Assembly Standing Committee on Revenue and Taxation

We cannot start right now. We're waiting for session to be adjourned. Just for those of you that are anxiously awaiting the start of the Revenue Tax Committee. So that'll be a few minutes. Okay. And then AB 491, Wallis, is proposed Consent. We'll be voting on the Consent Calendar. All right, we can get started now. Good afternoon and welcome to this hearing of the Assembly Committee on Revenue and Taxation.

Before we take up the bills on our agenda today, I again remind everybody in the audience and members of the public that the Committee is not accepting remote testimony. As always, we are accepting written testimony through the Position Letter Portal on the Committee's website. Please make sure to submit letters at least one week prior to the Committee hearing in order to have the letters be reflected in the analysis. We have reinstated our suspense file this year.

Bills with a fiscal impact of plus or minus 150,000 will not be eligible for a vote immediately after presentation. We only have two bills on the agenda that will be eligible for a vote today, File item 2, AB 1361, and file item 5, AB 491. File item 5 has been proposed for consent. It looks like we have a quorum, Ms. Highland. Please call the roll.

[Roll Call] We have a quorum.

All right. We have a quorum. And can I have a motion and a second on the Consent Calendar? Motion by Assembly Member Grayson. A second by Assembly Member Petrie-Norris. Roll call, please.

[Roll Call]

All right, Assembly Member Gipson, you are up with AB 1498, the consent file pass. What was the? 9 to 0. Consent is out. Welcome, Mr. Gipson.

Thank you very much, Madam Chair and Members, thank you for allowing me to present Assembly Bill 1498 which proposed an estimate establishment of the minimum California Earned Income Tax Credit of $300. This credit would provide a meaningful assistance to 3 million workers, no matter their dependent status. The goal of the CalEITC is to provide tax refunds aimed to give an economic boost to the Low income individuals making $30,000 or less per year.

Right now, the minimum of this grant of this credit, rather, is $1, while the maximum credit for filers without dependence is $275. Unfortunately, very few workers receive the maximum credit. Currently, the California Budget and Policy Center has estimated that most recipients of the CalEITC recipients receive less than, I want to repeat less than 200 from the credit. By establishing a $300 minimum amount.

This will make the benefit more meaningful by providing workers and their families with greater economic security while encouraging eligible taxpayers to claim the credit. The result is AB 1498. If pass, will incentivize tax filers and doing so they will have a boost in their family's total income and to the local economy.

I want to also underscore by doing this increase, when you actually go and pay for your filing, it exceeds over $200 to $300 and so that's taking money out of people's pocket and this helps put money back into their pocket. And so with me to provide supporting testimonies are representatives from the CalEITC coalition who was self introduced and thanked them for their testimony and their technical assistance if called upon.

Thank you.

Good afternoon chair and Members of the Committee. My name is Cody. I am 25 years old with a daughter who is almost two years old. As an 18 year old, I exited foster care into homelessness. I was working while attending school and filing my taxes. As a single worker in California at the time, I did not qualify for the tax credits the ways others in my community did.

If I was able to receive a minimum of $300 while I was homeless, that could have drastically changed my circumstances for the times I had no money. I remember a time when I wasn't legally required to file my taxes, but when I did, I was lucky if I received $200. As a former foster youth who didn't have someone to teach them how to file their taxes, I was terrified to file.

I was afraid that because I didn't fully understand what I needed to do, I would mess up, resulting in a fine or jail time, which is often highlighted around the topic of taxes and errors. $100 or $200 isn't a significant amount of money, especially when we take inflation into consideration. This little amount of money isn't enough incentive compared to the stress and fear of filing taxes.

When I was a single filer, if you would have told me that I would have received at minimum $300, I would 100% want to file my taxes and claim that $300. That money would cover a month of groceries for my household and could do the same for many of our low income households.

Now that I have my daughter and my filing status as head of household, the CalEITC alone that I receive is much greater giving me the ability to purchase must needed items for my daughter and allowing me to pay any bills or debt that I have. The CalEITC benefits me more than I can explain to you today, which is why I know how much it would benefit all of our low income families. For these reasons, I urge your aye vote on AB 1498. Thank you.

Thank you very much.

