Existing 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 defines the term sale for these purposes.

This bill would make nonsubstantive changes to that provision.

Date of Hearing: April 29, 2024

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:AB 2861 (

Author:Wallis) – As Amended Ver:March 18, 2024

SUSPENSE

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Personal income tax: credit: gun safe

SUMMARY: Allows, under the Personal Income Tax (PIT) Law, a credit of up to $300 for a taxpayer who has purchased a "gun safe", as specified. Specifically, this bill:

1. Allows, for taxable years beginning on or after January 1, 2025, and before January 1, 2030, a credit equal to the amount paid or incurred by a taxpayer during the taxable year for the purchase of one "gun safe" for use in a residential unit located in the state.
2. Provides that the maximum credit amount in any taxable year shall not exceed $300 and that only one credit may be claimed for taxpayers filing a joint return.
3. Specifies that any taxpayer is eligible to receive the credit once; taxpayers are ineligible if they received this credit in any prior taxable year.
4. Allows any unused credit amounts to be carried forward indefinitely and applied to subsequent taxable years until the credit is exhausted.
5. Defines a "gun safe" as a new safe that is specifically manufactured to store firearms, that is constructed of steel or a material of equal or greater strength, and that has a combination or key lock listed by the Underwriters' Laboratories Incorporated.
6. Finds and declares the following for the purposes of satisfying the requirements of Revenue and Taxation Code (R&TC) Section 41:
   1. The specific goals, purposes, and objectives of this bill are to assist California residents by providing for the safe storage of guns that they own and to increase the number of Californians who safely store those guns, which will lower the likelihood of accidental gunshot wounds, particularly with respect to children, and will reduce theft of firearms from households for subsequent use in crimes; and,
   2. To measure whether this bill achieves its intended purpose, the Franchise Tax Board (FTB) shall prepare a written report summarizing the number of taxpayers claiming the credit.
7. Requires the FTB to provide the written report required by this bill to the Legislature by December 1, 2026, and annually thereafter.
8. Takes immediate effect as a tax levy.
9. Sunsets the credit's statutory provisions on December 1, 2030.

EXISTING LAW:

1. Allows various tax credits under the PIT Law and the Corporation Tax (CT) Law. These credits are generally designed to encourage socially beneficial behavior or to provide relief to taxpayers who incur specified expenses.
2. Requires any bill authorizing a new credit to contain all of the following:
   1. Specific goals, purposes, and objectives that the tax credit will achieve;
   2. Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill; and,
   3. Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. The requirements shall include the specific data and baseline measurements to be collected and remitted in each year the credit is in effect, for the Legislature to measure the change in performance indicators, and the specific taxpayers, state agencies, or other entities required to collect and remit data. (R&TC Section 41.)
3. Imposes an excise tax of 11% on the gross receipts from the retail sale of a firearm, firearm precursor part, and ammunition, as specified. (R&TC Section 36001 et seq.)
4. Requires firearm owners to ensure that guns in their possession are stored unloaded and in a place that is not accessible by children and adults who are prohibited from possessing a gun. A violation of this provision may result in a misdemeanor or a felony if the child or adult accesses the firearm and causes injury or death. (Penal Code Section 25100.)
5. Provides that no firearm may be sold, transferred, or manufactured within California unless that firearm is accompanied by a California Department of Justice (DOJ)-approved firearms safety device or proof that the purchaser owns a gun safe that meets regulatory standards established by the California DOJ. (Penal Code Section 23620 et seq.)

FISCAL EFFECT: The FTB estimates General Fund revenue losses of $13 million in fiscal year (FY) 2024-25, $27 million in FY 2025-26, and $31 million in FY 2026-27.

COMMENTS:

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

Increasing access to gun safes in California can significantly enhance community safety by promoting responsible firearm storage practices. Gun safes provide a secure means of storing firearms, reducing the risk of unauthorized access by children, burglars, or individuals at risk of self-harm. By encouraging the widespread adoption of gun safes, we can mitigate the incidence of accidental shootings, prevent firearm-related tragedies, and decrease the likelihood of stolen firearms being used in crimes. This proactive approach fosters a safer environment for all Californians, aligning with efforts to promote responsible gun ownership and protect public well-being.

1. Writing in support of this bill, the Peace Officers' Research Association of California (PORAC), notes, in part:

We are pleased to inform you of our support for AB 2861 regarding tax credits. The Personal Income Tax Law allows various credits against the taxes imposed by that law. This bill would allow a credit against those taxes for each taxable year beginning on or after January 1, 2025, and before January 1, 2030, in an amount equal to the amount paid or incurred, not to exceed $300, during the taxable year for the purchase of one gun safe, as defined, for use in a residential unit located in the state.

