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 of, 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 the sale of fuel and petroleum products sold to a water common carrier for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out-of-state destination, as defined. Existing law repeals this exemption on January 1, 2024.

This bill would extend that exemption until January 1, 2029.

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.

Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would make findings to comply with that provision.

This bill would take effect immediately as a tax levy.

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 of, 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 the sale of fuel and petroleum products sold to a water common carrier for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out-of-state destination, as defined. Existing law repeals this exemption on January 1, 2024.

This bill would extend that exemption until January 1, 2029.

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.

Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would make findings to comply with that provision.

This bill would take effect immediately as a tax levy.

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 of, 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 the sale of fuel and petroleum products sold to a water common carrier for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out-of-state destination, as defined. Existing law repeals this exemption on January 1, 2024.

This bill would delete the above-described January 1, 2024, repeal date, thereby extending operation of this exemption indefinitely. extend that exemption until January 1, 2029.

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.

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 of, 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 the sale of fuel and petroleum products sold to a water common carrier for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out-of-state destination, as defined. Existing law repeals this exemption on January 1, 2024.

This bill would delete the above-described January 1, 2024, repeal date, thereby extending operation of this exemption indefinitely.

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.

 THIRD READING  

Bill No: AB 543

Author: Gipson (D)

Amended: 4/24/23 in Assembly

Vote: 21- Urgency

SENATE GOVERNANCE & FIN. COMMITTEE: 4-2, 6/21/23 (FAIL)

AYES: Caballero, Seyarto, Dahle, Glazer

NOES: Blakespear, Wiener

NO VOTE RECORDED: Durazo, Skinner

SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 7/5/23

AYES: Caballero, Seyarto, Dahle, Durazo, Glazer, Wiener

NOES: Blakespear

NO VOTE RECORDED: Skinner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 9/1/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

ASSEMBLY FLOOR: 73-0, 5/25/23 - See last page for vote

SUBJECT: Sales and Use Tax Law: exemptions: petroleum products: water common carriers

SOURCE: Pacific Merchant Shipping Association

DIGEST:

This bill extends, from January 1, 2024, to January 1, 2029, the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers.

ANALYSIS:

Existing law:

1. Imposes a sales tax on every retailer “engaged in business in this state” that sells tangible personal property, with some exemptions, applying whenever a retail sale occurs.
2. Exempts fuel and petroleum product sales to water common carriers from sales tax when used by the carrier after it has reached its first “out-of-state destination”, until January 1, 2024.
3. Defines the “first out of state destination” as the first point reached outside the state by a carrier where passengers or cargo are added or removed, fuel is transferred, or docking fees are charged.
4. Requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection and reporting requirements.

This bill:

1. Extends from January 1, 2024, to January 1, 2029, the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers, with the exemption continuing to apply only in cases when the fuel is used by the water carrier after it has reached its first out-of-state destination.
2. Makes legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code, including to require the Legislative Analyst Office to analyze specified performance indicators on or before January 1, 2026 to measure whether the exemption meets specified goals.
3. Eliminates references to the State Board of Equalization and replaces them with the California Department of Tax and Fee Administration (CDTFA), which currently administers the Sales and Use Tax (SUT).
4. Makes legislative findings and declarations.

Background

Bunker fuels are sometimes referred to as ‘marine fuels,’ and serve as a common method of powering marine vessels used to deliver cargo nationally and internationally. The Legislature has repealed and re-enacted this exemption on fuel and petroleum product sales to water carriers a number of times, including most recently by reinstating the exemption for water carriers on January 1, 2004, ((SB 808, Karnette, Chapter 712, Statutes of 2003), and extending its sunset from January 1, 2014, to January 1, 2025 (SB 1243, Lowenthal, Chapter 293, Statutes of 2012)).

Comments

SUTs generally apply to goods sold and used in California, whereas they are typically not applied to goods sold in California but immediately exported outside of the state. Bunker fuel falls in between these categories, since it is consumed both while leaving the state and continuing into other territories. Based on this, the LAO stated in its 2001 analysis that a partial bunker fuel exemption as described in this bill “constitutes appropriate treatment.”

On the other hand, suppliers of bunker fuels, including oil refineries, often derive bunker fuels from the residual products of crude oil extraction. Crude oil is a fossil fuel that, when burned for energy, releases greenhouse gases that contribute to climate change.

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

According to the Senate Appropriations Committee:

• CDTFA estimates that this bill would result in a SUT revenue reduction of $25.6 million to $38.4 million for calendar year 2024. Of this amount, the General Fund loss would be $10.6 million to $15.9 million, and the loss to local governments would be $15.0 million to $22.5 million. CDTFA notes that fuel prices are highly volatile and unpredictable; consequently, it cannot project this bill’s revenue loss for the out years.
• One of the destinations of SUT revenue is the 2011 Local Revenue Fund, which provides local governments with public safety realignment money. Under the California Constitution, if the taxes collected by the 2011 Local Revenue Fund sales tax rate (1.0625 percentage points) are reduced or cease to be operative, the State is required to annually offset the reduction. However, this bill would prohibit the State from reimbursing any local agency for any reduction in SUT revenue. Consequently, this bill would result in a cost pressure of $2.9 million to $4.3 million in 2024 related to the prohibited backfill of the 2011 Local Revenue Fund.
• CDTFA would incur minor and absorbable costs to notify affected retailers, and revise regulations and applicable publications.

SUPPORT: (Verified 9/1/23)

Pacific Merchant Shipping Association (source)

American Waterways Operators

California Taxpayers Association

Centerline Logistics Corporation

CSL Americas

International Organization of Masters, Mates, and Pilots

Jacobsen Pilot Service, INC.

San Francisco Bar Pilots

The Vane Brothers Company

OPPOSITION: (Verified 9/1/23)

California Teachers Association

ARGUMENTS IN SUPPORT: According to the author, “AB 543 seeks to extend the tax exemption for the Marine Sales Tax that has been in effect since 2003 and is set to sunset on January 1^st, 2024. The Marine Sales Tax is a levy imposed on all marine fuels that are used to transport critical resources and goods to keep our supply chain running smoothly across the state and nation. If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The Legislative Analyst Office has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels. Reinstating this tax would affect multiple different industries that would result in the loss of wages and jobs for potentially thousands of middle class workers.”

ARGUMENTS IN OPPOSITION: According to the California Teachers Association, “According to the Department of Finance, the state provided over $87 billion in General Fund tax expenditures in 2022-23 (including income, sales and use, corporate and other taxes). This number continues to grow each year. This revenue would have otherwise gone to the General Fund, of which approximately 40 percent would have gone toward Proposition 98 for K-14 education. This means that approximately $33 billion is redirected away from schools and community colleges each year. While we understand these bills are well intended, CTA does not support this approach, as it would reduce overall funding for education. CTA believes that Proposition 98 should be protected from reductions through the creation of new or expanding existing tax expenditures, especially as the state faces a budget deficit. For these reasons, we must oppose AB 543 (Gipson).”

