, Brough, Chu, Gray, Mayes, Melendez, Mullin, Petrie-Norris, Quirk, Luz Rivas, Ting

ASM APPROPRIATIONS: 16-0-2

YES: Gonzalez, Bigelow, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

ABS, ABST OR NV: Brough, Eduardo Garcia

ASSEMBLY FLOOR: 77-0-3

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Cooley, Eduardo Garcia, Mullin

SENATE FLOOR: 40-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

UPDATED:

VERSION: August 30, 2019

CONSULTANT: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0001952

 THIRD READING  

Bill No: AB 1257

Author: Salas (D), et al.

Amended: 8/30/19 in Senate

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 6/19/19

AYES: McGuire, Moorlach, Beall, Hurtado, Nielsen, Wiener

NO VOTE RECORDED: Hertzberg

SENATE VETERANS AFFAIRS COMMITTEE: 6-0, 6/25/19

AYES: Archuleta, Hurtado, Nielsen, Roth, Umberg, Wilk

NO VOTE RECORDED: Grove

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/30/19

AYES: Portantino, Bates, Bradford, Durazo, Hill, Jones, Wieckowski

ASSEMBLY FLOOR: 77-0, 5/22/19 (Consent) - See last page for vote

SUBJECT: Sales and use taxes: exemption: vehicle modifications: physically handicapped persons: veterans

SOURCE: Author

DIGEST:

This bill expands a current sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons to include veterans with severe burns.

ANALYSIS:

Existing law:

1. Imposes the sales tax on every retailer “engaged in business in this state” that sells tangible personal property, and requires them to register with the California Department of Tax and Fee Administration (CDTFA), as well as collect and remit appropriate tax at purchase and remit the amount to CDTFA.
2. Applies the sales tax whenever a retail sale occurs, which is generally any sale other than one for resale in the regular course of business.
3. Provides that unless the purchaser pays the sales tax to the retailer, he or she is liable for the use tax, which the law imposes on any person consuming tangible personal property in the state, and requires the purchaser to remit use tax to CDTFA.
4. Sets the state sales and use tax rate at 7.25% of the sales price of the property sold or used.
5. Allows cities, counties, and specified special districts to increase the sales and use tax, also known as district or transactions and use taxes, up to a 2% countywide cap, with some exceptions.
6. Exempts from the state and local sales and use tax items and materials used to modify a vehicle for physically handicapped persons.
7. Allows the exemption for disabled persons or disabled veterans for portions of a vehicle modified for physically handicapped persons, so long as the purchaser has been issued a distinguishing license plate or placard under the Vehicle Code.

This bill:

1. Expands the current state and local sales and use tax exemption for items and materials used for vehicle modifications to include veterans with severe burn injuries.
2. Defines “veterans with severe burn injuries” by reference to the United States Code.
3. Commences on July 1, 2020, and sunsets July 1, 2030.
4. Contains provisions intended to comply with Section 41 of the Revenue and Taxation Code.

Background

The law allows the current exemption for persons issued a distinguishing license plate or placard under the Vehicle Code. A purchaser simply displays their license plate or placard to the retailer at purchase to apply the exemption.

Current CDTFA regulations define exempt items to include, among others:

• An interlock system;
• Upper torso restraints;
• Airbags of a unique type to raise or lower the vehicle for loading or unloading;
• Running boards on the lower side of vehicle;
• Bolt cams used to restrain a wheelchair inside a van;
• Seat belts;
• Tire carriers to hold a spare that is installed within reach of a handicapped person;
• AC lights to illuminate the ramp or elevator area;
• Hardware for privacy curtains; and
• Air compressors for use with medical equipment.

The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that provides necessary equipment to enable physically challenged veterans to enter, exit, and safely operate motor vehicles. Equipment includes platform wheelchair lifts, under vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced effort and zero effort steering and braking equipment, and digital driving systems. The VA program does not pay or reimburse state and local taxes, because the federal government considers itself exempt from state and local taxation. As a result, veterans must pay the tax if the equipment does not qualify for the current exemption.

The VA program applies to veterans with a service-connected disability as defined in the United States Code, which includes veterans with severe burn injuries, who are not included in the Vehicle Code definitions used for the sales tax exemption. As a result, veterans with severe burn injuries may not be able to apply the exemption for modifications paid for or reimbursed under the VA program.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, the CDTFA estimates that this bill will result in an annual revenue loss of up to $255,000, up to $118,000 of which would come from the General Fund. Due to data limitations, the department’s revenue estimate includes exemptions related to disabilities that were not service connected; consequently, its revenue estimate is likely overstated, and should be consider an upper bound. CDTFA would incur minor and absorbable administrative costs to revise publications and one regulation.

SUPPORT: (Verified 8/30/19)

American GI Forum
AMVETS – Department of California
California Association of County Veterans Services Officers
California State Commanders Veterans Council
Kern County Board of Supervisors
Kern River Blue Star Moms
Veterans of Foreign Wars, Wasco Post No. 6742
Vietnam Veterans of America – California State Council

OPPOSITION: (Verified 8/30/19)

None received

ARGUMENTS IN SUPPORT: According to the author, “California is privileged to be a home to more veterans than any other state in the country. According to the U.S. Department of Veteran Affairs, approximately 390,864 disabled veterans reside in the state. It is important that California take care of its veterans and eliminate any barrier that may prevent former service members from living a fulfilling life. Physically disabled veterans often require add-on equipment to help them safely enter, exit, or operate a motor vehicle. By eliminating sales tax on this equipment, this bill will increase access to invaluable tools that will help California’s disabled veterans live productive and fulfilling lives.”