1. Writing in opposition to this bill, the California Tax Reform Association, notes, in part:

As a matter of policy, tax expenditure programs should seek to incentivize behavior that would not otherwise occur without the tax benefit. As a matter of responsible gun ownership, to promote safety and to reduce liability, residential gun owners should already be highly incentivized to store their firearms appropriately in a locked safe. We do not believe this program will incentivize responsible behavior that would not otherwise occur and, one could argue, should be a mandatory aspect of responsible gun ownership.

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 typically 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. Firearm deaths are increasing: According to the Pew Research Center, about 4 in 10 U.S. adults say they live in a household with a gun, including 32% who say they personally own one.^[1] Further, more Americans died of gun-related injuries in 2021 than in any other year on record according to the latest available statistics from the Centers for Disease Control and Prevention (CDC). Those statistics included record numbers of both gun murders and gun suicides. Additionally, the number of children and teens killed by gunfire in the United States increased 50% between 2019 and 2021.^[2]
     
  2. Responsible firearm storage: California recognizes the importance of safe storage by requiring that all firearms sold in California be accompanied by a DOJ-approved firearms safety device or proof that the purchaser owns a gun safe that meets regulatory standards established by the DOJ.^[3] There are a variety of safety and storage devices currently available to the public in a wide range of prices. Some devices are locking mechanisms designed to keep the firearm from being loaded or fired, but do not prevent the firearm from being handled or stolen. There are also locking storage containers that hold the firearm out of sight.
     
     Smaller lock boxes and larger gun safes are two of the most common types of locking storage containers. One advantage of lock boxes and gun safes is that they are designed to completely prevent unintended handling and removal of a firearm. Lock boxes are generally constructed of sturdy, high-grade metal opened by either a key or combination lock. Gun safes are quite heavy, usually weighing at least 50 pounds. While gun safes are typically the most expensive firearm storage devices, they are generally more reliable and secure.^[4] For maximum safety, it is recommended that firearm owners use both a firearm safety device and a locking storage container to store their unloaded firearm.
  3. An incentive or reward? Typically, tax credits are provided as a matter of legislative grace to encourage taxpayers to behave in ways they might not absent a financial incentive. This credit is intended to encourage gun owners to purchase a product that can reduce the risks of negligent discharges and theft. Given the potentially devastating consequences relating to unsecured firearms, Committee staff questions the degree to which this credit would actually serve as an incentive for behaviors that responsible firearm owners are already undertaking of their own accord. Additionally, this credit may serve to subsidize behaviors that are already required by law.
     
  4. Committee's tax expenditure policy: Both R&TC Section 41 and Committee policy require any tax expenditure bill to 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. 

In its current form, this bill states that the credit is designed to assist California residents by providing for the safe storage of guns that they own and to increase the number of Californians who safely store those guns, which will lower the likelihood of accidental gunshot wounds, particularly with respect to children, and will reduce theft of firearms from households for subsequent use in crimes. The effectiveness of the credit will be measured by the number of individuals claiming the credit.

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 this policy, an "appropriate sunset provision" means 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, complies with the Committee's policy on sunset dates.

• 1. Related legislation:
     1. AB 28 (Gabriel), Chapter 231, Statutes of 2023, imposed an excise tax of 11% on the gross receipts from the retail sale of a firearm, firearm precursor part, and ammunition, as specified.
     2. SB 243 (Seyarto) would have exempted "gun safety systems", as specified, from the state General Fund component of the Sales and Use Tax Law. SB 243 failed passage in the Senate Governance and Finance Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Peace Officers' Research Association of California (PORAC)

Opposition

California Tax Reform Association

California Teachers Association

Analysis Prepared by: Wesley Whitaker / REV. & TAX. / (916) 319-2098

1. Schaeffer, Key facts about Americans and guns, Pew Research Center (September 13, 2023). https://www.pewresearch.org/short-reads/2023/09/13/key-facts-about-americans-and-guns/. ↑

2. Gramlich, Gun deaths among U.S. children and teens rose 50% in two years, Pew Research Center (April 6, 2023). https://www.pewresearch.org/short-reads/2023/04/06/gun-deaths-among-us-kids-rose-50-percent-in-two-years/. ↑

3. Firearm Safety, California Department of Justice, Office of the Attorney General. https://oag.ca.gov/firearms/tips. ↑

4. Rosen, Locked and UN-loaded: The Importance of Safe and Secure Firearm Storage, Johns Hopkins Center for Gun Violence Solutions. https://publichealth.jhu.edu/2023/how-safe-and-secure-gun-storage-reduces-injury-saves-lives. ↑