Good afternoon Chair and Members. I'm sorry some of you are getting my back, but my name is Sarah Bouabibsa and I'm with Young Invincibles and we're a proud supporter of AB 1498. And I'd first like to thank Assemblymember Gipson for his commitment to lifting Californians out of poverty. And in California, currently, one in five working young adults struggle to afford basic needs. Many are working low wage jobs and face an incredibly competitive job market.

This, coupled with the fact that young adults are more educated than their predecessors, tells us that the financial insecurity they face is not because they're not educated or don't have college degrees. Rather, it's because today's young adults live with an impossible economic reality. The cost of living crisis is higher than ever and the value of incomes today doesn't stretch like they used to. In addition to this cost of living crisis that many Californians are experiencing, our 4 million student borrowers are suffocated by their student debt.

The student debt averages $22,000 per borrower and $50,000 for black student borrowers. So not only are young adults making less and experiencing job insecurity, they have thousands of dollars in debt from taking on higher education, which is a pathway that we have assured them is the only viable option for disrupting poverty and building wealth. Expanding the CalEITC minimum to $300 is a tangible solution toward disrupting poverty. We know that direct cash assistance, like tax credits, are transformative.

They give people the autonomy to address their needs as they see fit. During the pandemic, the federal child tax credit expansions reduced child poverty to the lowest level on record. The current $1 CalEITC minimum disincentivizes tax filers from seeking the credit, and the $255 maximum for filers without dependence doesn't begin to address the needs of the nearly 1 million young adults that receive the credit every year.

Young adults leave CalEITC money on the table because spending hours for filing for a $1 minimum is not worth the effort. We can change that. We can expand the minimum credit to $300 and it will result in an uptake of the credit and support young adults that are excluded from the federal EITC and most state supports. We have the opportunity to empower a generation of young people to build economic security for themselves. And for that reason, I respectfully urge your aye vote. Thank you.

Thank you very much. Do we have any other supporters in favor?

Good afternoon, Madam Chair and Members Kathy Van Austin here on behalf of - I can't even remember where I am - John Burton Advocates for Youth and in strong support.

Madam Chair and Members Andres Ramirez, on behalf of All Home and Economic Security Project Action in strong support. Thank you.

Hello Chair and Members Sam Wilkinson here on behalf of Grace & End Child Poverty in California, as well as Friends Committee on Legislation of California, California Immigrant Policy Center, United Ways of California and the California Association of Food Banks in support of AB 1498. Thank you.

Thank you. Do we have anybody in the audience in opposition? Any questions or comments from the Committee? Assemblymember Petrie-Norris.

Thank you, Madam Chair, and thank you, Assemblymember, for bringing this measure forward. We all recognize that the EITC and CalEITC have been really important tools for lifting Californians and Californian families out of poverty. The analysis did highlight a couple of implementation considerations, including some ambiguity associated with a one time appropriation, the fact that the phase out exceeds the current income limit, and some potentially unnecessary language. Can you just talk us through kind of how you're going to address those implementation considerations to ensure that the proposal is able to advance?

Sure. Well, thank you very much for your question. And so we realize this is going to need an appropriation as a result of this and moving this Bill forward. We're working with all the intended departments in order to making sure that, one, this Bill gets across the finish line and gets the support that it needs both in this Committee and moving forward through appropriations. And so I'm working with those departments right now, and I'd be more than happy to speak with you and come to your office and provide that answer specifically.

Okay, that'd be great. I think in particular, as it goes through the revenue tax suspense file, I think ensuring that some of the ambiguity that the staff analysis has flagged is addressed would just be important to ensure that it can move on.

I'll get with you offline.

The analysis has some technical considerations that should be addressed, and Assemblymember Petrie-Norris is just bringing those up. And I assume as you work move through the process, you will be addressing those.

I absolutely will.

So would you like to close?

And I just want to say I think CalEITC is one of our most effective programs to bring up the working poor. And so I appreciate you bringing this Bill forward. You did mention one thing, that some people spend $200 to $300 to get their taxes done. And we just want to point out many people do, but there are a lot of free options for people that are in the lower income arena. And certainly we've worked on bills to try to get more people to fill out their taxes using these free services. So just a little public service announcement.

Thank you.

I would. Thank you very much, Madam Chair and Members. I was going to bring out in my closing that I offer every year a free tax preparation program where we have a number of agents coming in preparing individuals taxes free of charge. But you'll be surprised. We all have a huge influx and then it falls off. People don't know they can get their taxes.