ASSEMBLY FLOOR: 73-0, 5/25/23

AYES: Addis, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Aguiar-Curry, Dixon, Kalra, Mathis, Papan, Reyes, Ward

Prepared by: Kyle Krueger / GOV. & F. / (916) 651-4119

9/4/23 8:53:04

**** END ***

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 543 (Gipson) - Sales and Use Tax Law: exemptions: petroleum products: water common carriers

Bill Summary:

AB 543 would extend, from January 1, 2024, to January 1, 2029, the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers.

Fiscal Impact:

• The California Department of Tax and Fee Administration (CDTFA) estimates that this bill would result in a sales and use tax (SUT) revenue reduction of $25.6 million to $38.4 million for calendar year 2024. Of this amount, the General Fund loss would be $10.6 million to $15.9 million, and the loss to local governments would be $15.0 million to $22.5 million. CDTFA notes that fuel prices are highly volatile and unpredictable; consequently, it cannot project the bill’s revenue loss for the out years.
• One of the destinations of SUT revenue is the 2011 Local Revenue Fund, which provides local governments with public safety realignment money. Under the California Constitution, if the taxes collected by the 2011 Local Revenue Fund sales tax rate (1.0625 percentage points) are reduced or cease to be operative, the State is required to annually offset the reduction. However, this bill would prohibit the State from reimbursing any local agency for any reduction in SUT revenue. Consequently, the bill would result in a cost pressure of $2.9 million to $4.3 million in 2024 related to the prohibited backfill of the 2011 Local Revenue Fund.
• CDTFA would incur minor and absorbable costs to notify affected retailers, and revise regulations and applicable publications.

Background:

Tax expenditure programs (TEPs) are special tax provisions that reduce the amount of revenues the “basic” tax system would otherwise generate in order to provide (1) benefits to certain groups of taxpayers, and/or (2) incentives to encourage certain types of behavior and activities, such as charitable giving. Specifically, current law provides for, among other things, various income and corporation tax credits and deductions, as well as exemptions from the sales and use tax. The Department of Finance is required to publish a list of TEPs (currently totaling several hundred), which currently exceed $87 billion annually.

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 pay 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 ($78 billion in 2021-22), 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—a 1.0625 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 December 31, 2022, the average statewide SUT rate was 8.56 percent.

Many items are fully exempted from the SUT (prescription drugs, food, poultry litter), while others are exempted from the state sales tax, but not the local share, such as farm equipment and machinery, diesel fuel used for farming and food processing, teleproduction and postproduction equipment, timber harvesting equipment and machinery, and racehorse breeding stock.

Bunker fuels are sometimes referred to as ‘marine fuels,’ and serve as a common method of powering marine vessels used to deliver cargo nationally and internationally. California has several fueling ports, including in Los Angeles, Long Beach, and San Francisco, where ocean-going vessels and operators serve as the primary buyers of bunker fuels. Suppliers of bunker fuels, including oil refineries, often derive bunker fuels from the residual products of crude oil extraction. Others involved in bunker fuel sales include brokers & agents, port operators, and tug and barge companies. The Pacific Merchant Shipping Association estimates that more than 500 jobs statewide are associated with the marine fueling industry in California. The LAO wrote in 2001 that one characteristic of the industry is its competitiveness, due to price sensitivity and consumer flexibility.

Fuel and petroleum product sales to ‘water carriers’ are currently exempt from SUT when used by the carrier after it has reached its first out-of-state destination. The exemption will expire on January 1, 2024.

Proposed Law:

This bill would extend the sunset on the SUT exemption for specified fuel and petroleum product sales to water carriers from January 1, 2024, to January 1, 2029. This exemption would continue to apply only in cases when the fuel is used by the water carrier after it has reached its first out-of-state destination.

Related Legislation:

SB 1243 (Lowenthal, Chapter 293, Statutes of 2012) extended the sunset on the exemption from January 1, 2014, to January 1, 2024.

Staff Comments:

In January 2001, the Legislative Analyst’s Office (LAO) released a statutorily mandated study on bunker fuel that found the revocation of the SUT exemption from July 1991 through December 1992 increased state and local SUT revenues by roughly $20 to $30 million, but likely resulted in the loss of between 100 to 200 industry-related jobs. The LAO concluded the out-of-state exemption represented “appropriate tax policy,” especially since bunker fuel purchases are used both inside and outside of state boundaries and export sales are usually exempt from SUT. A subsequent statutorily mandated LAO study in November 2007 reached a similar conclusion, adding that due to increases in fuel prices at the time, revoking the SUT exemption would likely have an even more adverse impact than previously considered.

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Sales and Use Tax Law: exemptions: petroleum products: water common carriers

This bill would extend, from January 1, 2024, to January 1, 2029, the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers.

Background

Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. The Legislature enacts such tax incentives either to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behavior, such as charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something that they would otherwise not do, but for the tax credit. The Department of Finance is required annually to publish a list of tax expenditures, currently totaling around $87 billion per year.

Bunker Fuel Industry. Bunker fuels are sometimes referred to as ‘marine fuels,’ and serve as a common method of powering marine vessels used to deliver cargo nationally and internationally. California has several fueling ports, including in Los Angeles, Long Beach, and San Francisco, where ocean-going vessels and operators serve as the primary buyers of bunker fuels. Suppliers of bunker fuels, including oil refineries, often derive bunker fuels from the residual products of crude oil extraction. Others involved in bunker fuel sales include brokers & agents, port operators, and tug and barge companies. The Pacific Merchant Shipping Association estimates that more than 500 jobs statewide are associated with the marine fueling industry in California. The LAO wrote in 2001 that one characteristic of the industry is its competitiveness, due to price sensitivity and consumer flexibility.

Sales tax. State law imposes the sales tax on every retailer “engaged in business in this state” that sells tangible personal property. Sales tax applies whenever a retail sale occurs, which is generally any sale other than one for resale in the regular course of business. Retailers must remit the amounts collected to the California Department of Tax and Fee Administration (CDTFA).

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.

Many items are fully exempted from the sales and use tax in California (prescription drugs, food, poultry litter), while others are exempted from the state sales tax, but not the local share, such as farm equipment and machinery, diesel fuel used for farming and food processing, teleproduction and postproduction equipment, timber harvesting equipment and machinery, and racehorse breeding stock.

Fuel and petroleum product sales to ‘water carriers’ are currently exempt from sales tax when used by the carrier after it has reached its first out-of-state destination. The Legislature has repealed and re-enacted this exemption on fuel and petroleum product sales to water carriers a number of times:

• Before July 15, 1991, fuel and petroleum product sales to water, air, and rail carriers were exempt from sales tax when used by the carrier after it had reached its first out-of-state destination.
• AB 2181 (Vasconcellos, 1991) and SB 179 (Deddeh, 1991) repealed the exemption on July 1, 1991, and bunker fuel was fully subject to the sales tax until December 31, 1992.
• AB 2396 (Elder, 1992) reinstated the tax exemption for water carriers only on January 1, 1992. AB 366 (Havice, 1997) extended the sunset to January 1, 2003.
• The exemption sunsetted on January 1, 2003 after Governor Davis vetoed legislation extending (SB 145, Perata, 2002), and so bunker fuel was fully subject to the sales tax until January 1, 2004.
• SB 808 (Karnette, 2003) reinstated the exemption for water carriers from January 1, 2004 to January 1, 2014.
• SB 1243 (Lowenthal, 2012) subsequently extended the sunset from January 1, 2014 to January 1, 2024.