ASSEMBLY FLOOR: 77-0, 5/22/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Cooley, Eduardo Garcia, Mullin

Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119

9/3/19 11:08:02

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1257 (Salas) - Sales and use taxes: exemption: vehicle modifications: physically handicapped persons: veterans

Bill Summary:

AB 1257 would expand a current sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons to include veterans with severe burns.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 30, 2019

Fiscal Impact:

The California Department of Tax and Fee Administration (CDTFA) estimates that the bill would result in an annual revenue loss of up to $255,000, up to $118,000 of which would come from the General Fund. Due to data limitations, the department’s revenue estimate includes exemptions related to disabilities that were not service connected; consequently, its revenue estimate is likely overstated, and should be consider an upper bound. CDTFA would incur minor and absorbable administrative costs to revise publications and one regulation.

Author Amendments:

Add coauthors.

-- END --

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1257 (Salas) - Sales and use taxes: exemption: vehicle modifications: physically handicapped persons: veterans

Bill Summary:

AB 1257 would expand a current sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons to include veterans with severe burns.

Fiscal Impact:

The California Department of Tax and Fee Administration (CDTFA) estimates that the bill would result in an annual revenue loss of up to $255,000, up to $118,000 of which would come from the General Fund. Due to data limitations, the department’s revenue estimate includes exemptions related to disabilities that were not service connected; consequently, its revenue estimate is likely overstated, and should be consider an upper bound. CDTFA would incur minor and absorbable administrative costs to revise publications and one regulation.

Background:

Except where a specific exemption or exclusion is provided, current law imposes SUT on all retailers for the privilege of selling tangible personal property (TPP) at retail in California, or on the storage, use, or other consumption in this state of TPP purchased from a retailer. Unless purchasers pays the sales tax to the retailer, they are liable for the use tax, which the law imposes on any person consuming tangible personal property in the state. The use tax is the same rate as the sales tax.

After CDTFA collects SUT revenue ($57 billion in 2017-18), it allocates the money to various state and local funds. Roughly half—collected from an approximately 3.9 percent rate—goes to the General Fund and can be spent on any state program, such as education, health care, and criminal justice. Another 1.25 percent, known as the Bradley-Burns rate, goes to cities and counties for general purposes. Three sales tax funds have uniform state rates and support specified programs—an approximately 1.1 percent rate for 2011 realignment (county-administered criminal justice, mental health, and social service programs); a 0.5 percent rate for 1991 realignment (county-administered health and social services programs); and a 0.5 percent rate for city and county public safety programs pursuant to Proposition 172 (1993). Additionally, some local governments levy optional local rates—known as Transactions and Use Taxes (TUTs)—and a small portion of these funds are used for general purposes. As of January 1, 2018, the average statewide SUT rate was 8.50 percent.

State law includes a state and local SUT exemption for items and materials used to modify a vehicle for physically handicapped persons. The exemption is also available to disabled persons or disabled veterans for portions of a vehicle modified for physically handicapped persons, so long as the purchaser has been issued a distinguishing license plate or placard under the Vehicle Code. A purchaser simply displays their license plate or placard to the retailer at purchase to apply the exemption. CDTFA regulation defines exempt items to include, among others, (1) an interlock system, (2) upper torso restraints, (3) airbags of a unique type to raise or lower the vehicle for loading or unloading, (4) running boards on the lower side of vehicle, (5) bolt cams used to restrain a wheelchair inside a van, (6) seat belts, (7), tire carriers to hold a spare that is installed within reach of a handicapped person, (8) AC lights to illuminate the ramp or elevator area, (9) hardware for privacy curtains, and (10) air compressors for use with medical equipment.

The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that provides necessary equipment to enable physically challenged veterans to enter, exit, and safely operate motor vehicles. Equipment includes platform wheelchair lifts, under vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced effort and zero effort steering and braking equipment, and digital driving systems. The VA program does not pay or reimburse state and local taxes, because the federal government considers itself exempt from state and local taxation. As a result, veterans must pay the tax if the equipment does not qualify for the current exemption.

The VA program applies to veterans with a service-connected disability as defined in the United States Code, which includes veterans with severe burn injuries, who are not included in the Vehicle Code definitions used for the sales tax exemption. As a result, veterans with severe burn injuries may not be able to apply the exemption for modifications paid for or reimbursed under the VA program.

Proposed Law:

This bill would, from July 1, 2020 to July 1, 2030, expand the current state and local SUT exemption to include veterans with severe burn injuries.

Staff Comments:

In developing its revenue estimate for the bill, CDTFA staff drew upon the experience from the State of Washington, which in 2013 implemented an identical law. The Washington Department of Revenue (WDOR) estimated that the exemption would reduce state revenues by $123,000 in 2020-21. Based on Washington’s sales tax rate of 6.5 percent, this translates to an estimated $2 million in equipment sales.

