Existing law, the Lithium Extraction Tax Law, imposes a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted from geothermal fluid, spodumene ore, rock, minerals, clay, or any other naturally occurring substance in this state, as specified. Existing law requires the California Department of Tax and Fee Administration to administer and collect the tax and requires all collected revenues, less refunds and reimbursement to the department for administrative expenses, to be deposited into the Lithium Extraction Excise Tax Fund and disbursed in the manner prescribed. Existing law requires 80% of the moneys in the Lithium Extraction Excise Tax Fund to be disbursed by the Controller to all counties in proportion to the amounts collected for lithium extraction within each county, as specified, and 20% of the moneys to be deposited into the Salton Sea Lithium Fund.

This bill would, instead of depositing 20% of the moneys in the Lithium Extraction Excise Tax Fund into the Salton Sea Lithium Fund, deposit 20% of the revenues collected in the County of Imperial into the Salton Sea Lithium Fund, and disburse 20% of the revenues collected in every other county to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities. The bill would remove a restriction on the Lithium Extraction Excise Tax Fund, and would change the amount deposited into the Salton Sea Lithium Fund, both continuously appropriated funds, thereby making an appropriation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Imperial.

Existing law, the Lithium Extraction Tax Law, imposes a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted from geothermal fluid, spodumene ore, rock, minerals, clay, or any other naturally occurring substance in this state, as specified. Existing law requires the California Department of Tax and Fee Administration to administer and collect the tax and requires all collected revenues, less refunds and reimbursement to the department for administrative expenses, to be deposited into the Lithium Extraction Excise Tax Fund and disbursed in the manner prescribed. Existing law requires 80% of the moneys in the Lithium Extraction Excise Tax Fund to be disbursed by the Controller to all counties in proportion to the amounts collected for lithium extraction within each county, as specified, and 20% of the moneys to be deposited into the Salton Sea Lithium Fund.

This bill would, instead of depositing 20% of the moneys in the Lithium Extraction Excise Tax Fund into the Salton Sea Lithium Fund, deposit 20% of the revenues collected in the County of Imperial into the Salton Sea Lithium Fund, and disburse 20% of the revenues collected in every other county to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities. The bill would remove a restriction on the Lithium Extraction Excise Tax Fund, and would change the amount deposited into the Salton Sea Lithium Fund, both continuously appropriated funds, thereby making an appropriation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Imperial.

Existing law, the Lithium Extraction Tax Law, imposes a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted from geothermal fluid, spodumene ore, rock, minerals, clay, or any other naturally occurring substance in this state, as specified. Existing law requires the California Department of Tax and Fee Administration to administer and collect the tax and requires all collected revenues, less refunds and reimbursement to the department for administrative expenses, to be deposited into the Lithium Extraction Excise Tax Fund and disbursed in the manner prescribed. Existing law requires 80% of the moneys in the Lithium Extraction Excise Tax Fund to be disbursed by the Controller to all counties in proportion to the amounts collected for lithium extraction within each county, as specified, and 20% of the moneys to be deposited into the Salton Sea Lithium Fund.

This bill would, instead of depositing 20% of the moneys in the Lithium Extraction Excise Tax Fund into the Salton Sea Lithium Fund, deposit 20% of the revenues collected in the County of Imperial into the Salton Sea Lithium Fund. The bill would also distribute Fund, and disburse 20% of the revenues collected in the County of Kern to communities in the County of Kern that are the most directly and indirectly every other county to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities. The bill would remove a restriction on the Lithium Extraction Excise Tax Fund, and would change the amount deposited into the Salton Sea Lithium Fund, both continuously appropriated funds, thereby making an appropriation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Kern. Imperial.

Existing law, the Lithium Extraction Tax Law, imposes a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted from geothermal fluid, spodumene ore, rock, minerals, clay, or any other naturally occurring substance in this state, as specified. Existing law requires the California Department of Tax and Fee Administration to administer and collect the tax and requires all collected revenues, less refunds and reimbursement to the department for administrative expenses, to be deposited into the Lithium Extraction Excise Tax Fund and disbursed in the manner prescribed. Existing law requires 80% of the moneys in the Lithium Extraction Excise Tax Fund to be disbursed by the Controller to all counties in proportion to the amounts collected for lithium extraction within each county, as specified, and 20% of the moneys to be deposited into the Salton Sea Lithium Fund.