AB 366 also required the Legislative Analyst’s Office (LAO) to analyze the impact of the first repeal on the bunker fuel exemption. The report, issued in January 25, 2001, found a 45% decline in bunker fuel deliveries for California ports in 1992. While the report attributed most of this decline to an economic recession and localized pressures on the Los Angeles port, it stated the repeal of the exemption may have resulted in a loss of about 100-200 jobs. On the other hand, the LAO did estimate the repeal of the exemption increased state-local SUT revenues in the range of $20 million to $30 million.

SB 808 also directed the LAO to study the impact of the 2003 repeal. In its November 2007 report, it came to similar conclusions, finding bunker fuel sales decreased by 30% in 2003 and dropped 22% further in 2004. While the report reiterated that other factors may have also caused the decline, it stated “both of these experiences suggest that the removal of the partial exemption did result in lost business for California bunker fuel suppliers.” The report added that the exemption reduced state and local revenues by tens of millions of dollars annually.

The Pacific Merchant Shipping Association wants to extend the sunset date for the sales tax exemption on bunker fuels sold to water common carriers, as previously specified, in order to prevent the loss of jobs in the bunker fuel industry.

Proposed Law

Assembly Bill 543 extends the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers from January 1, 2024, to January 1, 2029. This exemption would continue to apply only in cases when the fuel is used by the water carrier after it has reached its first out-of-state destination. Additionally, the bill includes legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code. It also eliminates references to the State Board of Equalization and replaces them with the California Department of Tax and Fee Administration (CDTFA), the latter of which now administers the SUT Law.

State Revenue Impact

According to CDTFA, AB 543 results in revenue losses between $25.58 million and $38.37 million in the 2024 calendar year. Of this amount, CDTFA estimates General Fund losses of between $10.61 million and $15.91 million with the rest accruing to local agencies.

Comments

1. Purpose of the bill. According to the author: “AB 543 seeks to extend the tax exemption for the Marine Sales Tax that has been in effect since 2003 and is set to sunset on January 1^st, 2024. The Marine Sales Tax is a levy imposed on all marine fuels that are used to transport critical resources and goods to keep our supply chain running smoothly across the state and nation. If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The Legislative Analyst Office has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels. Reinstating this tax would affect multiple different industries that would result in the loss of wages and jobs for potentially thousands of middle class workers.”

2. Tradeoffs of Exemptions. While a sales and use tax exemption may prevent the loss of jobs, it is likely to reduce General Fund revenues. The state can offset this loss by either increasing taxes elsewhere or reducing spending. The state currently faces a significant budget deficit, and the LAO estimates ongoing budget deficits will average $18 billion annually through FY 2026-2027. On the other hand, one might argue that the revenue losses are worth the jobs that are created by incentivizing ships to refuel at California ports. The Committee may wish to consider the benefits of extending this tax exemption against its potential costs.

3. How does this work? AB 543’s exemption extension applies to sales of fuel and petroleum product to ‘water carriers’ after they have reached their first out-of-state destination. Specifically:

• “Water carriers” transport people or property as a part of interstate or foreign commerce.
• The “first out of state destination” is the first point reached outside the state by a carrier where passengers or cargo are added or removed, fuel is transferred, or docking fees are charged.
• Any fuel a water carrier buys in California and uses while it traveled to its first out-of-state destination is subject to a sales tax, but any California purchased fuel used after reaching that first out-of-state destination is not subject to a sales tax.

For example, if Ship A buys 10 units of bunker fuel at the San Francisco port, uses 4 units of fuel to travel to Vancouver to pick up a shipment, and then uses 6 units of fuel to travel to Yokohama to drop off the shipment, only the 4 units of fuel used on the first leg of the trip are subject to California sales tax.

To qualify for the exemption in practice, the water carrier must provide the seller an exemption certificate showing the quantity of fuel claimed as exempt based on how much will be consumed after reaching its first “out-of-state destination.”

4. Section 41. Section 41 of the Revenue and Taxation Code, requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, and detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). AB 543 states that its goal, purpose, and objective is to ensure fueling will contribute to a robust economic activity in the state and adhere to tax policy and rationale of first substantial use occurring out of state. The performance indicators include the average monthly maritime fuel price at all domestic and international Pacific seaports, the average monthly maritime fuel price at California seaports, and the maritime fuel deliveries at California seaports. The bill then requires LAO to analyze the performance indicators to measure whether the exemption meets its goals, and report its findings to the Legislature on or before January 1, 2026.

5. Do the LAO analyses apply today? When the LAO found the “removal of the partial exemption did result in lost business for California bunker fuel suppliers” in its November 2007 analysis, it reasoned lost business occurred due to the sensitivity of the bunker fuel industry to fuel prices and the flexibility marine vessels have in choosing where to buy fuels.

Many of the factors that made the bunker fuel industry susceptible to harm from the full application of the sales tax appear to be present today. For example, since fueling currently accounts for at least 40% of the cost of operating a marine vessel in international commerce, it is likely the bunker fuel industry is still sensitive to fuel taxes. Additionally, according to the author’s office, the technological capacity of marine vessels continues to advance, likely granting ships more flexibility in choosing where to re-fuel.

6. Consistency. Sales & use taxes generally apply to goods sold and used in California, whereas they are typically not applied to goods sold in California but immediately exported outside of the state. Bunker fuel falls in between these categories, since it is consumed both while leaving the state and continuing into other territories. Based on this, the LAO stated in its 2001 analysis that a partial bunker fuel exemption as described in this bill “constitutes appropriate treatment.”

While the sales tax exemption currently applies for fuel sold to water carriers, it does not apply in most cases when fuel is sold to a rail or aircraft carrier. The Committee may wish to consider whether there is a reason why bunker fuels sold to water carriers are exempt from the sales tax in certain circumstances, whereas bunker fuels sold to rail and aircraft carriers in most cases are not.

7. Update. On June 21, AB 543 failed passage in the Committee by a vote of 4 to 2. The Committee is considering the measure on reconsideration for vote only.

Assembly Actions

Assembly Revenue and Taxation Committee: 11-0

Assembly Appropriations Committee: 15-0

Assembly Floor: 73-0

Support and Opposition

(6/30/23)

Support: Pacific Merchant Shipping Association (Sponsor)
American Waterways Operators
California Taxpayers Association
Centerline Logistics Corporation
CSL Americas
International Organization of Masters, Mates, and Pilots
Jacobsen Pilot Service, INC.
San Francisco Bar Pilots
The Vane Brothers Company

Opposition: California Teachers Association

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Sales and Use Tax Law: exemptions: petroleum products: water common carriers

This bill would extend, from January 1, 2024, to January 1, 2029, the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers.

Background

Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. The Legislature enacts such tax incentives either to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behavior, such as charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something that they would otherwise not do, but for the tax credit. The Department of Finance is required annually to publish a list of tax expenditures, currently totaling around $87 billion per year.