According to the National Center for Veterans Analysis and Statistics with U.S. Department of Veterans Affairs, the veteran population in California in 2021 is forecasted to be 1.4 million, roughly three times the comparable population in the State of Washington. Thus, CDTFA staff assumes that California tax basis would be thrice Washington’s, or $6 million. To account for the difference between how the two states tax installation and repair charges, department staff reduced this number by 50 percent, and conclude that add-on automotive adaptive equipment sales in California is estimated to be $3 million. Applying the statewide average SUT rate of 8.5 percent results in a revenue loss of $255,000. The General Fund SUT rate is 3.9375 percent; thus, this portion of the revenue loss would be about $118,000.

As noted above, CDTFA notes that its revenue estimate includes exemptions related to disabilities that were not service connected; consequently, its revenue estimate is likely overstated, and should be consider an upper bound.

-- END --

SENATE COMMITTEE ON

Senator Bob Archuleta, Chair

2019 - 2020 Regular

Bill No: Hearing Date: 6/25/19

Subject:

DESCRIPTION

Summary:

This bill expands a current sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons to include veterans with severe burns.

Existing law:

1) Impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state;

2) Includes an exemption for items and materials when used to modify a vehicle for physically handicapped persons;

3) Exempts from those taxes, in the case of a sale of a modified vehicle for physically handicapped persons to a disabled person who is eligible to be issued a distinguishing license plate or placard for parking purposes, the gross receipts attributable to that portion of the vehicle that has been so modified;

4) Provides that physically handicapped persons include disabled persons, as specified, which existing law defines as, among others, persons with a diagnosed disease or disorder which substantially impairs or interferes with mobility;

5) Authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws;

6) Requires the state to reimburse counties and cities for revenue losses caused by the enactment of sales and use tax exemptions.

Federal law:

1) Provides various benefits to disabled veterans, including assistance with the purchase of an automobile and adaptive equipment.

2) Defines an eligible person, for purposes of that benefit, as, among others, certain veterans with specified disabilities, including a severe burn injury, if the disability is the result of an injury incurred or disease contracted in or aggravated by active military, naval, or air service.

3) Defines severe burn injuries as deep partial thickness or full thickness burns resulting in scar formation that cause contractures and limit motion of one or more extremities or the trunk and preclude effective operation of an automobile.

This bill:

1) Specifies that, on and after July 1, 2020, and before July 1, 2030, for purposes of the exemptions described above, physically handicapped persons include eligible persons with a severe burn injury, as those terms are defined in existing federal law.

2) Provides that, notwithstanding Section 2230 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse any local agencies for sales and use tax revenues lost by them pursuant to this bill.

BACKGROUND

State law includes a state and local sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons (SB 2175, Wilson, 1978). The exemption is also available to disabled persons or disabled veterans for portions of a vehicle modified for physically handicapped persons, so long as the purchaser has been issued a distinguishing license plate or placard under the Vehicle Code (SB 522, Russell, 1987). A purchaser simply displays their license plate or placard to the retailer at purchase to apply the exemption. California Department of Tax and Fee Administration (CDTFA) regulation defines exempt items to include, among others:

• An interlock system;

• Upper torso restraints;

• Airbags of a unique type to raise or lower the vehicle for loading or unloading;

• Running boards on the lower side of vehicle;

• Bolt cams used to restrain a wheelchair inside a van;

• Seat belts;

• Tire carriers to hold a spare that is installed within reach of a handicapped person;

• AC lights to illuminate the ramp or elevator area;

• Hardware for privacy curtains; and

• Air compressors for use with medical equipment.

The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that provides necessary equipment to enable physically challenged veterans to enter, exit, and safely operate motor vehicles. Equipment includes platform wheelchair lifts, under vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced effort and zero effort steering and braking equipment, and digital driving systems. The VA program does not pay or reimburse state and local taxes, because the federal government considers itself exempt from state and local taxation. As a result, veterans must pay the tax if the equipment does not qualify for the current exemption.

The VA program applies to veterans with a service-connected disability as defined in the United States Code, which includes veterans with severe burn injuries, who are not included in the Vehicle Code definitions used for the sales tax exemption. As a result, veterans with severe burn injuries may not be able to apply the exemption for modifications paid for or reimbursed under the VA program.

Double referred. This bill was placed on consent in the Senate Governance and Finance Committee on 6/19/19.

COMMENT

Author’s Statement. According to the Author, “California is privileged to be a home to more veterans than any other state in the country. According to the U.S. Department of Veteran Affairs, approximately 390,864 disabled veterans reside in the state. It is important that California take care of its veterans and eliminate any barrier that may prevent former service members from living a fulfilling life. Physically disabled veterans often require add-on automotive equipment to help them safely enter, exit, or operate a motor vehicle. While sales tax exemptions on this equipment exist for physically disabled veterans, the exemption does not apply to veterans who are disabled from severe burns. This bill would expand current exemption language to ensure that all disabled veterans, including those with severe burns, are able to more easily purchase vital adaptive automotive equipment.”

Previous/Related Legislation. SB 522 (Russel, Statutes of 1987, Chapter 1471), provided state and local sales and use tax exemptions for disabled persons or disabled veterans for portions of a vehicle modified for physically handicapped persons, so long as the purchaser has been issued a distinguishing license plate or placard under the Vehicle Code.

SB 2175 (Wilson, 1978), provided state and local sales and use tax exemptions for items and materials used to modify a vehicle for physically handicapped persons.

POSITIONS

Sponsor: Author.

Support: American GI Forum

AMVETS – Department of California

California Association of County Veterans Services Officers

California State Commanders Veterans Council

Vietnam Veterans of America – California State Chapter

Oppose: None on file.