This bill would, instead of depositing 20% of the moneys in the Lithium Extraction Excise Tax Fund into the Salton Sea Lithium Fund, deposit 20% of the revenues collected in the County of Imperial into the Salton Sea Lithium Fund. The bill would also distribute 20% of the revenues collected in the County of Kern to communities in the County of Kern that are the most directly and indirectly impacted by the lithium extraction activities. The bill would remove a restriction on the Lithium Extraction Excise Tax Fund, and would change the amount deposited into the Salton Sea Lithium Fund, both continuously appropriated funds, thereby making an appropriation.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Kern.

SENATE THIRD READING

STR Bill Id:SB 974

Author:(Grove)

As Amended Ver:April 2, 2024

2/3 vote

SUMMARY

Amends the Lithium Extraction Tax Law (LET Law) to provide that 20% of the revenues collected in a county other than the County of Imperial shall be retained by the county where the extraction occurs instead of being allocated to the Salton Sea Lithium Fund.

Major Provisions

1. Provides that 20% of the revenues collected in a county other than the County of Imperial shall be disbursed to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities.
2. Finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because the impact caused by lithium mining to the Salton Sea and the surrounding community is an impact limited to the County of Imperial, and thus should be mitigated with the portion of the Lithium Extraction Excise Tax Fund received by the County of Imperial.

COMMENTS

1. Lithium Valley: Lithium is becoming an increasingly critical resource as California moves toward a clean energy future to combat the climate crisis. Specifically, lithium is a crucial component of batteries needed to power electric vehicles. California has rich but largely untapped lithium reserves, including those in geothermal brine more than one mile underground near the Salton Sea. Experts estimate that the region could satisfy more than one-third of today's global lithium demand.
2. The Lithium Extraction Tax (LET) Law: In 2022, the Legislature passed and the Governor signed into law the LET Law. (SB 125 (Committee on Budget and Fiscal Review), Chapter 63, Statutes of 2022.) The LET Law was adopted to promote a robust California-based lithium extraction industry "that considers the needs of the local communities where the lithium extraction occurs, while recognizing the significant benefit of having a domestic supply of lithium for the state's goals for reducing the emissions of greenhouse gases." (Revenue and Taxation Code (R&TC) Section 47000(b).) Specifically, beginning January 1, 2023, the LET Law requires producers to pay a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted in this state. (R&TC Section 47010.) The tax is imposed at different rates based on the lifetime cumulative metric tonnage extracted by the producer. (Id.) Revenues from the tax are deposited in the Lithium Extraction Excise Tax Fund within the State Treasury and are continuously appropriated as follows:
   1. 80% to counties in proportion to the amounts of the taxes, interest, penalties, and other amounts collected for lithium extraction within each county, as specified; and,
   2. 20% to the Salton Sea Lithium Fund created by Fish and Game Code Section 2951.
3. So, what's the problem? In 2022, when the LET Law was adopted, the Legislature only contemplated lithium extraction occurring in the Imperial County. As a result, the law allocated 20% of all revenues to benefit the County's Salton Sea, which has considerable restoration, air quality, and habitat preservation needs. So long as lithium is extracted in Imperial County, 80% of the tax revenue is allocated to the County, and 20% is distributed to the Salton Sea Lithium Fund. However, if lithium is extracted in any other county, that county would receive 80% of the revenue, but the 20% set-aside for the Salton Sea would continue to apply. With potential lithium projects in Kern and San Bernardino Counties as well, the author wants to return the 20% to the county where the lithium is extracted for distribution to communities directly impacted by the lithium extraction. To this end, the author's office notes:

Lithium production was initially expected to be primarily within Imperial County, and especially around the Salton Sea. However, other counties have begun to explore the possibility of lithium production, and under current law 20% of their contribution to the Lithium Fund would go directly to the Salton Sea instead of going back into the communities impacted by lithium extraction in their own county. This bill would clean up the code by ensuring counties that produce lithium can direct their portion of the Lithium Fund toward their own communities.

According to the Author

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

The Lithium Extraction Excise Tax is intended to help communities mitigate the possible environmental effects of lithium mining. Under existing law, 80% of revenue in the fund goes to counties that produce lithium, and 20% goes to the Salton Sea Lithium Fund. This made sense when Imperial County was seen as the only source of lithium extraction in the state. However, now that other counties are beginning to mine lithium, the law needs to be updated to ensure each county retains the revenue generated locally.