They don't have to go and pay $200 to $300 to get their taxes done, but also raising the amount of the minimum so that people can have more money in their pocket. We know through data shows that when you place additional resources, the people who receive those additional resources, especially those filers, they invest in their community, they spend money, but it's also a game changer for those individuals, for their families.

Just like the witness indicated, as a young mother, she absolutely could use that because it means groceries for that particular month. And we believe this is a very thoughtful way to making sure that we leave no one behind. And this 3 million workers would absolutely be benefit from it. So we appreciate your aye vote at the appropriate time.

All right. Thank you very much. And with that objection, this Bill will be referred to our suspense file. And I want to thank the witnesses for coming in also.

Thank you.

Thank you.

All right, next up is file item 2, AB 1361 by Assembly Member Hoover. And please begin whenever you're ready.

Thank you. Thank you, Madam Chair and Members of the Committee. Appreciate the opportunity to bring this bill forward. This was the product of conversations with veterans in my district, particularly the ones that have sacrificed so much for our country. Our bill, AB 1361, allows 100% disabled veterans the ability to get pre-approval for the Veterans Property Tax Exemption. Anyone that's familiar with this process knows that it's very cumbersome for our veterans.

Currently, it requires them to own the home first and then apply for reimbursement of taxes that they have to pay in the meantime. This bill would put all of that work at the beginning of the process so that they do not have to go through those steps, and it would allow them to, the bill would streamline the home buying process for them.

It would also enhance their buying power, and it also ends the practice that currently requires those that have sacrificed so much for our country to pay taxes that they otherwise would not have owed. We are very happy to continue working with the opposition.

We're in active conversations with them at the moment, actually meeting later this week to discuss some potential amendments to this bill. And I think my last comment would just be that this would be no additional cost to the state, and with that in mind, I would love to turn it over to my witness, and I'd respectfully ask for an aye vote.

Thank you, Josh, and thank you, Chair and Committee Members, for allowing me to speak here. California is home to nearly 1.8 million veterans, with almost half a million of those receiving some kind of disability benefits. AB 1361 will be able to support those veterans who have at least a 100% disability rating. The current process a disabled veteran is required to go through is arduous and time consuming.

Six to nine months with the assessor's office and four to six months with the lender's servicer is the full time frame for the tax exemption. During this time, the disabled veteran must pay the full amount of taxes due only to receive their refund at a much later date. Streamlining this will allow the lender to collect the correct amount of taxes based on the preapproval of the exemption. This will leave that amount of money in the disabled veteran's hand and control.

The amount of the refund can be equal to approximately $180 to $250 a month. As you all know, that could be the matter of an electricity bill or groceries. Affordable housing is an issue, a giant issue, in our economy today. Allowing disabled veterans to have a pre-approval of their exemption could increase their buying power to the tune of tens of thousands of dollars. This could mean the difference between a disabled veteran being a homeowner or not being one.

As Josh mentioned, we want to work with the assessor's office to find an administerable solution. We do not want to make this harder on any governmental agency, but we do want to make it easier for our disabled veterans to get through this process and to raise awareness of the discount that they're allowed per our constitution. By approving this bill, we will be impacting the lives of disabled veterans who fought for our country.

These veterans who you are helping are defined by the current constitution and the current requirements are blind in both eyes, have lost two or more limbs, or they must be 100% totally and permanently disabled due to a service connected disability. Our current laws require them to meet these guidelines and approving this will give the most deserving members of our community the opportunity to increase their buying power and reduce the financial stress that's caused by the current process. Thank you.

Thank you very much. Are there any witnesses in the room wishing to speak in support?

I think just...

Were you going to speak, Josh?

If you allow me, yes.

If we could have another support witness... One additional witness. Sorry.

Oh, sorry about that.

That's okay.

Go ahead. Whenever you're ready.

Good afternoon. My name is Joshua Baker, and I'm the President of the California Enlisted Association of the National Guard of the United States and representing National Guardsmen. I did reach out to a lot of my members that are 100% disabled and asked if this bill would help them, and a lot of my response were, I didn't even know that this was a thing. So that's telling me that we're not doing a good enough job educating our veterans, especially our 100% disabled veterans, of this program. But projecting to them if this were possible, if this bill were possible, how it would help them.

And they said immediately yes. Because a lot of the people that are applying for this program are using the VA Home Loan Program, and that VA home Loan Program does have those additional fees attached to it. And if this bill were to be passed, that would help defray that cost to our veterans, especially those ones that are 100% disabled. Thank you.