Bunker Fuel Industry. Bunker fuels are sometimes referred to as ‘marine fuels,’ and serve as a common method of powering marine vessels used to deliver cargo nationally and internationally. California has several fueling ports, including in Los Angeles, Long Beach, and San Francisco, where ocean-going vessels and operators serve as the primary buyers of bunker fuels. Suppliers of bunker fuels, including oil refineries, often derive bunker fuels from the residual products of crude oil extraction. Others involved in bunker fuel sales include brokers & agents, port operators, and tug and barge companies. The Pacific Merchant Shipping Association estimates that more than 500 jobs statewide are associated with the marine fueling industry in California. The LAO wrote in 2001 that one characteristic of the industry is its competitiveness, due to price sensitivity and consumer flexibility.

Sales tax. State law imposes the sales tax on every retailer “engaged in business in this state” that sells tangible personal property. Sales tax applies whenever a retail sale occurs, which is generally any sale other than one for resale in the regular course of business. Retailers must remit the amounts collected to the California Department of Tax and Fee Administration (CDTFA).

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.

Many items are fully exempted from the sales and use tax in California (prescription drugs, food, poultry litter), while others are exempted from the state sales tax, but not the local share, such as farm equipment and machinery, diesel fuel used for farming and food processing, teleproduction and postproduction equipment, timber harvesting equipment and machinery, and racehorse breeding stock.

Fuel and petroleum product sales to ‘water carriers’ are currently exempt from sales tax when used by the carrier after it has reached its first out-of-state destination. The Legislature has repealed and re-enacted this exemption on fuel and petroleum product sales to water carriers a number of times:

• Before July 15, 1991, fuel and petroleum product sales to water, air, and rail carriers were exempt from sales tax when used by the carrier after it had reached its first out-of-state destination.
• AB 2181 (Vasconcellos, 1991) and SB 179 (Deddeh, 1991) repealed the exemption on July 1, 1991, and bunker fuel was fully subject to the sales tax until December 31, 1992.
• AB 2396 (Elder, 1992) reinstated the tax exemption for water carriers only on January 1, 1992. AB 366 (Havice, 1997) extended the sunset to January 1, 2003.
• The exemption sunsetted on January 1, 2003 after Governor Davis vetoed legislation extending (SB 145, Perata, 2002), and so bunker fuel was fully subject to the sales tax until January 1, 2004.
• SB 808 (Karnette, 2003) reinstated the exemption for water carriers from January 1, 2004 to January 1, 2014.
• SB 1243 (Lowenthal, 2012) subsequently extended the sunset from January 1, 2014 to January 1, 2024.

AB 366 also required the Legislative Analyst’s Office (LAO) to analyze the impact of the first repeal on the bunker fuel exemption. The report, issued in January 25, 2001, found a 45% decline in bunker fuel deliveries for California ports in 1992. While the report attributed most of this decline to an economic recession and localized pressures on the Los Angeles port, it stated the repeal of the exemption may have resulted in a loss of about 100-200 jobs. On the other hand, the LAO did estimate the repeal of the exemption increased state-local SUT revenues in the range of $20 million to $30 million.

SB 808 also directed the LAO to study the impact of the 2003 repeal. In its November 2007 report, it came to similar conclusions, finding bunker fuel sales decreased by 30% in 2003 and dropped 22% further in 2004. While the report reiterated that other factors may have also caused the decline, it stated “both of these experiences suggest that the removal of the partial exemption did result in lost business for California bunker fuel suppliers.” The report added that the exemption reduced state and local revenues by tens of millions of dollars annually.

The Pacific Merchant Shipping Association wants to extend the sunset date for the sales tax exemption on bunker fuels sold to water common carriers, as previously specified, in order to prevent the loss of jobs in the bunker fuel industry.

Proposed Law

Assembly Bill 543 extends the sunset on the sales tax exemption for specified fuel and petroleum product sales to water carriers from January 1, 2024, to January 1, 2029. This exemption would continue to apply only in cases when the fuel is used by the water carrier after it has reached its first out-of-state destination. Additionally, the bill includes legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code. It also eliminates references to the State Board of Equalization and replaces them with the California Department of Tax and Fee Administration (CDTFA), the latter of which now administers the SUT Law.

State Revenue Impact

According to CDTFA, AB 543 results in revenue losses between $25.58 million and $38.37 million in the 2024 calendar year. Of this amount, CDTFA estimates General Fund losses of between $10.61 million and $15.91 million with the rest accruing to local agencies.

Comments

1. Purpose of the bill. According to the author: “AB 543 seeks to extend the tax exemption for the Marine Sales Tax that has been in effect since 2003 and is set to sunset on January 1^st, 2024. The Marine Sales Tax is a levy imposed on all marine fuels that are used to transport critical resources and goods to keep our supply chain running smoothly across the state and nation. If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The Legislative Analyst Office has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels. Reinstating this tax would affect multiple different industries that would result in the loss of wages and jobs for potentially thousands of middle class workers.”

2. Tradeoffs of Exemptions. While a sales and use tax exemption may prevent the loss of jobs, it is likely to reduce General Fund revenues. The state can offset this loss by either increasing taxes elsewhere or reducing spending. The state currently faces a significant budget deficit, and the LAO estimates ongoing budget deficits will average $18 billion annually through FY 2026-2027. On the other hand, one might argue that the revenue losses are worth the jobs that are created by incentivizing ships to refuel at California ports. The Committee may wish to consider the benefits of extending this tax exemption against its potential costs.

3. How does this work? AB 543’s exemption extension applies to sales of fuel and petroleum product to ‘water carriers’ after they have reached their first out-of-state destination. Specifically:

• “Water carriers” transport people or property as a part of interstate or foreign commerce.
• The “first out of state destination” is the first point reached outside the state by a carrier where passengers or cargo are added or removed, fuel is transferred, or docking fees are charged.
• Any fuel a water carrier buys in California and uses while it traveled to its first out-of-state destination is subject to a sales tax, but any California purchased fuel used after reaching that first out-of-state destination is not subject to a sales tax.

For example, if Ship A buys 10 units of bunker fuel at the San Francisco port, uses 4 units of fuel to travel to Vancouver to pick up a shipment, and then uses 6 units of fuel to travel to Yokohama to drop off the shipment, only the 4 units of fuel used on the first leg of the trip are subject to California sales tax.

To qualify for the exemption in practice, the water carrier must provide the seller an exemption certificate showing the quantity of fuel claimed as exempt based on how much will be consumed after reaching its first “out-of-state destination.”

4. Section 41. Section 41 of the Revenue and Taxation Code, requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, and detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). AB 543 states that its goal, purpose, and objective is to ensure fueling will contribute to a robust economic activity in the state and adhere to tax policy and rationale of first substantial use occurring out of state. The performance indicators include the average monthly maritime fuel price at all domestic and international Pacific seaports, the average monthly maritime fuel price at California seaports, and the maritime fuel deliveries at California seaports. The bill then requires LAO to analyze the performance indicators to measure whether the exemption meets its goals, and report its findings to the Legislature on or before January 1, 2026.

5. Do the LAO analyses apply today? When the LAO found the “removal of the partial exemption did result in lost business for California bunker fuel suppliers” in its November 2007 analysis, it reasoned lost business occurred due to the sensitivity of the bunker fuel industry to fuel prices and the flexibility marine vessels have in choosing where to buy fuels.