Arguments in Support

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

Under current law, the Lithium Extraction Tax Law imposes a lithium extraction excise tax upon every metric ton of lithium produced. This money goes into the Lithium Fund, 80% of which goes to all counties in proportion to the amounts collected for lithium extraction within each county, and 20% to the Salton Sea Lithium Fund.

At the time this legislation was passed, lithium production was primarily expected to be within Imperial County, and especially around the Salton Sea. However, other counties have begun to explore the possibility of lithium production, and under current law, 20% of their contribution to the Lithium Fund would go directly to the Salton Sea instead of going back into the communities impacted by lithium extraction in their own county.

For Kern County, the need for this legislation is of the utmost importance because Rio Tinto, which operates the borax mine in Kern County, is set to begin lithium production in the town of Boron. The tax revenue is projected to be around $400,000. However, as it now stands, the communities directly and indirectly impacted by this production will not receive the full relief intended under the law. This must be rectified to ensure equality in risk mitigation across all counties producing lithium. Therefore, SB 974 would allow Kern County, which has a fully permitted lithium mine, to direct its portion of the Lithium Fund toward its own communities that are affected by lithium extraction.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations:

1. Negligible costs to the Department of Tax and Fee Administration, which oversees excise tax administration.
2. To the extent excise tax revenues are derived from a county other than Imperial County, this bill would require the money be disbursed back to the other county, resulting in less revenue to the Fund. The magnitude of this fiscal effect is unknown and depends on future lithium production activity. For reference, if another county was the site of 10,000 metric tons of lithium extraction, revenues to the Fund would decline by $800,000.

VOTES

SENATE FLOOR: 37-0-3

YES: Alvarado-Gil, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Allen, Archuleta, Newman

ASM REVENUE AND TAXATION: 6-0-1

YES: Irwin, Ta, Bains, Haney, Grayson, Luz Rivas

ABS, ABST OR NV: Jim Patterson

ASM APPROPRIATIONS: 14-0-1

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua

ABS, ABST OR NV: Jim Patterson

UPDATED

VERSION: April 2, 2024

CONSULTANT: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0003917

Date of Hearing: August 7, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 974

Author:(Grove) – As Amended Ver:April 2, 2024

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

SUMMARY:

This bill revises how revenue in the Lithium Extraction Excise Tax Fund (Excise Tax Fund) is disbursed so all Excise Tax Fund monies collected from a county return to that county.

Specifically, this bill requires, instead of depositing 20% of total Excise Tax Fund monies into the Salton Sea Lithium Fund (Fund), that:

1. 20% of Excise Tax Fund monies collected in Imperial County be deposited into the Fund.
2. 20% of Excise Tax Fund monies collected in every other county be disbursed to that county for further distribution to communities most impacted by lithium extraction activities.

FISCAL EFFECT:

1. Negligible costs to the Department of Tax and Fee Administration, which oversees excise tax administration.
2. To the extent excise tax revenues are derived from a county other than Imperial County, this bill would require the money be disbursed back to the other county, resulting in less revenue to the Fund. The magnitude of this fiscal effect is unknown and depends on future lithium production activity. For reference, if another county was the site of 10,000 metric tons of lithium extraction, revenues to the Fund would decline by $800,000.

COMMENTS:

1. Purpose. According to the author:

The Lithium Extraction Excise Tax is intended to help communities mitigate the possible environmental effects of lithium mining. Under existing law, 80% of revenue in the fund goes to counties that produce lithium, and 20% goes to the [Fund]. This made sense when Imperial County was seen as the only source of lithium extraction in the state. However, now that other counties are beginning to mine lithium, the law needs to be updated to ensure each county retains the revenue generated locally.

This bill is sponsored by the Kern County Board of Supervisors and supported by Kern County resource companies and community groups, San Bernardino County, and the Imperial Valley Equity and Justice Coalition.

1. Lithium Excise Tax. SB 125 (Committee on Budget and Fiscal Review), Chapter 63, Statutes of 2022, enacted a tax on lithium extraction in lieu of all county, municipal, or district taxes on lithium extraction or storage, with 80% of revenues appropriated to the county of extraction and 20% to the Fund to support Salton Sea restoration and community projects.