All right, now we can have witnesses wishing to speak in support.

Vanessa Chavez with the California Association of Realtors in support. Thank you.

Mr. Chair and Members. David Creager for United Wholesale Mortgage in support.

Dana Nichol with Reeb Government Relations, representing AmVets, the American Legion, the Military Officers Association of America, the Vietnam Veterans of America, and also the California State Commanders Veterans Council, an umbrella group of 21 veterans service organizations. Thank you.

Thank you. And are there any witnesses in the room that wish to speak in opposition? Come on up. Whenever you're ready.

Thank you, Mr. Acting Chair and Members. Rob Grossglauser on behalf of the California Assessors Association, unfortunately, in opposition to AB 1361. We agree with the Assemblyman and the goal to support veterans. It's difficult to imagine a taxpayer that's more deserving of an efficient and effective government process, and we agree with that. But unfortunately, the goal of the bill, although intended to help veterans, we believe, is actually going to have the opposite effect because it's going to be creating expectations that are not achievable.

Those expectations are reasonable with the passage of the bill, but they can't be realized because of the process out there. And so veterans feeling more frustrated about government is something that the Assessors are very worried about. The process in our state constitution and the state statutes and the way to get the lowest possible property tax bill for veterans is articulated analysis fairly well, but let me cover it real fast again. So the Assessors need a change in ownership.

They need a property to be purchased, then they need that number and appraised value. Right. You need to put a market value on it. Then you need to apply an exclusion, such as a base share transfer. You're going from one home to another, taking that old base share, and then you apply the exemption. That's how you get the lowest possible number. If we try to do something on the front end, it's not going to be accurate for the veteran.

The exemption number itself is in the analysis, and there's an inflation factor. So in our opinion, the possible solution is looking at the lending community to see if the lending community can make estimates based on a veteran's status. You get a letter from the VA and it describes your disability percentage, and you can use that with the assessor's office.

So the process of going through the steps from an assessor's world is one that's going not to allow veterans to actually realize the benefit that 1361 is intended. We again really appreciate the author's intent and the intent here, but we also don't want to confuse our veterans and frustrate them further with a government process that's not possible right now. It's not possible to get the lowest number. So here, happy to respond to any questions, and thank you for your time today.

Thank you. Are there any other witnesses in the room wishing to speak in opposition? Seeing none. Questions or comments from the Committee?

So, assemblymember, thank you for bringing this Bill forward. And I think it's actually heartbreaking to hear just how many hoops we make our disabled veterans jump through, how protracted a process that they've got to go through to access a benefit that they absolutely deserve that and 1000 times over. I am, though, concerned about, and I will be supporting the Bill today.

Reading through the analysis and listening to the comments from the assessors, certainly want to make sure that we enact a solution that's actually delivering the highest level of benefit to our disabled veterans. And there were some implementation issues and some potential conflicts with existing law that were highlighted in the analysis that I do think it's important to figure out.

And I don't know that we're going to get into those details here and just, I think 30,000 foot view from my perspective, I just think we should be doing everything possible to implement this existing state program in as efficient and as effective a manner as possible and ensuring that our disabled veterans get the largest benefit that they're eligible for with the least administrative hurdles. So I appreciate you wanting to kind of cut the red tape around it. This is not relevant to your Bill.

It's sad when we hear that the folks that qualify for this benefit aren't aware of it. And so I think that I made a note of that. I think that that's a good flag for all of us to ensure that with this program, with many other state programs that we have, it can be really hard for the folks that we're trying to help to access them or even know about them. So that was, I think, an important point as well.

So with that, like I said, I'll be happy to support the Bill today. But do you want to make sure that as you continue to work on it, that you address some of those implementation considerations?

Absolutely. And it is really hard to hear what the witness testified about, people not even taking advantage of this. And part of the reason for that is because it's such a cumbersome process. And I think one of the goals of this Bill is to simplify that process so that more people are wanting to actually go through all of that work to do it.

But I think to your point, we do have some amendments we're already currently working on to address some of the concerns raised in the Committee analysis. We're meeting with the Assessors Association later this week to continue those conversations. We do appreciate the complexity of this, but we do believe that it's very feasible to do this, and if there's some tweaks we need to make to make that more possible for the assessors, I think we're totally open to doing that.