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Sales and use taxes: exemption: vehicle modifications: physically handicapped persons: veterans

Expands a current sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons to include veterans with severe burns.

Background

Sales and Use Taxes. State law imposes the sales tax on every retailer “engaged in business in this state” that sells tangible personal property, and requires them to register with the California Department of Tax and Fee Administration (CDTFA), as well as collect the appropriate tax at purchase and remit the amount to CDFTA. Sales tax applies whenever a retail sale occurs, which is generally any sale other than one for resale in the regular course of business. The current rate is 7.25% as shown in the table below. Additionally, cities, counties, and specified special districts may increase the sales and use tax, also known as district or transactions and use taxes.

Unless the purchaser pays the sales tax to the retailer, he or she is liable for the use tax, which the law imposes on any person consuming tangible personal property in the state. The use tax is the same rate as the sales tax, and also like the sales tax, must be remitted on or before the last day of the month following the quarterly period in which the person made the purchase.

State law includes a state and local sales and use tax exemption for items and materials used to modify a vehicle for physically handicapped persons (SB 2175, Wilson, 1978). The exemption is also available to disabled persons or disabled veterans for portions of a vehicle modified for physically handicapped persons, so long as the purchaser has been issued a distinguishing license plate or placard under the Vehicle Code (SB 522, Russell, 1987). A purchaser simply displays their license plate or placard to the retailer at purchase to apply the exemption. CDTFA regulation defines exempt items to include, among others:

• An interlock system;
• Upper torso restraints;
• Airbags of a unique type to raise or lower the vehicle for loading or unloading;
• Running boards on the lower side of vehicle;
• Bolt cams used to restrain a wheelchair inside a van;
• Seat belts;
• Tire carriers to hold a spare that is installed within reach of a handicapped person;
• AC lights to illuminate the ramp or elevator area;
• Hardware for privacy curtains; and
• Air compressors for use with medical equipment.

The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that provides necessary equipment to enable physically challenged veterans to enter, exit, and safely operate motor vehicles. Equipment includes platform wheelchair lifts, under vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced effort and zero effort steering and braking equipment, and digital driving systems. The VA program does not pay or reimburse state and local taxes, because the federal government considers itself exempt from state and local taxation. As a result, veterans must pay the tax if the equipment does not qualify for the current exemption.

The VA program applies to veterans with a service-connected disability as defined in the United States Code, which includes veterans with severe burn injuries, who are not included in the Vehicle Code definitions used for the sales tax exemption. As a result, veterans with severe burn injuries may not be able to apply the exemption for modifications paid for or reimbursed under the VA program. The author wants to expand the current exemption for equipment to veterans with severe burn injuries.

Proposed Law

Assembly Bill 1257 expands the current state and local sales and use tax exemption to include veterans with severe burn injuries. The expanded exemption commences on July 1, 2020, and sunsets July 1, 2030. The measure defines several terms, and includes provisions intended to comply with Section 41 of the Revenue and Taxation Code.

State Revenue Impact

CDTFA estimates that the April 10^th version of AB 1257 resulted in state and local revenue losses of $255,000 annually; an estimate of this version is pending.

Comments

1. Purpose of the bill. According to the author, “California is privileged to be a home to more veterans than any other state in the country. According to the U.S. Department of Veteran Affairs, approximately 390,864 disabled veterans reside in the state. It is important that California take care of its veterans and eliminate any barrier that may prevent former service members from living a fulfilling life. Physically disabled veterans often require add-on equipment to help them safely enter, exit, or operate a motor vehicle. By eliminating sales tax on this equipment, this bill will increase access to invaluable tools that will help California’s disabled veterans live productive and fulfilling lives.”

2. Revenue loss. AB 1257 expands a current state and local sales and use tax exemption, which could result in revenue losses to the state and local agencies. As a result, the state and local agencies may have to reduce spending or increase taxes to match the revenue foregone as a result of the bill. The Committee may wish to consider whether the bill is worth the tradeoff of spending cuts or raising taxes, or both.

3. Section 41. In 2014, Governor Brown signed SB 1335 (Leno, 2014), which added Section 41 to the Revenue and Taxation Code. In the hopes of applying the same level of review used for government spending programs to tax expenditure programs, including tax credits, Section 41 requires any bill introduced on or after January 1, 2015, that allows a new income tax credit to contain specific goals, purposes, and objectives that the tax credit will achieve. In addition, Section 41 requires detailed performance indicators for the Legislature to use when measuring whether the tax credit meets its goals, purposes, and objectives. This year, the Assembly Revenue and Taxation Committee adopted a new policy, requiring that all new tax expenditure proposals including sales and use tax exemptions, comply with Section 41’s requirements. AB 1257 state legislative intent to apply the requirements of Section 41.

4. Gut and amend. As approved by the Assembly, AB 1257 enacted a new state and local sales and use tax exemption for veterans with service-connected disabilities purchasing add-on automotive adaptive equipment under the VA’s program. On June 12^th, the author amended the bill to remove these provisions, and instead insert the current ones, which expand the existing exemption.

5. Double-referred. The Senate Rules Committee ordered a double-referral of AB 1257: first to the Committee on Governance and Finance to consider its tax provisions, and second to the Committee on Veterans Affairs to consider its implications for veterans.

Assembly Actions

Not relevant to this version of the bill.