The Salton Sea region may contain enough lithium in geothermal brines to supply one third of the world’s current lithium demand. Thus, when SB 125 was adopted, the Legislature contemplated lithium extraction occurring only in Imperial County, where the Salton Sea is located. With potential lithium projects in the counties of Kern and San Bernardino, this bill revises the Excise Tax Fund allocations to provide that only 20% of monies collected in Imperial County be deposited into the Fund. For monies collected in other counties, 20% would be disbursed back to the originating county for local restoration and community projects instead of the Fund.

1. Related Legislation. SB 797 (Padilla), Chapter 506, Statutes of 2023, established the Lithium Extraction Tax Citizens Oversight Committee to ensure revenues from the excise tax are appropriately distributed and make recommendations on how to improve community engagement and maximize community benefits from tax revenues.

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

Date of Hearing: June 24, 2024

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

SBPCA Bill Id:SB 974

Author:(Grove) – As Amended Ver:April 2, 2024

2/3 vote. Fiscal committee.

SENATE VOTE: 37-0

SUBJECT: Lithium Extraction Tax: fund distribution

SUMMARY: Amends the Lithium Extraction Tax Law (LET Law) to provide that 20% of the revenues collected in a county other than the County of Imperial shall be retained by the county where the extraction occurs instead of being allocated to the Salton Sea Lithium Fund. Specifically, this bill:

1. Provides that 20% of the revenues collected in a county other than the County of Imperial shall be disbursed to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities.
2. Finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because the impact caused by lithium mining to the Salton Sea and the surrounding community is an impact limited to the County of Imperial, and thus should be mitigated with the portion of the Lithium Extraction Excise Tax Fund received by the County of Imperial.

EXISTING LAW:

1. Imposes, under the LET Law, a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted from geothermal fluid, spodumene ore, rock, minerals, clay, or any other naturally occurring substance in this state, as specified. (Revenue and Taxation Code (R&TC) Section 47010.)
2. Requires the California Department of Tax and Fee Administration (CDTFA) to administer and collect the tax and requires all collected revenues, less refunds and reimbursement to the CDTFA for administrative expenses, to be deposited into the Lithium Extraction Excise Tax Fund and disbursed in the manner prescribed. (R&TC Section 47060 et seq.)
3. Requires 80% of the moneys in the Lithium Extraction Excise Tax Fund to be disbursed by the State Controller to all counties in proportion to the amounts collected for lithium extraction within each county, as specified, and 20% of the moneys to be deposited into the Salton Sea Lithium Fund. (R&TC Section 47100.)

FISCAL EFFECT: Committee staff estimates no impact to overall revenues.

COMMENTS:

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

The Lithium Extraction Excise Tax is intended to help communities mitigate the possible environmental effects of lithium mining. Under existing law, 80% of revenue in the fund goes to counties that produce lithium, and 20% goes to the Salton Sea Lithium Fund. This made sense when Imperial County was seen as the only source of lithium extraction in the state. However, now that other counties are beginning to mine lithium, the law needs to be updated to ensure each county retains the revenue generated locally.

1. This bill is sponsored by the Kern County Board of Supervisors, which notes the following:

Under current law, the Lithium Extraction Tax Law imposes a lithium extraction excise tax upon every metric ton of lithium produced. This money goes into the Lithium Fund, 80% of which goes to all counties in proportion to the amounts collected for lithium extraction within each county, and 20% to the Salton Sea Lithium Fund.

At the time this legislation was passed, lithium production was primarily expected to be within Imperial County, and especially around the Salton Sea. However, other counties have begun to explore the possibility of lithium production, and under current law, 20% of their contribution to the Lithium Fund would go directly to the Salton Sea instead of going back into the communities impacted by lithium extraction in their own county.

For Kern County, the need for this legislation is of the utmost importance because Rio Tinto, which operates the borax mine in Kern County, is set to begin lithium production in the town of Boron. The tax revenue is projected to be around $400,000. However, as it now stands, the communities directly and indirectly impacted by this production will not receive the full relief intended under the law. This must be rectified to ensure equality in risk mitigation across all counties producing lithium. Therefore, SB 974 would allow Kern County, which has a fully permitted lithium mine, to direct its portion of the Lithium Fund toward its own communities that are affected by lithium extraction.

1. This bill is supported by Comite Civico del Valle, which notes the following:

Lithium production is a necessary part of producing batteries for cellphones, laptops, and electric vehicles. The Lithium Extraction Excise Fund collects taxes on lithium production and distributes them to the affected communities. SB 974 will ensure the tax generated in Kern County stays in Kern County.