But at the end of the day, we just want to get it done so that these veterans are able to access this more readily. So we'll continue those conversations and keep everyone in the loop on that.

Assemblymember Grayson.

Thank you, Mr. Chair. Have you all had very much time to be able to get together and collaborate and work on this, or have we come to a head where there's not an answer.

Unfortunately, the Bill has been in print for a little while now. I think the opposition came in a little bit late, but I think our doors open to work, and we have had, I think my staff has met with the assessors already to kind of start those discussions.

When did opposition come in?

So Sacramento County is part of our legislative Committee. Sure. Sorry. Through the chair, Rob Grossglauser, again with the Assessors Association. And so a couple of weeks ago, we'd had the opportunity to meet with the author's office and continue to try to educate on the process. The exemption itself number and that process. Easy. We can give any person that number today because it's articulated. And so then giving them what your property tax obligation is requires all those steps.

So we've been in discussions for a couple of weeks and hope to continue to discuss it, but it's not a process that can be achieved with any sort of negotiation on the front end because we don't know what the value of the home is and all the other applicable things. So the exemption approval, it's pretty much automatic. I'm unaware of a process outside, but giving you actual, an assessed value after subtracting everything, that's not just unachievable.

Okay. I appreciate that. But the Bill has been in print for a couple of months, so for only a couple of weeks of having conversation where the author could have made adjustments. I'm going to support the Bill today to be able to give more time for adjustments to be made, even if the Bill has to make a complete right turn and go a different direction.

But I think it's worthy to the author to be able to have an opportunity to work on a Bill and work out the bugs and things like that, especially if opposition came in fairly late. So with that, I will support the Bill today.

Assemblymember Patterson. Floor is yours.

Do the assessors wish to see this happen for the veterans? And can you chart the pathway to get it done instead of saying what can't be done. Why don't you start talking to them about what can be done? What do you need to make it work?

I really appreciate. Again, through the chair. I really appreciate that question Assemblymember, when you say it is, where? I don't mean to be technical. The assessors we've discussed, it could be a process as simple as calling the assessor as to the applicability of the exemption and saying, yes, getting to an assessed value after all the subtractions.

And we have done a market analysis of the home to ensure that the lowest number possible is there for the veteran. That part is different. So the Bill is articulating that part, the exemption process and the approval there could be done. The lenders can already estimate the number that the exemption is applicable to. So let's say hypothetically, you're looking at a $400,000 home. You can apply the exemption just with a number from a lending perspective, is that the final number from assessed value? No.

We want to make sure maybe there's a base or transfer that came from another home we truly seek, want them to have the lowest number. So the exemption, are you qualified for it? The answer is yes, we can do that and we would love to engage the assemblymember for those discussions. Giving you an assessed value. We could not do that.

Don't you normally and routinely give assessed values?

Absolutely.

How do you do your work of assessing if you can't get to that number?

Under the. Obviously, everyone's familiar with the constitutional framework. It's the appraised value of the market value of a property. So if you acquire a home from a relative and wasn't on the market, were there other considerations? The appraised value, nine times out of 10 is the purchase price, but the assessor has to go through that diligence of establishing it. And again, there may be other sort of considerations to lower what your taxable value is before you even apply the exemption to get a lower number. So that's the process, hopefully. I'd answer your question, sir. Would you mind repeating it, then, so I could try?

Do we have any other questions or comments from the Committee?

Yeah, it seems to me that there ought to be ways of working through this. What's the problem here? The problem here is what? You can do the exemption, but?

Through the chair. The Bill is articulating a process for a preliminary application without actually a transfer of a property occurring. So what would we be giving them an assessed value for? Since there's not a property or transaction or number to assess against.

To the author. We got assessors all over the place. My daughter, son in law, my grandkids, they're moving and they just went through assessment. It seems like you can get an assessment from private sector people as well.

Yeah so.

What we're trying to figure out is what the value?

And I think our office, just, not to get too technical, but our office is working on currently, the Bill states if the application is preliminarily approved, the amount of the tax exemption for the property the person intends to purchase would need to be provided. I think we're working on taking that out to try to address some of these concerns. But again, we certainly are open to making this as doable as possible. We just want it to be done upfront.

Just comment to the chair, I've been here 10 years, my final term, and I'll be here 12 years. I've seen far too many state bureaucracies tell people no, wait, or maybe instead of telling them yes, I hope you can get to a way of telling these veterans, yes.