+

Support and Opposition

(6/14/19)

Support: American GI Forum, AMVETS – Department of California, California Association of County Veterans Services Officers, California State Commanders Veterans Council, Vietnam Veterans of America – California State Chapter.

Opposition: Unknown.

--END--

Date of Hearing: May 16, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1257

Author:(Salas) – As Amended Ver:April 10, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill establishes, from July 1, 2020 until July 1, 2030, a sales and use tax (SUT) exemption for add-on automotive equipment (such as wheelchair lifts, power seats and voice-activated controls) sold to disabled veterans.

FISCAL EFFECT:

1. Annual General Fund revenue loss of approximately $120,000.
2. Minor and absorbable costs to the California Department of Tax and Fee Administration to administer the proposed SUT exemption and to report the required summary data to the Legislative Analyst’s Office for aggregation and submission to the Legislature.

COMMENTS:

1. Purpose. According to the author, this bill will “increase access to invaluable items that will help California’s disabled veterans live productive and fulfilling lives.” The author notes there are approximately 390,000 disabled veterans living in California, and many physically disabled veterans need add-on equipment to help them safely enter and operate a vehicle.
2. Other programs. Disabled veterans can access a patchwork of programs that offer direct financial assistance to help them travel. Those programs include:
   1. The federal Automobile Adaptive Equipment Program: The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that, among other things, provides equipment to help veterans with disabilities enter, exit and safely operate motor vehicles. The program provides veterans with access to necessary equipment including platform wheelchair lifts, under-vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced-effort and zero-effort steering and braking equipment, and digital driving systems.
   2. California Department of Veteran Affairs’ vehicle reimbursement. The state does not have a comparable equipment program to the VA program, but does provide some targeted assistance. For example, the state may reimburse disabled veterans for the use of a wheelchair van to access health care services.
3. Washington State. AB 1257 is similar to a law in Washington State that took effect in 2013. The policy was subsequently extended by HB 2269, Chapter 130, Laws of 2018, until July 1, 2028. Unlike AB 1257, HB 2269 contained additional restrictions on the proposed exemption: (a) the equipment must be prescribed by a doctor, and (b) the VA must reimburse the buyer for the purchase.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: May 6, 2019

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Autumn R. Burke, Chairwoman

ABPCA Bill Id:AB 1257 (

Author:Salas) – As Amended Ver:April 10, 2019

FOR VOTE ONLY

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Sales and use taxes: exemption: adaptive automotive equipment: disabled veterans

SUMMARY: Provides a complete sales and use tax (SUT) exemption, on and after July 1, 2020, and before July 1, 2030, for "add-on automotive adaptive equipment" sold to a "qualified person". Specifically, this bill:

1. Defines "add-on automotive adaptive equipment" to mean equipment installed in, and modifications made to, a motor vehicle that are necessary to assist physically challenged persons to enter, exit, or safely operate a motor vehicle.
2. Provides that "add-on automotive adaptive equipment" includes, without limitation, wheelchair lifts, wheelchair restraints, ramps, under vehicle lifts, power door openers, power seats, lowered floors, raised roofs, raised doors, hand controls, left foot gas pedals, chest and shoulder harnesses, parking brake extensions, dual battery systems, steering devices, reduced and zero effort steering and braking, voice-activated controls, and digital driving systems.
3. Provides that "add-on automotive adaptive equipment" does not include motor vehicles and equipment installed in a motor vehicle by the manufacturer of the motor vehicle.
4. Defines a "qualified person" as a veteran who has a disability that is service connected, as defined in Section 101 of Title 38 of the United States Code.
5. Provides that no exemption shall be allowed unless the qualified person provides the seller with an exemption certificate, completed in accordance with any instructions or regulations prescribed by the California Department of Tax and Fee Administration (CDTFA).
6. Requires sellers to retain a copy of any exemption certificate provided.
7. Provides that, notwithstanding existing law, the state shall not reimburse any local agency for any SUT revenues lost as a result of this exemption.
8. Takes immediate effect as a tax levy.
9. Sunsets the exemption provisions on January 1, 2031.
10. Contains the following legislative findings:
    1. The goal of this exemption is to remove fiscal barriers for disabled veterans who seek to purchase adoptive automotive equipment. The objective of this bill is to enable more disabled veterans to purchase adaptive automotive equipment.
    2. The Legislature will measure the success of this bill in meeting that goal by evaluating the number of qualified persons who have applied for exemption certificates with CDTFA.
    3. CDTFA shall compile a list of qualified persons who have successfully obtained exemption certificates and report to the Legislative Analyst's Office (LAO) on or before January 1, 2021, and on or before January 1 each year thereafter until January 1, 2031. The LAO shall report it to the Legislature. The information in the LAO's report shall be compiled in an aggregate or anonymized manner to preserve confidentiality.

EXISTING LAW:

1. Imposes a sales tax on retailers for the privilege of selling tangible personal property (TPP), absent a specific exemption. The tax is based upon the retailer's gross receipts from TPP sales in this state.
   
2. Imposes a complimentary use tax on the storage, use, or other consumption of TPP purchased out-of-state and brought into California. The use tax is imposed on the purchaser; and unless the purchaser pays the use tax to an out-of-state retailer registered to collect California's use tax, the purchaser remains liable for the tax. The use tax is set at the same rate as the state's sales tax and must generally be remitted to the CDTFA.