SB 974 will allocate the funds in the Lithium Extraction Excise Fund proportionately to each county that produces lithium. This is especially important for communities like the town of Boron, which is close to a fully permitted lithium mine. With the passage of SB 974, Boron and other affected communities will be equipped properly to handle any issues that may arise with lithium production.

1. Committee Staff Comments:
   1. Lithium Valley: Lithium is becoming an increasingly critical resource as California moves toward a clean energy future to combat the climate crisis. Specifically, lithium is a crucial component of batteries needed to power electric vehicles. California has rich but largely untapped lithium reserves, including those in geothermal brine more than one mile underground near the Salton Sea. Experts estimate that the region could satisfy more than one-third of today's global lithium demand.
   2. The Lithium Extraction Tax Law: In 2022, the Legislature passed and the Governor signed into law the LET Law. (SB 125 (Committee on Budget and Fiscal Review), Chapter 63, Statutes of 2022.) The LET Law was adopted to promote a robust California-based lithium extraction industry "that considers the needs of the local communities where the lithium extraction occurs, while recognizing the significant benefit of having a domestic supply of lithium for the state's goals for reducing the emissions of greenhouse gases." (R&TC Section 47000(b).) Specifically, beginning January 1, 2023, the LET Law requires producers to pay a lithium extraction excise tax upon each metric ton of lithium carbonate equivalent extracted in this state. (R&TC Section 47010.) The tax is imposed at different rates based on the lifetime cumulative metric tonnage extracted by the producer. (Id.) Revenues from the tax are deposited in the Lithium Extraction Excise Tax Fund within the State Treasury and are continuously appropriated as follows:
      1. 80% to counties in proportion to the amounts of the taxes, interest, penalties, and other amounts collected for lithium extraction within each county, as specified; and,
      2. 20% to the Salton Sea Lithium Fund created by Fish and Game Code Section 2951.
   3. So, what's the problem? In 2022, when the LET Law was adopted, the Legislature only contemplated lithium extraction occurring in the Imperial County. As a result, the law allocated 20% of all revenues to benefit the County's Salton Sea, which has considerable restoration, air quality, and habitat preservation needs. So long as lithium is extracted in Imperial County, 80% of the tax revenue is allocated to the County, and 20% is distributed to the Salton Sea Lithium Fund. However, if lithium is extracted in any other county, that county would receive 80% of the revenue, but the 20% set-aside for the Salton Sea would continue to apply. With potential lithium projects in Kern and San Bernardino Counties as well, the author wants to return the 20% to the county where the lithium is extracted for distribution to communities directly impacted by the lithium extraction. To this end, the author's office notes:

Lithium production was initially expected to be primarily within Imperial County, and especially around the Salton Sea. However, other counties have begun to explore the possibility of lithium production, and under current law 20% of their contribution to the Lithium Fund would go directly to the Salton Sea instead of going back into the communities impacted by lithium extraction in their own county. This bill would clean up the code by ensuring counties that produce lithium can direct their portion of the Lithium Fund toward their own communities.

• 1. Related legislation: SB 797 (Padilla), Chapter 506, Statutes of 2023, established the Lithium Extraction Tax Citizens Oversight Committee (Oversight Committee) within the CDTFA. The Oversight Committee is charged with ensuring that certain revenues from the excise tax are appropriately distributed and with making recommendations on how to improve community engagement and maximize community benefits from the revenues. As with the original LET Law, SB 797 was primary focused on Imperial County's lithium deposits, and directs the Oversight Committee to ensure that excise tax revenues are appropriately distributed pursuant to the following two statutory provisions: R&TC Section 47100(a)(2)(A) and R&TC Section 47100(b).
     
     R&TC Section 47100(a)(2)(A) provides that, of the 80% stream of revenues disbursed to Imperial County, the County must establish a method to distribute at least 30% of that amount to Imperial County communities that are most directly and indirectly impacted by the lithium extraction activities. R&TC Section 47100(b), in turn, requires the 20% revenue stream to be deposited into the Salton Sea Lithium Fund.

If enacted, the current legislation would amend R&TC Section 47100(b) to provide that 20% of the revenues collected in a county other than Imperial County must be disbursed to that county for distribution to communities in in that county that are the most impacted by the lithium extraction activities. Thus, it would appear that, under this bill, the Oversight Committee would also oversee the use of this revenue stream in counties other than Imperial County.

REGISTERED SUPPORT / OPPOSITION:

Support

Kern County Board of Supervisors (Sponsor)

Comite Civico Del Valle, Inc.