Date of Hearing: April 8, 2024

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:AB 2861 (

Author:Wallis) – As Amended Ver:March 18, 2024

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Personal income tax: credit: gun safe

SUMMARY: Allows, under the Personal Income Tax (PIT) Law, a credit of up to $300 for a taxpayer who has purchased a "gun safe", as specified. Specifically, this bill:

1. Allows, for taxable years beginning on or after January 1, 2025, and before January 1, 2030, a credit equal to the amount paid or incurred by a taxpayer during the taxable year for the purchase of one "gun safe" for use in a residential unit located in the state.
2. Provides that the maximum credit amount in any taxable year shall not exceed $300 and that only one credit may be claimed for taxpayers filing a joint return.
3. Specifies that any taxpayer is eligible to receive the credit once; taxpayers are ineligible if they received this credit in any prior taxable year.
4. Allows any unused credit amounts to be carried forward indefinitely and applied to subsequent taxable years until the credit is exhausted.
5. Defines a "gun safe" as a new safe that is specifically manufactured to store firearms, that is constructed of steel or a material of equal or greater strength, and that has a combination or key lock listed by the Underwriters' Laboratories Incorporated.
6. Finds and declares the following for the purposes of satisfying the requirements of Revenue and Taxation Code (R&TC) Section 41:
   1. The specific goals, purposes, and objectives of this bill are to assist California residents by providing for the safe storage of guns that they own and to increase the number of Californians who safely store those guns, which will lower the likelihood of accidental gunshot wounds, particularly with respect to children, and will reduce theft of firearms from households for subsequent use in crimes; and,
   2. To measure whether this bill achieves its intended purpose, the Franchise Tax Board (FTB) shall prepare a written report summarizing the number of taxpayers claiming the credit.
7. Requires the FTB to provide the written report required by this bill to the Legislature by December 1, 2026, and annually thereafter.
8. Takes immediate effect as a tax levy.
9. Sunsets the credit's statutory provisions on December 1, 2030.

EXISTING LAW:

1. Allows various tax credits under the PIT Law and the Corporation Tax (CT) Law. These credits are generally designed to encourage socially beneficial behavior or to provide relief to taxpayers who incur specified expenses.
2. Requires any bill authorizing a new credit to contain all of the following:
   1. Specific goals, purposes, and objectives that the tax credit will achieve;
   2. Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill; and,
   3. Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. The requirements shall include the specific data and baseline measurements to be collected and remitted in each year the credit is in effect, for the Legislature to measure the change in performance indicators, and the specific taxpayers, state agencies, or other entities required to collect and remit data. (R&TC Section 41.)
3. Imposes an excise tax of 11% on the gross receipts from the retail sale of a firearm, firearm precursor part, and ammunition, as specified. (R&TC Section 36001 et seq.)
4. Requires firearm owners to ensure that guns in their possession are stored unloaded and in a place that is not accessible by children and adults who are prohibited from possessing a gun. A violation of this provision may result in a misdemeanor or a felony if the child or adult accesses the firearm and causes injury or death. (Penal Code Section 25100.)
5. Provides that no firearm may be sold, transferred, or manufactured within California unless that firearm is accompanied by a California Department of Justice (DOJ)-approved firearms safety device or proof that the purchaser owns a gun safe that meets regulatory standards established by the California DOJ. (Penal Code Section 23620 et seq.)

FISCAL EFFECT: The FTB estimates General Fund revenue losses of $13 million in fiscal year (FY) 2024-25, $27 million in FY 2025-26, and $31 million in FY 2026-27.

COMMENTS:

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

Increasing access to gun safes in California can significantly enhance community safety by promoting responsible firearm storage practices. Gun safes provide a secure means of storing firearms, reducing the risk of unauthorized access by children, burglars, or individuals at risk of self-harm. By encouraging the widespread adoption of gun safes, we can mitigate the incidence of accidental shootings, prevent firearm-related tragedies, and decrease the likelihood of stolen firearms being used in crimes. This proactive approach fosters a safer environment for all Californians, aligning with efforts to promote responsible gun ownership and protect public well-being.

1. Writing in support of this bill, the Peace Officers' Research Association of California (PORAC), notes, in part:

We are pleased to inform you of our support for AB 2861 regarding tax credits. The Personal Income Tax Law allows various credits against the taxes imposed by that law. This bill would allow a credit against those taxes for each taxable year beginning on or after January 1, 2025, and before January 1, 2030, in an amount equal to the amount paid or incurred, not to exceed $300, during the taxable year for the purchase of one gun safe, as defined, for use in a residential unit located in the state.