FISCAL EFFECT: Pending

COMMENTS:

1. The author has provided the following statement in support of this bill:

California is privileged to be a home to more veterans than any other state in the country. Within this group are approximately 390,864 disabled veterans according to the U.S. Department of Veterans Affairs. It is important that California take care of its veterans and eliminate any barrier that may prevent current or former servicemembers from living a fulfilling life. Physically disabled veterans often require add-on equipment to help them safely enter, exit, or operate a motor vehicle. This bill would add Section 6372 to the Revenue and Taxation Code to exempt sales tax on add-on automotive adaptive equipment sold to any disabled veteran […] in California. By eliminating sales tax on this equipment, this bill will increase access to invaluable items that will help California's disabled veterans live productive and fulfilling lives.

1. This bill is supported by the American GI Forum of California, which notes:

Some veterans who are physically disabled require add-on automotive adaptive equipment which allows them to enter, exit, or safely operate a motor vehicle despite being physically challenged. In a state like California where the primary mode of transportation is overwhelmingly the use of single-occupant vehicles, the ability to transport oneself with ease and safety is a basic necessity.

Automotive adaptive equipment provides an invaluable function that enables disabled veterans to complete everyday tasks such as driving to and from work, buying groceries, or attending medical appointments.

Costs can often create a prohibitive barrier for California's disabled veterans, many of whom may be living on a fixed income. It is important that California help ease financial burdens for disabled veterans when they are purchasing something as paramount to daily life as automotive adaptive equipment.

1. Committee Staff Comments
   1. What is a "tax expenditure"? Existing law provides various credits, deductions, exclusions, and exemptions for particular taxpayer groups. In the late 1960s, U.S. Treasury officials began arguing that these features of the tax law should be referred to as "expenditures" since they are generally enacted to accomplish some governmental purpose and there is a determinable cost associated with each (in the form of foregone revenues).
      

As the Department of Finance notes in its annual Tax Expenditure Report, there are several key differences between tax expenditures and direct expenditures. First, tax expenditures are reviewed less frequently than direct expenditures. Second, there is generally no control over the amount of revenue losses associated with any given tax expenditure. Finally, it should also be noted that, once enacted, it takes a two-thirds vote to rescind an existing tax expenditure absent a sunset date. This effectively results in a "one-way ratchet" whereby tax expenditures can be conferred by majority vote, but cannot be rescinded, irrespective of their efficacy or cost, without a supermajority vote.

• 1. An overview of the SUT Law: The SUT represents the state's second largest source of General Fund (GF) revenues. Nevertheless, the past 70 years have seen a dramatic reduction in the state's reliance on the SUT and a corresponding increase in its reliance on personal income tax revenues. In FY 2019-20, SUT revenues are estimated to comprise only 19% of the state's GF revenues, down from nearly 60% in FY 1950-51.
  2. What accounts for the state's reduced reliance on SUT revenues? The SUT Law was enacted in a very different era. In the 1930s, California's economy was largely dominated by manufacturing, and residents mostly bought and sold tangible goods. Thus, in establishing the base for a new consumption tax, it made sense to impose the tax on sales of TPP, defined as personal property that may be "seen, weighed, measured, felt, or touched." Over the past 80 years, however, California's economy has seen dramatic growth in the service and information sectors, resulting in a significant erosion of the SUT base. For example, the Commission on the 21^st Century Economy noted that spending on taxable goods represented 34.6% of personal income in 2008, down from 55.4% in 1980. As a result, tax experts and economists from across the political spectrum argue that California should expand its SUT base.

It could be argued that, while well-intentioned, additional SUT exemptions further erode an already shrinking SUT base. This, in turn, increases fiscal pressures to maintain or even increase California's relatively high SUT rate. High rates arguably promote non-compliance and encourage out-of-state purchases, placing California retailers at a competitive disadvantage. High rates also risk impacting consumer decision-making, which runs counter to widely accepted principles of sound tax policy.

• 1. What would this bill do? On and after July 1, 2020, and before July 1, 2030, this bill would exempt from SUT add-on automotive adaptive equipment sold to a veteran who has a disability that is service connected, as defined. According to the author, many disabled veterans require this equipment, which allows them to enter, exit, or safely operate a motor vehicle.
  2. The federal Automobile Adaptive Equipment Program: The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that, among other things, provides necessary equipment to enable physically challenged veterans to enter, exit, and safely operate motor vehicles. The program provides veterans with access to necessary equipment including platform wheelchair lifts, under vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced effort and zero effort steering and braking equipment, and digital driving systems. Under the program, however, state and local taxes (including SUT) on adaptive equipment is neither payable nor reimbursable. Specifically, the VA notes that, according to advice from the Office of General Counsel it is a fundamental legal principle that the Federal Government is immune from both state and local taxes on its property and operations. 
  3. Policy on tax expenditures: SB 1335 (Leno), Chapter 845, Statutes of 2014, added Revenue and Taxation Code (R&TC) Section 41, which recognized that the Legislature should apply the same level of review used for government spending programs to tax credits introduced on or after January 1, 2015.  This Committee has recently adopted a new policy, requiring that all new tax expenditure proposals (including SUT exemptions) comply with the requirements of R&TC Section 41.  A tax expenditure proposal must outline specific goals, purposes, and objectives that the tax expenditure will achieve, along with detailed performance indicators for the Legislature to use when measuring whether the tax expenditure meets those stated goals, purposes, and objectives.  A tax expenditure bill will not be eligible for a Committee vote unless it has complied with these requirements.  This bill has been amended to specify the goals being advanced by providing a SUT exemption for adaptive automotive equipment.  
     