Mr. Chair, if I could have my witness respond, she's a bit more of an expert as well.

Please go ahead.

On this topic.

Lindsay McCoy, responding to that statement. To the assessor's point, we want to make amendments, and as was previously mentioned, we were in a little bit of discussions, but a little too late to make that amendment and find a workable, administrable option so that the assessor's office can still go through their normal time frame of bringing the property value and giving the veteran exactly what they need and what the assessor's office needs. And by amending our Bill slightly, we can find an inventoriable option.

What we're asking is for preliminary approval that the veteran qualifies for the exemption, not the actual dollar amount. And I know that's how the Bill reads right now, but not the actual dollar amount of said exemption, as the veteran can take that preliminary approval and take it to their lender or their mortgage person or their bank and be approved for a higher mortgage amount or just a lower tax amount. The information that we need, I'm a lender.

Information that we need to process, that information is on every county's website. But we cannot do so without approval from the assessor's office. We cannot do so. We cannot just take the veteran's word or even their documentation because the assessor's office has to say, yes, you're approved for this. I hope that clarifies. Thank you.

Mr. Chair.

Yes. I also want to thank the author for bringing this Bill forward. I also agree with my colleagues that we shouldn't be making more of a hurdle for veterans, especially our disabled veterans. And I'm actually looking at the Bill, and I know there's.

All right. Ms. Pacheco.

I understand what the opposition is saying, but my understanding of the Bill is it says that the Bill would provide preliminary approval, and then the county assessor will process the exemption for the property when the person receives ownership of the property, because I know the person actually has to own the property, of course. So I know there may be some fine tuning that needs to be done. So I really like this Bill.

I think we should do everything possible for our veterans, and I'm glad to hear that there's conversations happening, so that way we can fine tune this Bill. So I'm hoping to see both of you work together so that way we can create a Bill that will help our veterans. So thank you again to the author.

Thank you. Appreciate that.

Any other questions or comments from the.

Thank you, Madam Chair. Rob Grossglauser with the assessors. Again, I'm very sensitive to the idea that government is not working hard for veterans, and I want to assure you all that is not the position of the assessors. There's a Bill in the Senate right now about having electronic letter from the VA. I'm unaware of an assessor denying a veteran's exemption request because we just need a letter from the VA.

And maybe that's one of the disconnects because it's not like the assessors are putting folks through the hoops if you're trying to establish, though, an impound account or getting to an assessed value. And on page three of the Bill, line four is what I'm referring to when it talks about the amount of the tax exemption for the applicability to the property.

So we would love to work with the author's office, and we understand the Bill is getting out today, but please know assessors are not trying to create hurdles for veterans. We just want to make sure that we're not going to create new frustrations for them. Thank you.

Assemblymember Valencia.

Thank you, Madam Chair. And on that point, really appreciate you making that. And I don't think the intent here is to stigmatize the assessor's office, and to your point, really appreciate the fact that nobody has been denied. But I think the intent of the Bill here from the conversation is to remove the possibility of that not coming to fruition. Right.

With so many challenges in accessing information and the hurdles that could potentially arise throughout the process, eliminating one more hurdle I think will be helpful specifically to our veteran community when they're trying to access these types of resources. So I'll be supporting the Bill as well. Thank you.

All right, well, I appreciate the robust conversation. I was able to present a Bill and come back and it was still going on. So I obviously was the chair of the Veterans Committee before and support efforts to support our veterans. I appreciate you bringing this Bill forward. Obviously, you hear that there's a lot of work still to be done with the assessors. We want to make sure that this is implementable.

I am supporting the Bill today, and there are a number of other times along the process that we will be able to make sure that the Bill evolves into something that we can all support at the end. So with that, would you like to close?

Sure. Thank you so much. And thank you for, again, my colleagues and the discussion. I will close by just saying that. Just reiterating the small amount of people that this is actually going to affect, we're talking about 100% disabled veterans, those that have sacrificed the most for our country, and I do not believe it's going to be a major burden.

I would also point out that there are, I believe, at least seven states that have already either passed legislation exactly like this or that are in the process of passing that legislation. And so this is a movement that is gaining steam across the country. And I would love to see California be a part of that movement and then finally to one of the points made by the know there is some substantial variance across counties. Every county assessor does require something differently in these situations.