Many of the factors that made the bunker fuel industry susceptible to harm from the full application of the sales tax appear to be present today. For example, since fueling currently accounts for at least 40% of the cost of operating a marine vessel in international commerce, it is likely the bunker fuel industry is still sensitive to fuel taxes. Additionally, according to the author’s office, the technological capacity of marine vessels continues to advance, likely granting ships more flexibility in choosing where to re-fuel.

6. Consistency. Sales & use taxes generally apply to goods sold and used in California, whereas they are typically not applied to goods sold in California but immediately exported outside of the state. Bunker fuel falls in between these categories, since it is consumed both while leaving the state and continuing into other territories. Based on this, the LAO stated in its 2001 analysis that a partial bunker fuel exemption as described in this bill “constitutes appropriate treatment.”

While the sales tax exemption currently applies for fuel sold to water carriers, it does not apply in most cases when fuel is sold to a rail or aircraft carrier. The Committee may wish to consider whether there is a reason why bunker fuels sold to water carriers are exempt from the sales tax in certain circumstances, whereas bunker fuels sold to rail and aircraft carriers in most cases are not.

Assembly Actions

Assembly Revenue and Taxation Committee: 11-0

Assembly Appropriations Committee: 15-0

Assembly Floor: 73-0

Support and Opposition

(6/16/23)

Support: Pacific Merchant Shipping Association (Sponsor)
American Waterways Operators
California Taxpayers Association
Centerline Logistics Corporation
CSL Americas
International Organization of Masters, Mates, and Pilots
Jacobsen Pilot Service, INC.
San Francisco Bar Pilots
The Vane Brothers Company

Opposition: California Teachers Association

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 543

Author:(Gipson)

As Amended Ver:April 24, 2023

Majority vote

SUMMARY

Extends by five years the sunset date for the current sales tax exemption for specified fuel and petroleum products (i.e., bunker fuel) sold to water common carriers.

Major Provisions

1. Extends, from January 1, 2024 to January 1, 2029, the sunset date for the bunker fuel sales tax exemption.
2. Provides that, notwithstanding existing law, the state shall not reimburse any local agency for any sales and use tax (SUT) revenues lost as a result of this bill.
3. Replaces obsolete references to the State Board of Equalization with the California Department of Tax and Fee Administration (CDTFA), which is now charged with administering the SUT Law.
4. Takes immediate effect as a tax levy.

COMMENTS

1. What would this bill do? This bill extends by five years the January 1, 2024 sunset date for the bunker fuel sales tax exemption. In support of this bill, the author's office notes:

Imposing a complete [SUT] on all sales of marine fuels is counterproductive. Due to the highly competitive nature of the market for marine fuels, carriers will bypass California ports and refuel elsewhere, refusing to pay an additional ~ 10% in tax that is not imposed in other states or countries.

Additionally, the author argues that working class citizens of all demographics will be negatively impacted via job losses and other harms if this exemption is not extended.

1. Background: Bunker fuel refers to the fuel used to propel ships. Like most tangible products sold in California, bunker fuel is generally subject to the state's SUT Law. However, the state currently provides a partial SUT exemption for bunker fuel sales. Specifically, the state does not tax fuel that will be consumed by a ship after its first out-of-state destination.

History of the bunker fuel exemption: As noted by the Legislative Analyst's Office (LAO), California's tax treatment of bunker fuel has changed back and forth over time. From July 15, 1991 through December 31, 1992, and again from January 1, 2003 through March 31, 2004, California fully taxed all bunker fuel sales in the state. On April 1, 2004, however, California reinstated the partial exemption that had been allowed prior to July 1991, and from January 1, 1993 through December 31, 2002. This partial exemption is currently set to expire on January 1, 2024.

According to the Author

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

AB 543 seeks to extend the tax exemption for the Marine Sales Tax that has been in effect since 2003 and is set to sunset on January 1^st, 2024. The Marine Sales Tax is a levy imposed on all marine fuels that are used to transport critical resources and goods to keep our supply chain running smoothly across the state and nation. If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The Legislative Analyst Office has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels. Reinstating this tax would affect multiple different industries that would result in the loss of wages and jobs for potentially thousands of middle class workers.

Arguments in Support

This bill is sponsored by the Pacific Merchant Shipping Association, which notes:

Without legislative action, there would be devastating impacts to union labor, tug and barge companies, pilots, suppliers and other services, many of which represent small businesses. On two separate occasions under different administrations, a lapse in the partial tax exemption resulted in these same negative impacts. AB 543 will ensure state and local government entities will not lose considerable revenues from taxes and fees by keeping the business in state; a win-win for both the budget and California maritime businesses and laborers.

Arguments in Opposition

This bill is opposed by the California Teachers Association, which notes:

While we understand these bills are well intended, CTA does not support this approach, as it would reduce overall funding for education. CTA believes that Proposition 98 should be protected from reductions through the creation of new or expanding existing tax expenditures, especially as the state faces a budget deficit.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. SUT revenue loss of approximately $25.6 million to $38.4 million for calendar year 2024, as well as ongoing indeterminable SUT revenue loss in future years. The CDTFA notes fuel prices are highly volatile and unpredictable, so applicable revenue losses cannot be projected beyond one year.

This bill prohibits the state from reimbursing any local agency for any lost SUT revenues. Thus, approximately $10.6 million to $15.9 million of that revenue loss would be attributable to the General Fund (GF) (3.9375% rate) in calendar year 2024, as well as ongoing indeterminable GF revenue loss in future years.

Additionally, the exemption would result in GF cost pressures, as one component of California's SUT rate is the 1.0625% rate supporting the 2011 Local Revenue Fund, which provides local governments with public safety realignment money. Proposition 30 (2012) protected the fund by ensuring, in the event the 1.0625% component is reduced or eliminated, local governments continue to receive a commensurate level of state funding.

1. Minor and absorbable costs to CDTFA to continue administering the exemption.
2. Costs of an unknown, but likely absorbable, amount to the LAO to prepare the report analyzing performance indicators. However, the Legislature sees a wide array of bills that require the LAO to measure different tax expenditures. Generally, a request to prepare an individual report would not generate significant new workload for the LAO. But, taken together, these proposals strain the ability of the LAO fulfill other existing or future legislative mandates and requests, as the LAO's budget is subject to the Legislature's constitutional spending cap.

VOTES

ASM REVENUE AND TAXATION: 11-0-0

YES: Irwin, Wallis, Bains, Grayson, Pacheco, Jim Patterson, Petrie-Norris, Luz Rivas, Ta, Valencia, Zbur

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega

ABS, ABST OR NV: Robert Rivas

UPDATED

VERSION: April 24, 2023

CONSULTANT: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0000737

Date of Hearing: May 17, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 543

Author:(Gipson) – As Amended Ver:April 24, 2023

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

SUMMARY:

This bill extends, from January 1, 2024, to January 1, 2029, the current exemption under the Sales and Use Tax (SUT) Law for fuel and petroleum products sold to a water common carrier for consumption in the conduct of its business after the first out-of-state destination.

This bill declares the goals and performance indicators for the extended exemption and requires, by January 1, 2026, the Legislative Analyst’s Office (LAO) to analyze the specified performance indicators and report its findings to the Legislature.