1. Writing in opposition to this bill, the California Tax Reform Association, notes, in part:

As a matter of policy, tax expenditure programs should seek to incentivize behavior that would not otherwise occur without the tax benefit. As a matter of responsible gun ownership, to promote safety and to reduce liability, residential gun owners should already be highly incentivized to store their firearms appropriately in a locked safe. We do not believe this program will incentivize responsible behavior that would not otherwise occur and, one could argue, should be a mandatory aspect of responsible gun ownership.

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 typically 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. Firearm deaths are increasing: According to the Pew Research Center, about 4 in 10 U.S. adults say they live in a household with a gun, including 32% who say they personally own one.^[1] Further, more Americans died of gun-related injuries in 2021 than in any other year on record according to the latest available statistics from the Centers for Disease Control and Prevention (CDC). Those statistics included record numbers of both gun murders and gun suicides. Additionally, the number of children and teens killed by gunfire in the United States increased 50% between 2019 and 2021.^[2]
     
  2. Responsible firearm storage: California recognizes the importance of safe storage by requiring that all firearms sold in California be accompanied by a DOJ-approved firearms safety device or proof that the purchaser owns a gun safe that meets regulatory standards established by the DOJ.^[3] There are a variety of safety and storage devices currently available to the public in a wide range of prices. Some devices are locking mechanisms designed to keep the firearm from being loaded or fired, but do not prevent the firearm from being handled or stolen. There are also locking storage containers that hold the firearm out of sight.
     
     Smaller lock boxes and larger gun safes are two of the most common types of locking storage containers. One advantage of lock boxes and gun safes is that they are designed to completely prevent unintended handling and removal of a firearm. Lock boxes are generally constructed of sturdy, high-grade metal opened by either a key or combination lock. Gun safes are quite heavy, usually weighing at least 50 pounds. While gun safes are typically the most expensive firearm storage devices, they are generally more reliable and secure.^[4] For maximum safety, it is recommended that firearm owners use both a firearm safety device and a locking storage container to store their unloaded firearm.
  3. An incentive or reward? Typically, tax credits are provided as a matter of legislative grace to encourage taxpayers to behave in ways they might not absent a financial incentive. This credit is intended to encourage gun owners to purchase a product that can reduce the risks of negligent discharges and theft. Given the potentially devastating consequences relating to unsecured firearms, Committee staff questions the degree to which this credit would actually serve as an incentive for behaviors that responsible firearm owners are already undertaking of their own accord. Additionally, this credit may serve to subsidize behaviors that are already required by law.
     
  4. Committee's tax expenditure policy: Both R&TC Section 41 and Committee policy require any tax expenditure bill to 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. 

In its current form, this bill states that the credit is designed to assist California residents by providing for the safe storage of guns that they own and to increase the number of Californians who safely store those guns, which will lower the likelihood of accidental gunshot wounds, particularly with respect to children, and will reduce theft of firearms from households for subsequent use in crimes. The effectiveness of the credit will be measured by the number of individuals claiming the credit.

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 this policy, an "appropriate sunset provision" means 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, complies with the Committee's policy on sunset dates.

• 1. Related legislation:
     1. AB 28 (Gabriel), Chapter 231, Statutes of 2023, imposed an excise tax of 11% on the gross receipts from the retail sale of a firearm, firearm precursor part, and ammunition, as specified.
     2. SB 243 (Seyarto) would have exempted "gun safety systems", as specified, from the state General Fund component of the Sales and Use Tax Law. SB 243 failed passage in the Senate Governance and Finance Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Peace Officers' Research Association of California (PORAC)

Opposition

California Tax Reform Association

Analysis Prepared by: Wesley Whitaker / REV. & TAX. / (916) 319-2098

1. Schaeffer, "Key facts about Americans and guns", Pew Research Center (September 13, 2023). https://www.pewresearch.org/short-reads/2023/09/13/key-facts-about-americans-and-guns/. ↑

2. Gramlich, "Gun deaths among U.S. children and teens rose 50% in two years," Pew Research Center (April 6, 2023). https://www.pewresearch.org/short-reads/2023/04/06/gun-deaths-among-us-kids-rose-50-percent-in-two-years/. ↑

3. "Firearm Safety", California Department of Justice, Office of the Attorney General. https://oag.ca.gov/firearms/tips. ↑

4. Rosen, "Locked and UN-loaded: The Importance of Safe and Secure Firearm Storage", Johns Hopkins Center for Gun Violence Solutions. https://publichealth.jhu.edu/2023/how-safe-and-secure-gun-storage-reduces-injury-saves-lives. ↑