     In addition to the R&TC Section 41 requirements, this Committee's policy also requires that all tax expenditure proposals contain an appropriate sunset provision to be eligible for a vote.  According to the new policy, an "appropriate sunset provision" shall mean five years, except in the case of a tax expenditure measure providing relief to California veterans, in which case "appropriate sunset provision" shall mean ten years.  This bill has been amended to add a ten-year sunset, consistent with this Committee's policy for tax expenditures assisting veterans.

REGISTERED SUPPORT / OPPOSITION:

Support

American GI Forum of California

AMVETS-Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Vietnam Veterans of America-California State Council

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098

Date of Hearing: April 1, 2019

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Autumn R. Burke, Chairwoman

ABPCA Bill Id:AB 1257 (

Author:Salas) – As Amended Ver:March 25, 2019

FOR TESTIMONY ONLY

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Sales and use taxes: exemption: adaptive automotive equipment: disabled veteran or member of the Armed Forces

SUMMARY: Provides a complete sales and use (SUT) tax exemption, on and after July 1, 2020, for "add-on automotive adaptive equipment" sold to a "qualified person". Specifically, this bill:

1. Defines "add-on automotive adaptive equipment" to mean equipment installed in, and modifications made to, a motor vehicle that are necessary to assist physically challenged persons to enter, exit, or safely operate a motor vehicle.
2. Provides that "add-on automotive adaptive equipment" includes, without limitation, wheelchair lifts, wheelchair restraints, ramps, under vehicle lifts, power door openers, power seats, lowered floors, raised roofs, raised doors, hand controls, left foot gas pedals, chest and shoulder harnesses, parking brake extensions, dual battery systems, steering devices, reduced and zero effort steering and braking, voice-activated controls, and digital driving systems.
3. Provides that "add-on automotive adaptive equipment" does not include motor vehicles and equipment installed in a motor vehicle by the manufacturer of the motor vehicle.
4. Defines a "qualified person" as a veteran, or member of the United States Armed Forces serving on active duty, who is disabled, regardless of whether the disability is service connected, as defined in Section 101 of Title 38 of the United States Code.
5. Provides that no exemption shall be allowed unless the qualified person provides the seller with an exemption certificate, completed in accordance with any instructions or regulations prescribed by the California Department of Tax and Fee Administration (CDTFA).
6. Requires sellers to retain a copy of any exemption certificate provided.
7. Provides that, notwithstanding existing law, the state shall not reimburse any local agency for any SUT revenues lost as a result of this exemption.
8. Takes immediate effect as a tax levy.

EXISTING LAW:

1. Imposes a sales tax on retailers for the privilege of selling tangible personal property (TPP), absent a specific exemption. The tax is based upon the retailer's gross receipts from TPP sales in this state.
   
2. Imposes a complimentary use tax on the storage, use, or other consumption of TPP purchased out-of-state and brought into California. The use tax is imposed on the purchaser; and unless the purchaser pays the use tax to an out-of-state retailer registered to collect California's use tax, the purchaser remains liable for the tax. The use tax is set at the same rate as the state's sales tax and must generally be remitted to the CDTFA.

FISCAL EFFECT: It is estimated that this bill would reduce state and local revenues by $255,000 in fiscal year 2020-21.

COMMENTS:

1. The author has provided the following statement in support of this bill:

California is privileged to be a home to more veterans than any other state in the country. Within this group are approximately 390,864 disabled veterans according to the U.S. Department of Veterans Affairs. It is important that California take care of its veterans and eliminate any barrier that may prevent current or former servicemembers from living a fulfilling life. Physically disabled veterans often require add-on equipment to help them safely enter, exit, or operate a motor vehicle. This bill would add Section 6372 to the Revenue and Taxation Code to exempt sales tax on add-on automotive adaptive equipment sold to any disabled veteran or active duty servicemember in California. By eliminating sales tax on this equipment, this bill will increase access to invaluable items that will help California's disabled veterans live productive and fulfilling lives."

1. This bill is supported by the American GI Forum of California, which notes:

Many veterans who are physically disabled require add-on automotive adaptive equipment which allows them to enter, exit, or safely operate a motor vehicle despite being physically challenged. In a state like California where the primary mode of transportation is overwhelmingly the use of single-occupant vehicles, the ability to transport oneself with ease and safety is a basic necessity.

Automotive adaptive equipment provides an invaluable function that enables disabled veterans to complete everyday tasks such as driving to and from work, buying groceries, or attending medical appointments.

Costs can often create a prohibitive barrier for California's disabled veterans who may be living on a fixed income. It is important that California help ease financial burdens for disabled veterans when they are purchasing something as paramount to daily life as automotive adaptive equipment.

1. Committee Staff Comments
   1. What is a "tax expenditure"? Existing law provides various credits, deductions, exclusions, and exemptions for particular taxpayer groups. In the late 1960s, U.S. Treasury officials began arguing that these features of the tax law should be referred to as "expenditures" since they are generally enacted to accomplish some governmental purpose and there is a determinable cost associated with each (in the form of foregone revenues).
      