FISCAL EFFECT:

1. SUT revenue loss of approximately $25.6 million to $38.4 million for calendar year 2024, as well as ongoing indeterminable SUT revenue loss in future years. The California Department of Tax and Fee Administration (CDTFA) notes fuel prices are highly volatile and unpredictable, so applicable revenue losses cannot be projected beyond one year.

This bill prohibits the state from reimbursing any local agency for any lost SUT revenues. Thus, approximately $10.6 million to $15.9 million of that revenue loss would be attributable to the General Fund (GF) (3.9375% rate) in calendar year 2024, as well as ongoing indeterminable GF revenue loss in future years.

Additionally, the exemption would result in GF cost pressures, as one component of California’s SUT rate is the 1.0625% rate supporting the 2011 Local Revenue Fund, which provides local governments with public safety realignment money. Proposition 30 (2012) protected the fund by ensuring, in the event the 1.0625% component is reduced or eliminated, local governments continue to receive a commensurate level of state funding.

1. Minor and absorbable costs to CDTFA to continue administering the exemption.
2. Costs of an unknown, but likely absorbable, amount to the LAO to prepare the report analyzing performance indicators. However, this committee sees a wide array of bills that require the LAO to measure different tax expenditures. Generally, a request to prepare an individual report would not generate significant new workload for the LAO. But, taken together, these proposals strain the ability of the LAO fulfill other existing or future legislative mandates and requests, as the LAO’s budget is subject to the Legislature’s constitutional spending cap.

COMMENTS:

1. Purpose. According to the author:

If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The [LAO] has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels.

1. Support and Opposition. This bill is sponsored by the Pacific Merchant Shipping Association, which argues this bill extends “a long-standing tax structure which supports California’s economy, publicly owned seaports, union jobs and ultimately increases state and local tax revenues.” This bill is also supported by other marine operators and the California Taxpayers Association.

This bill is opposed by the California Teachers Association (CTA). CTA notes that while this bill is well intended, “CTA does not support this approach, as it would reduce overall funding for education” especially as the state faces a budget deficit.

1. Background.

Erosion of the SUT Base. Despite being the state’s third largest source of GF revenues, the past several decades have seen a dramatic reduction in the state’s reliance on SUT and a corresponding increase in reliance on personal income tax revenues. California’s economy has seen dramatic growth in the service and information sectors, resulting in a significant erosion of the SUT base that further shrinks with any additional SUT exemption. The SUT is also widely criticized as a regressive tax that disproportionately impacts the wallets of lower-income individuals. However, there is some degree of progressivity provided via various exemptions for certain necessities of life, such as food, housing, and prescription medication.

Water Common Carrier Exemption. Existing law currently exempts from SUT Law the portion of bunker fuel consumed to propel a ship after its first out-of-state destination. However, such fuel was taxed from July 15, 1991, through December 31, 1992, and again from January 1, 2003, through March 31, 2004. The current sunset on the exemption is set to expire on January 1, 2024. This bill extends the exemption to January 1, 2029.

In January 2001, the LAO released a statutorily mandated study on bunker fuel that found the revocation of the SUT exemption from July 1991 through December 1992 increased state and local SUT revenues by roughly $20 to $30 million, but likely resulted in the loss of between 100 to 200 industry-related jobs. As such, the LAO concluded the out-of-state exemption represented “appropriate tax policy,” especially since bunker fuel purchases are used both inside and outside of state boundaries and export sales are usually exempt from SUT. A subsequent statutorily mandated LAO study in November 2007 came to a similar conclusion as the first study, adding that due to increases in fuel prices at the time, revoking the SUT exemption would likely have an even more adverse impact than before.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: May 1, 2023

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:AB 543 (

Author:Gipson) – As Amended Ver:April 24, 2023

SUSPENSE

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Sales and Use Tax Law: exemptions: petroleum products: water common carriers

SUMMARY: Extends by five years the sunset date for the current sales tax exemption for specified fuel and petroleum products (i.e., bunker fuel) sold to water common carriers. Specifically, this bill:

1. Extends, from January 1, 2024 to January 1, 2029, the sunset date for the bunker fuel sales tax exemption.
2. Provides that, for the purpose of complying with Revenue and Taxation Code (R&TC) Section 41, the Legislature finds and declares all of the following:
   
   1. The specific goal that the exemption will continue to achieve is to ensure fueling will continue to be a robust economic activity in this state and adhere to tax policy and rationale of first substantial use occurring out of state;
      
   2. Detailed performance indicators measuring whether the exemption meets the goal described above are the following:
      
      1. The average monthly maritime fuel price at all domestic and international Pacific seaports;
         
      2. The average monthly maritime fuel price at California seaports; and,
         
      3. Maritime fuel deliveries at California seaports.
         
   3. On or before January 1, 2026, the Legislative Analyst's Office (LAO) shall analyze the performance indicators described above and shall report its findings to the Legislature.
3. Provides that, notwithstanding existing law, the state shall not reimburse any local agency for any sales and use tax (SUT) revenues lost as a result of this bill.
4. Replaces obsolete references to the State Board of Equalization with the California Department of Tax and Fee Administration (CDTFA), which is now charged with administering the SUT Law.
5. 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. (R&TC Section 6051 et seq.)
   
2. Provides a sales tax exemption for fuel and petroleum products sold to a water "common carrier" for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the "first out-of-state destination." To qualify for this exemption, the common carrier must provide the seller an exemption certificate showing the quantity of fuel claimed as exempt, which will be consumed after reaching the "first out-of-state destination." (R&TC Section 6385(c).)
   
3. Defines a "common carrier" to include any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce. (R&TC Section 6385(e).)
   
4. Defines "first out-of-state destination" as the first point reached outside this state by a common carrier at which cargo or passengers are loaded or discharged, cargo containers are added or removed, fuel is transferred, or docking fees are charged. The term is also defined to include the entry point of the Panama Canal when the carrier is only transiting the canal in the conduct of its business as a common carrier. (R&TC Section 6385(d).)
   
5. Provides for the automatic repeal of the "bunker fuel" sales tax exemption provisions described above on January 1, 2024. (R&TC Section 6385(l).)
   
6. Requires any bill introduced on or after January 1, 2020, that authorizes a SUT exemption, to contain all of the following:
   
   1. Specific goals, purposes, and objectives that the tax expenditure will achieve;
      
   2. Detailed performance indicators for the Legislature to use when measuring whether the tax expenditure meets the goals, purposes, and objectives stated in the bill; and,
      
   3. Specified data collection requirements to enable the Legislature to determine whether the tax expenditure is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. (R&TC Section 41(a).)

FISCAL EFFECT: A detailed revenue estimate is pending, but CDTFA anticipates revenue losses to exceed $150,000 annually.

COMMENTS:

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

AB 543 seeks to extend the tax exemption for the Marine Sales Tax that has been in effect since 2003 and is set to sunset on January 1^st, 2024. The Marine Sales Tax is a levy imposed on all marine fuels that are used to transport critical resources and goods to keep our supply chain running smoothly across the state and nation. If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The Legislative Analyst Office has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels. Reinstating this tax would affect multiple different industries that would result in the loss of wages and jobs for potentially thousands of middle class workers.