Hathaway LLC

Imperial Valley Equity & Justice Coalition

Jobs to Move America

Kern County Supervisor Jeff Flores

Kern County Taxpayers Association

Los Amigos de la Comunidad

Rio Tinto U.S. Borax

San Bernardino County Board of Supervisors

Searles Valley Minerals

Opposition

None on file

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

 THIRD READING  

Bill No: SB 974

Author: Grove (R)

Amended: 4/2/24

Vote: 27

SENATE REVENUE AND TAXATION COMMITTEE: 6-0, 4/10/24

AYES: Glazer, Dahle, Ashby, Bradford, Dodd, Padilla

NO VOTE RECORDED: Skinner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/16/24

AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab

SUBJECT: Lithium Extraction Tax: fund distribution

SOURCE: Kern County Board of Supervisors

DIGEST:

This bill amends the Lithium Extraction Tax Law to provide that 20 percent of the revenues collected in a county other than the County of Imperial is instead retained by the county where the extraction occurred for distribution to specified communities instead of being allocated to the Salton Sea Lithium Fund.

ANALYSIS:

Existing law:

1. Enacts the Lithium Extraction Tax (LET) Law, which imposes a lithium extraction excise tax upon each metric ton of lithium carbonate extracted from geothermal fluid or any other naturally occurring substance in this state (SB 125, Committee on Budget and Fiscal Review, Chapter 63, Statutes of 2022).
2. Requires lithium extractors to register, file tax returns, and remit tax payments to the California Department of Tax and Fee Administration.
3. Imposes a volume-based tax on lithium extraction at rates of:
   1. $400 per metric ton for the first 20,000 tons of lithium carbonate equivalent extracted,
   2. $600 per metric ton extracted over 20,000 up to 30,000 metric tons, and
   3. $800 per metric ton for lithium carbonate equivalent extracted over 30,000 metric tons.
4. States that the LET is in-lieu of any local taxes, and preempts any local taxes on lithium extraction, except to the extent that the sales and use tax applies to the sale, storage, use, or other consumption of lithium.
5. Allocates most of LET proceeds directly to local agencies, including returning 80 percent of tax proceeds to a county in proportion to the amounts of the taxes, interest, penalties, and other amounts collected for lithium extraction within each county.
6. Requires each county to establish an account or fund separate from its others to receive lithium tax revenues.
7. Specifically directs Imperial County to establish a method to distribute an amount not less than 30 percent of its share of the revenues to its communities most directly and indirectly impacted by the lithium extraction activities, and sets forth a specific list of communities that are directly and indirectly impacted.
8. Allocates the remaining 20% of LET revenues to the Salton Sea Lithium Fund administered by the Natural Resources Agency, which is used for projects and grants for community engagement or community-benefit projects at or around the Salton Sea.

This bill:

1. Amends the Lithium Extraction Tax Law to provide that 20% of the revenues collected in a county other than the County of Imperial is instead allocated back to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities.
2. Makes technical and conforming changes.
3. Includes a legislative finding justifying the need for special legislation.

Background:

The Future is Now. According to some estimates, Imperial County may hold lithium reserves with a market value of one half of one trillion dollars. While no lithium extraction has yet occurred, the Lithium Extraction Tax ensures that Imperial County will receive future revenue from the tax if and when it does, for the benefit of one of California’s most impoverished counties. At the time the Legislature created the tax, it only contemplated extraction occurring in Imperial County, so it allocated 20% for the benefit of the Salton Sea in Imperial County, which has considerable restoration, air quality, and habitat needs. However, with lithium extraction now being explored in other counties, it does not seem to be appropriate for revenues derived from applying the tax in those counties to be sent to fund programs related to the Salton Sea.

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

According to the Senate Appropriations Committee:

To the extent that Lithium Extraction Tax revenues are derived from extraction activity in any county other than Imperial County, monies flowing to the Salton Sea Lithium Fund would be lower under this bill than would be the case under current law. The magnitude is unknown, and would depend on future lithium production activity.