As the Department of Finance notes in its annual Tax Expenditure Report, there are several key differences between tax expenditures and direct expenditures. First, tax expenditures are reviewed less frequently than direct expenditures. Second, there is generally no control over the amount of revenue losses associated with any given tax expenditure. Finally, it should also be noted that, once enacted, it takes a two-thirds vote to rescind an existing tax expenditure absent a sunset date. This effectively results in a "one-way ratchet" whereby tax expenditures can be conferred by majority vote, but cannot be rescinded, irrespective of their efficacy or cost, without a supermajority vote.

• 1. An overview of the SUT Law: The SUT represents the state's second largest source of General Fund (GF) revenues. Nevertheless, the past 70 years have seen a dramatic reduction in the state's reliance on the SUT and a corresponding increase in its reliance on personal income tax revenues. In FY 2019-20, SUT revenues are estimated to comprise only 19% of the state's GF revenues, down from nearly 60% in FY 1950-51.
  2. What accounts for the state's reduced reliance on SUT revenues? The SUT Law was enacted in a very different era. In the 1930s, California's economy was largely dominated by manufacturing, and residents mostly bought and sold tangible goods. Thus, in establishing the base for a new consumption tax, it made sense to impose the tax on sales of TPP, defined as personal property that may be "seen, weighed, measured, felt, or touched." Over the past 80 years, however, California's economy has seen dramatic growth in the service and information sectors, resulting in a significant erosion of the SUT base. For example, the Commission on the 21^st Century Economy noted that spending on taxable goods represented 34.6% of personal income in 2008, down from 55.4% in 1980. As a result, tax experts and economists from across the political spectrum argue that California should expand its SUT base.

It could be argued that, while well-intentioned, additional SUT exemptions further erode an already shrinking SUT base. This, in turn, increases fiscal pressures to maintain or even increase California's relatively high SUT rate. High rates arguably promote non-compliance and encourage out-of-state purchases, placing California retailers at a competitive disadvantage. High rates also risk impacting consumer decision-making, which runs counter to widely accepted principles of sound tax policy.

• 1. What would this bill do? Beginning July 1, 2020, this bill would exempt from SUT add-on automotive adaptive equipment sold to a veteran, or an active duty member of the United States Armed Forces, who is disabled. According to the author, many disabled veterans require this equipment, which allows them to enter, exit, or safely operate a motor vehicle.
  2. The federal Automobile Adaptive Equipment Program: The United States Department of Veterans Affairs (VA) administers an Automobile Adaptive Equipment program that, among other things, provides necessary equipment to enable physically challenged veterans to enter, exit, and safely operate motor vehicles. The program provides veterans with access to necessary equipment including platform wheelchair lifts, under vehicle lifts, power door openers, lowered floors and raised roofs, raised doors, hand controls, left-foot gas pedals, reduced effort and zero effort steering and braking equipment, and digital driving systems. Under the program, however, state and local taxes (including SUT) on adaptive equipment is neither payable nor reimbursable. Specifically, the VA notes that, according to advice from the Office of General Counsel it is a fundamental legal principle that the Federal Government is immune from both state and local taxes on its property and operations. 
  3. Breadth of program: It should be noted that, in its current form, this bill appears more expansive than the federal program. As a preliminary matter, the federal program appears targeted toward veterans, while this bill provides a SUT exemption to both veterans and active duty members of the United States Armed Forces. Additionally, Committee staff has been advised that the federal program limits benefits available to veterans with non-service related disabilities to equipment allowing ingress and egress from a vehicle. This bill, in turn, provides a SUT exemption covering a broad range of equipment without making a distinction between service and non-service related disabilities. Establishing consistency between the state and federal benefits, however, would ease administration and enable the CDTFA to determine exemption eligibility by easy reference to the VA's equipment approval form (VA 10-1394).
  4. Policy on tax expenditures: SB 1335 (Leno), Chapter 845, Statutes of 2014, added Revenue and Taxation Code (R&TC) Section 41, which recognized that the Legislature should apply the same level of review used for government spending programs to tax credits introduced on or after January 1, 2015.  This Committee has recently adopted a new policy, requiring that all new tax expenditure proposals (including SUT exemptions) comply with the requirements of R&TC Section 41.  A tax expenditure proposal must outline specific goals, purposes, and objectives that the tax expenditure will achieve, along with detailed performance indicators for the Legislature to use when measuring whether the tax expenditure meets those stated goals, purposes, and objectives.  A tax expenditure bill will not be eligible for a Committee vote unless it has complied with these requirements.  The author may wish to amend this bill to specify the goals being advanced by providing a SUT exemption for adaptive automotive equipment.  
     
     In addition to the R&TC Section 41 requirements, this Committee's policy also requires that all tax expenditure proposals contain an appropriate sunset provision to be eligible for a vote.  According to the new policy, an "appropriate sunset provision" shall mean five years, except in the case of a tax expenditure measure providing relief to California veterans, in which case "appropriate sunset provision" shall mean ten years.  This bill, as currently drafted, does not comply with the Committee's policy. As such, the author may wish to amend this bill to add a ten-year sunset, consistent with this Committee's policy for tax expenditures assisting veterans.

REGISTERED SUPPORT / OPPOSITION:

Support

American GI Forum of California

AMVETS-Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Kern River Blue Star Moms

Veterans of Foreign Wars – Wasco Post No. 6742

Vietnam Veterans of America-California State Council

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098