1. This bill is sponsored by the Pacific Merchant Shipping Association, which notes:

Without legislative action, there would be devastating impacts to union labor, tug and barge companies, pilots, suppliers and other services, many of which represent small businesses. On two separate occasions under different administrations, a lapse in the partial tax exemption resulted in these same negative impacts. AB 543 will ensure state and local government entities will not lose considerable revenues from taxes and fees by keeping the business in state; a win-win for both the budget and California maritime businesses and laborers.

1. This bill is supported by the International Organization of Masters, Mates & Pilots, which notes the following:

The state must not repeat past mistakes that have all resulted in the same grave impacts. For example, in 2003, the state failed to extend the exemption sunset date and marine fuels sales immediately dropped by approximately 60 percent, nearly killing the industry and resulting in an extensive loss of union and non-union jobs. Should the tax

exemption again be allowed to sunset, the implications to our business and laborers will likely be even more severe than in the early 2000's and 1990's. In addition, the subsequent drop in sales and wages will lead to a reduction in the tens of millions of dollars in direct tax revenue to the State and our region.

1. This bill is opposed by the California Teachers Association, which notes:

While we understand these bills are well intended, CTA does not support this approach, as it would reduce overall funding for education. CTA believes that Proposition 98 should be protected from reductions through the creation of new or expanding existing tax expenditures, especially as the state faces a budget deficit.

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 third largest source of General Fund (GF) revenues. Nevertheless, the past several decades 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 fiscal year (FY) 2023-24, SUT revenues are estimated to comprise only 15.9% 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, 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? This bill extends by five years the January 1, 2024 sunset date for the bunker fuel sales tax exemption. In support of this bill, the author's office notes:

Imposing a complete [SUT] on all sales of marine fuels is counterproductive. Due to the highly competitive nature of the market for marine fuels, carriers will bypass California ports and refuel elsewhere, refusing to pay an additional ~ 10% in tax that is not imposed in other states or countries.

Additionally, the author argues that working class citizens of all demographics will be negatively impacted via job losses and other harms if this exemption is not extended.

• 1. Background: Bunker fuel refers to the fuel used to propel ships. Like most tangible products sold in California, bunker fuel is generally subject to the state's SUT Law. However, the state currently provides a partial SUT exemption for bunker fuel sales. Specifically, the state does not tax fuel that will be consumed by a ship after its first out-of-state destination.
     
  2. History of the bunker fuel exemption: As noted by the LAO, California's tax treatment of bunker fuel has changed back and forth over time. From July 15, 1991 through December 31, 1992, and again from January 1, 2003 through March 31, 2004, California fully taxed all bunker fuel sales in the state. On April 1, 2004, however, California reinstated the partial exemption that had been allowed prior to July 1991, and from January 1, 1993 through December 31, 2002. This partial exemption is currently set to expire on January 1, 2024.
  3. The LAO's first study: In January 2001, the LAO released a statutorily mandated study on bunker fuel pursuant to AB 366 (Havice), Chapter 615, Statutes of 1997. In this report, the LAO noted that the bunker fuel industry experienced a decline in California in the 1990s. A host of factors contributed to this decline. Specifically, the LAO pointed to general economic conditions, reductions in refining capacity, changes in shipping technology, the development of alternative bunker fuel facilities outside California, and the temporary revocation of the SUT exemption for bunker fuel during this period.

The LAO further noted that the revocation of the SUT exemption from July 1991 through December 1992 likely resulted in the loss of between 100 to 200 industry-related jobs, while increasing state and local SUT revenues by roughly $20 to $30 million. As such, the LAO concluded that a partial exemption for bunker fuel represents "an appropriate tax policy." The LAO also noted the following in support of this conclusion:

On tax-policy grounds, a strong argument can be made for the current partial exemption. Generally, items purchased in California that are subject to the SUT are presumed to be used in the state, while sales for export are usually exempt from the SUT. Bunker fuel purchases fall somewhere in between, since bunker fuel purchases are used both outside of and within state boundaries, suggesting that a partial SUT bunker fuel exemption constitutes appropriate treatment.

• 1. The LAO takes another look: In November 2007, the LAO prepared a second report in response to SB 808 (Karnette), Chapter 712, Statutes of 2003, which reinstated the partial exemption and also required the LAO to submit a report assessing the partial exemption's impacts. In its 2007 report, the LAO found that the revocation of the SUT exemption for bunker fuel during 2003 and 2004 produced impacts similar to those experienced during the early 1990s. The LAO also noted that, due to recent increases in fuel prices, revoking the SUT exemption would likely have an even larger adverse impact than it did previously. In its bottom-line findings, the LAO stated:
     

Based on our review of the performance of the bunker fuel market both with and without the partial exemption in place, we conclude that the partial SUT exemption for bunker fuel increases California bunker fuel sales and related economic activities. At the same time, however, it reduces state and local revenues by tens of millions of dollars annually.

Thus, the LAO recommended removing the sunset for the partial SUT exemption entirely.

• 1. Policy on tax expenditures: 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.  This bill has been amended to comply with R&TC Section 41.
     
     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" means 10 years. This bill has been amended to include a five-year sunset date in compliance with Committee policy.

REGISTERED SUPPORT / OPPOSITION:

Support

Pacific Merchant Shipping Association (Sponsor)

American Waterways Operators

Chamber of Shipping of America

International Organization of Masters, Mates & Pilots

Vane Brothers

Opposition

California Teachers Association

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

Date of Hearing: March 13, 2023

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:AB 543 (

Author:Gipson) – As Introduced Ver:February 8, 2023

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Sales and Use Tax Law: exemptions: petroleum products: water common carriers

SUMMARY: Deletes the sunset date for the current sales tax exemption for specified fuel and petroleum products (i.e., bunker fuel) sold to water common carriers. Specifically, this bill:

1. Deletes the January 1, 2024 sunset date for the bunker fuel sales tax exemption, thereby extending the exemption indefinitely.
2. Provides that, notwithstanding existing law, the state shall not reimburse any local agency for any sales and use tax (SUT) revenues lost as a result of this bill.
3. Replaces obsolete references to the State Board of Equalization with the California Department of Tax and Fee Administration (CDTFA), which is now charged with administering the SUT Law.
4. 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. Provides a sales tax exemption for fuel and petroleum products sold to a water "common carrier" for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the "first out-of-state destination." To qualify for this exemption, the common carrier must provide the seller an exemption certificate showing the quantity of fuel claimed as exempt, which will be consumed after reaching the "first out-of-state destination." (Revenue and Taxation Code (R&TC) Section 6385(c).)
   
3. Defines a "common carrier" to include any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce. (R&TC Section 6385(e).)
   
4. Defines "first out-of-state destination" as the first point reached outside this state by a common carrier at which cargo or passengers are loaded or discharged, cargo containers are added or removed, fuel is transferred, or docking fees are charged. The term is also defined to include the entry point of the Panama Canal when the carrier is only transiting the canal in the conduct of its business as a common carrier. (R&TC Section 6385(d).)
   
5. Provides for the automatic repeal of the "bunker fuel" sales tax exemption provisions described above on January 1, 2024. (R&TC Section 6385(l).)
   