SUPPORT: (Verified 5/16/24)

Kern County Board of Supervisors (Source)

Comite Civico Del Valle Inc.
Hathaway LLC
Imperial Valley Equity and Justice Coalition
Jobs to Move America
Kern County Supervisor Jeff Flores
Kern County Taxpayers Association
Kern County Hispanic Chamber of Commerce
Los Amigos De LA Comunidad, INC.
San Bernardino County
Searles Valley Minerals
U.S. Borax INC

OPPOSITION: (Verified 5/16/24)

None received

ARGUMENTS IN SUPPORT: According to the author:

“The Lithium Extraction Excise Tax is intended to help communities mitigate the possible environmental effects of lithium mining. Under existing law, 80% of revenue in the fund goes to counties that produce lithium, and 20% goes to the Salton Sea Lithium Fund. This made sense when Imperial County was seen as the only source of lithium extraction in the state. However, now that other counties are beginning to mine lithium, the law needs to be updated to ensure each county retains the revenue generated locally.”

Prepared by: Colin Grinnell / REV. & TAX. / (916) 651-4117

5/17/24 10:09:14

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

SB 974 (Grove) - Lithium Extraction Tax: fund distribution

Bill Summary:

SB 974 would provide that 20 percent of Lithium Extraction Tax revenues collected in a county other than Imperial County would be retained by the county where the extraction occurred.

Fiscal Impact:

To the extent that Lithium Extraction Tax revenues are derived from extraction activity in any county other than Imperial County, monies flowing to the Salton Sea Lithium Fund would be lower under this bill than would be the case under current law. The magnitude is unknown, and would depend on future lithium production activity (See Staff Comments).

Background:

In 2022, a budget trailer bill (SB 125, Committee on Budget & Fiscal Review), enacted the Lithium Extraction Tax (LET) Law. Specifically, SB 125 imposes a lithium extraction excise tax upon each metric ton of lithium carbonate extracted from geothermal fluid or any other naturally occurring substance in the State. The tax is volume-based, at rates of (1) $400 per metric ton for the first 20,000 tons of lithium carbonate equivalent extracted, (2) $600 per metric ton extracted over 20,000 up to 30,000 metric tons, and (3) $800 per metric ton for lithium carbonate equivalent extracted over 30,000 metric tons.

The LET applies to any extraction occurring on or after January 1, 2023; however, taxable lithium extraction has yet to begin. Firms are currently in the process of developing projects to recover lithium from geothermal brine at existing or new geothermal power plants in Imperial County.

Under current law, 80 percent of LET revenues are allocated to counties. The remaining 20 percent goes to the Salton Sea Lithium Fund, for projects and grants at or around the Salton Sea (also located in Imperial County).

Thus, if lithium is extracted in Imperial County, 80 percent of LET revenue is allocated to the County, and 20 percent is distributed to the Salton Sea Lithium Fund. However, if lithium were to be extracted in any other California county, that county would receive 80 percent of the tax revenue, but the 20 percent set-aside for the Salton Sea Fund would continue to apply.

Proposed Law:

This bill would amend the LET Law to provide that 20 percent of the revenues collected in a county other than Imperial County would, instead of going to the Salton Sea Lithium Fund, be allocated back to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities.

Staff Comments:

When the Legislature created the LET, it only contemplated lithium extraction occurring in Imperial County, and consequently earmarked 20 percent of revenues for the benefit of the Salton Sea, which has considerable restoration, air quality, and habitat needs. However, with lithium extraction now being considered in other counties, under current law, revenues derived from applying the LET in those counties would still be sent to fund programs related to the Salton Sea. As noted earlier, this bill would return that 20 percent to the county where the lithium is extracted for distribution to its communities directly impacted.

Thus, under the bill, the revenue flow to the Salton Sea Lithium Fund would be lower than would be the case under current law. The magnitude of the reduction is unknown, and would be dependent on the amount and timing of future lithium extraction activity outside of Imperial County.

As an example, if a county other than Imperial was the location of 10,000 metric tons of lithium carbonate equivalent extracted, revenues to the Salton Sea Lithium Fund would decline by $800,000. For an extraction of 50,000 metric tons, the reduction would be $6 million. For an extraction of 100,000 metric tons, the reduction would be $14 million.

-- END --

SENATE COMMITTEE ON REVENUE AND TAXATION

Senator Steven Glazer, Chair

2023 - 2024 Regular

Lithium Extraction Tax: fund distribution

Amends the Lithium Extraction Tax Law to provide that 20 percent of the revenues collected in a county other than the County of Imperial is instead retained by the county where the extraction occurred instead of being allocated to the Salton Sea Lithium Fund.