6. Requires any bill introduced on or after January 1, 2020, that authorizes a SUT exemption, to contain all of the following:
   
   1. Specific goals, purposes, and objectives that the tax expenditure will achieve;
      
   2. Detailed performance indicators for the Legislature to use when measuring whether the tax expenditure meets the goals, purposes, and objectives stated in the bill; and,
      
   3. Specified data collection requirements to enable the Legislature to determine whether the tax expenditure is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. (R&TC Section 41(a).)

FISCAL EFFECT: A detailed revenue estimate is pending, but CDTFA anticipates revenue losses to exceed $150,000 annually.

COMMENTS:

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

AB 543 seeks to extend the tax exemption for the Marine Sales Tax that has been in effect since 2003 and is set to sunset on January 1^st, 2024. The Marine Sales Tax is a levy imposed on all marine fuels that are used to transport critical resources and goods to keep our supply chain running smoothly across the state and nation. If this exemption is not extended, the consequences would expand the entire state and cripple our ports and work force. The Legislative Analyst Office has previously found that a partial exemption is an appropriate tax policy and imposing the tax would likely have an even larger adverse impact than it did previously. Additionally, California is the only state in the country that imposes this burdensome tax on marine fuels. Reinstating this tax would affect multiple different industries that would result in the loss of wages and jobs for potentially thousands of middle class workers.

1. This bill is sponsored by the Pacific Merchant Shipping Association, which notes:

Without legislative action, there would be devastating impacts to union labor, tug and barge companies, pilots, suppliers and other services, many of which represent small businesses. On two separate occasions under different administrations, a lapse in the partial tax exemption resulted in these same negative impacts. AB 543 will ensure state and local government entities will not lose considerable revenues from taxes and fees by keeping the business in state; a win-win for both the budget and California maritime businesses and laborers.

1. This bill is supported by the California Taxpayers Association, which notes the following:

California has long had a tax exemption for fuel sold to water common carriers, including for fuel sold prior to July 15, 1991, and then since January 1, 1993. During a two-year gap when California did not have an exemption in place, there were disastrous consequences, resulting in a decline in the number of ships that would bunker in California ports.

A decline in ships in port not only negatively impacts California's business climate, but also results in a loss of revenue for the state. Analysis conducted by a California tax agency found that the minor loss in sales tax revenue from the exemption was more than offset by revenue from increased activity in vessels choosing to bunker in California (port employment, pilots, barge operators, boom operators, and other marine suppliers). Similar findings by the Legislative Analyst's Office (LAO) stated that allowing the exemption to sunset would result in a negative economic impact. In a January 2001 report, the LAO found that when California allowed the fuel exemption to sunset in 1991, the action "resulted in a reduction in industry employment on the order of 100 to 200 jobs annually" and that 10 years later, the impact would be even greater.

AB 543 ensures that the exemption will be maintained, and that ships will continue to come into port in California. This bill lets California compete with other states by aligning our state's tax treatment of marine and maritime fuel sales with those of neighboring out-of-state ports. This bill also eliminates any uncertainty that the maritime industry has regarding fluctuating fuel prices at California's ports.

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 third largest source of General Fund (GF) revenues. Nevertheless, the past several decades 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 fiscal year (FY) 2023-24, SUT revenues are estimated to comprise only 15.9% 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, 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? This bill deletes the January 1, 2024 sunset date for the bunker fuel sales tax exemption, thereby extending the exemption indefinitely. In support of this bill, the author's office notes:

Imposing a complete [SUT] on all sales of marine fuels is counterproductive. Due to the highly competitive nature of the market for marine fuels, carriers will bypass California ports and refuel elsewhere, refusing to pay an additional ~ 10% in tax that is not imposed in other states or countries.

Additionally, the author argues that working class citizens of all demographics will be negatively impacted via job losses and other harms if this exemption is not extended.

• 1. Background: Bunker fuel refers to the fuel used to propel ships. Like most tangible products sold in California, bunker fuel is generally subject to the state's SUT Law. However, the state currently provides a partial SUT exemption for bunker fuel sales. Specifically, the state does not tax fuel that will be consumed by a ship after its first out-of-state destination.
     
  2. History of the bunker fuel exemption: As noted by the Legislative Analyst's Office (LAO), California's tax treatment of bunker fuel has changed back and forth over time. From July 15, 1991 through December 31, 1992, and again from January 1, 2003 through March 31, 2004, California fully taxed all bunker fuel sales in the state. On April 1, 2004, however, California reinstated the partial exemption that had been allowed prior to July 1991, and from January 1, 1993 through December 31, 2002. This partial exemption is currently set to expire on January 1, 2024.
  3. The LAO's first study: In January 2001, the LAO released a statutorily mandated study on bunker fuel pursuant to AB 366 (Havice), Chapter 615, Statutes of 1997. In this report, the LAO noted that the bunker fuel industry experienced a decline in California in the 1990s. A host of factors contributed to this decline. Specifically, the LAO pointed to general economic conditions, reductions in refining capacity, changes in shipping technology, the development of alternative bunker fuel facilities outside California, and the temporary revocation of the SUT exemption for bunker fuel during this period.

The LAO further noted that the revocation of the SUT exemption from July 1991 through December 1992 likely resulted in the loss of between 100 to 200 industry-related jobs, while increasing state and local SUT revenues by roughly $20 to $30 million. As such, the LAO concluded that a partial exemption for bunker fuel represents "an appropriate tax policy." The LAO also noted the following in support of this conclusion:

On tax-policy grounds, a strong argument can be made for the current partial exemption. Generally, items purchased in California that are subject to the SUT are presumed to be used in the state, while sales for export are usually exempt from the SUT. Bunker fuel purchases fall somewhere in between, since bunker fuel purchases are used both outside of and within state boundaries, suggesting that a partial SUT bunker fuel exemption constitutes appropriate treatment.

• 1. The LAO takes another look: In November 2007, the LAO prepared a second report in response to SB 808 (Karnette), Chapter 712, Statutes of 2003, which reinstated the partial exemption and also required the LAO to submit a report assessing the partial exemption's impacts. In its 2007 report, the LAO found that the revocation of the SUT exemption for bunker fuel during 2003 and 2004 produced impacts similar to those experienced during the early 1990s. The LAO also noted that, due to recent increases in fuel prices, revoking the SUT exemption would likely have an even larger adverse impact than it did previously. In its bottom-line findings, the LAO stated:
     

Based on our review of the performance of the bunker fuel market both with and without the partial exemption in place, we conclude that the partial SUT exemption for bunker fuel increases California bunker fuel sales and related economic activities. At the same time, however, it reduces state and local revenues by tens of millions of dollars annually.

Thus, the LAO recommended removing the sunset for the partial SUT exemption entirely.

• 1. Policy on tax expenditures: 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.  This bill, in its current form, does not comply with R&TC Section 41.
     
     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" means 10 years. This bill does not currently contain a sunset date, but the author's office has committed to amending this bill to include a 5-year sunset date in compliance with Committee policy.

REGISTERED SUPPORT / OPPOSITION:

Support

Pacific Merchant Shipping Association (Sponsor)

California Taxpayers Association

Opposition

None on file

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