Background

Lithium Extraction Tax Law. In 2022, the Legislature enacted SB 125 (Committee on Budget & Fiscal Review), which enacted the Lithium Extraction Tax (LET) Law, among other provisions. Specifically, SB 125 imposes a lithium extraction excise tax upon each metric ton of lithium carbonate extracted from geothermal fluid or any other naturally occurring substance in this state.

The LET Law requires producers to register, file tax returns, and remit tax payments to the California Department of Tax and Fee Administration (CDTFA). Specifically, SB 125 imposes a volume-based tax on lithium extraction at rates of:

• $400 per metric ton for the first 20,000 tons of lithium carbonate equivalent extracted,
• $600 per metric ton extracted over 20,000 up to 30,000 metric tons, and
• $800 per metric ton for lithium carbonate equivalent extracted over 30,000 metric tons.

Even though the lithium extraction tax applies to any extraction occurring on or after January 1, 2023, there is currently no taxable lithium extraction occurring. However, developers are in the process of developing projects to recover lithium from geothermal brine at existing or new geothermal power plants in Imperial County.

LET Allocation. SB 125 states that its tax is in-lieu of any local taxes, and preempts any local taxes on lithium extraction, except to the extent that the sales and use tax applies to the sale, storage, use, or other consumption of lithium. However, the bill allocates most of its proceeds directly to local agencies, including returning 80 percent of tax proceeds to a county in proportion to the amounts of the taxes, interest, penalties, and other amounts collected for lithium extraction within each county. Each county must establish an account or fund separate from its others to receive lithium tax revenues.

While each county must establish an account or fund separate from its other accounts and funds, SB 125 specifically directs Imperial County to establish a method to distribute an amount not less than 30 percent of its share of the revenues to its communities most directly and indirectly impacted by the lithium extraction activities. SB 125 set forth a specific list of communities that are directly and indirectly impacted. SB 125 then allocates the remaining 20% of LET revenues to the Salton Sea Lithium Fund administered by the Natural Resources Agency, which is used for projects and grants for community engagement or community-benefit projects at or around the Salton Sea.

So long as the lithium is extracted in Imperial County, 80% of tax revenue is allocated to the County, and 20% is distributed to the Salton Sea Fund. However, if lithium is extracted in any other California county, that county would receive 80% of the revenue, but the 20% set-aside for the Salton Sea Fund continues to apply. With lithium potentially in Kern and San Bernardino Counties as well, the author wants to return the 20% to the county where the lithium is extracted for distribution to communities directly impacted by lithium extraction.

Proposed Law

Senate Bill 974 amends the Lithium Extraction Tax Law to provide that 20% of the revenues collected in a county other than the County of Imperial is instead allocated back to that county for distribution to communities in that county that are the most impacted by the lithium extraction activities. The measure also makes technical and conforming changes, and includes a legislative finding justifying the need for special legislation.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “The Lithium Extraction Excise Tax is intended to help communities mitigate the possible environmental effects of lithium mining. Under existing law, 80% of revenue in the fund goes to counties that produce lithium, and 20% goes to the Salton Sea Lithium Fund. This made sense when Imperial County was seen as the only source of lithium extraction in the state. However, now that other counties are beginning to mine lithium, the law needs to be updated to ensure each county retains the revenue generated locally.”

2. The future is now. According to some estimates, Imperial County may hold lithium reserves with a market value of one half of one trillion dollars. While no lithium extraction has yet occurred, the Lithium Extraction Tax ensures that Imperial County will receive future revenue from the tax if and when it does, for the benefit of one of California’s most impoverished counties. At the time the Legislature created the tax, it only contemplated extraction occurring in Imperial County, so it allocated 20% for the benefit of the Salton Sea in Imperial County, which has considerable restoration, air quality, and habitat needs. However, with lithium extraction now being explored in other counties, it does not seem to be appropriate for revenues derived from applying the tax in those counties to be sent to fund programs related to the Salton Sea.

3. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). SB 974 finds and declares that legislation that applies only to Imperial County because the impact caused by lithium mining to the Salton Sea and the surrounding community is an impact limited to the County of Imperial, and thus should be mitigated with the portion of the Lithium Extraction Excise Tax Fund received by the County of Imperial.

Support and Opposition

(4/5/24)

Support: Kern County Board of Supervisors (Sponsor)
Hathaway LLC
Kern County Hispanic Chamber of Commerce
Los Amigos De LA Comunidad, INC.
San Bernardino County
Searles Valley Minerals
U.S. Borax INC.

Opposition: None submitted.

-- END --