And so this Bill provides some kind of statewide continuity to this process. And I look forward to continuing to work with the opposition to address those concerns. With that, I ask for an aye vote. Thank you.

Okay, very good. And we have a motion by Assemblymember Ta and a second by Assemblymember Wallace. The motion is do pass to appropriations. Ms. Highland, please call the roll.

[Roll Call].

That Bill is out 8 to 0.

Thank you.

All right, next we have file item 3, AB 1724. Assembly Member Sanchez, you may begin whenever you are ready.

Thank you. Thank you, Madam Chair and Members. I am proud today to present AB 1724. California is in unprecedented times. And we all know that the past few years have been rough for everyone, but they have been especially nearly unbearable for California's working class. Whether they're a single mom trying to work a double shift and pick their kids up from school or a senior citizen living on a fixed income, most of them agree every single dollar counts. Facts are facts. We live in an unaffordable state where homeownership is out of reach, the costs of goods continue to climb, and taxes are the highest in the nation.

According to a recent PPIC poll, a majority of Californians believe they pay more in taxes than they should and that the current tax system is unfair. This is why I've introduced AB 1724 to keep money in the pockets of hardworking Californians by reducing the sales tax by 1% for one year. We in the State Legislature need to get serious about making sure our tax system is fair and that it works for everyone, especially working class people.

Why don't we give the people of this state exactly what they're asking for? They want lower taxes. They want the opportunity to keep more of what they earn. The government should not be so arrogant as to believe that they know what is best for and how to spend someone else's money. It should be up to the people to decide, and AB 1724 allows them to keep more of their money and do as they see fit.

By passing measures like AB 1724, the state can take a first step in reforming our unfair tax system and providing relief to the people who need it most. Testifying with me today is Scott Kaufman of Howard Jarvis Taxpayers Association.

Hello. I'm here today in support of AB 724, which would reduce the state sales tax by 1% for one year. Given the Committee analysis, I think it's important to define what this proposal is. It is not a sales tax holiday. It is a suspension of a portion of the state sales tax for one year. Tax holidays typically target a few selected commercial goods.

I spoke on some of those last week, for a few days out of the year, such as back to school sales events during a weekend in August. AB 1724 would cover all commercial goods impacted by the state sales tax for an entire year. Make no mistake about it, this would put more disposable income into the pockets of all consumers, especially those with lower incomes. This is because the state sales tax is highly regressive.

This means that low income taxpayers pay a higher portion of their income on these taxes than middle and high income earners do. And California has one of the highest base sales tax rates in America. We know this hurts low income consumers the most. And so AB 1724 is an important step forward in helping provide immediate relief to those working class Californians during this extremely difficult economic time. And I ask for your aye vote at the appropriate time. Thank you.

All right, thank you. Do we have any other witnesses in support? Anybody in the audience in opposition? Right. Comments from the Committee? All right.

Sorry. What would the revenue loss be to the state?

We actually can go into the weeds and get back to you, but quite honestly, I believe the intent of the bill is to provide immediate relief to those hit hardest the past couple of years, especially on our taxes. So the intent is to provide immediate relief.

Yes. Okay, great. Thank you.

It mentions in the analysis that it's $9.5 billion and at least 4 billion would be Prop 98.

Right, sorry. And the bill does not contemplate any alternative strategy for those revenues?

No, but we're happy to work with the Committee and behind the scenes to make amendments if needed.

Very good. Assembly Member, would you like to close?

Sure. AB 1724 is an important measure to help keep hardworking Californians more of what they earn. I respectfully ask for your aye vote on this measure when it comes to you for a vote.

All right. Thank you very much. And without objection, this bill will be referred to our suspense file.

Thank you.

All right. Assembly Member Grayson, you are next. Good afternoon.

Good afternoon, Madam Chair. And shall we? And Members. Before I begin, I'd like to thank Mr. Ruff for his astute counsel and assistance in bringing this bill before you all today. We are very fortunate as a Committee to have his expertise at our disposal. AB 52 seeks to incentivize long term investments and fuel expansion in California's manufacturing industry by providing what would essentially be a full sales and use tax exemption for the purchase of manufacturing equipment.

The measure would accomplish this by providing a state tax credit for the local sales tax paid by manufacturers for qualified equipment purchases. This would facilitate the growth, hiring, and training of skilled workforces for the future and provide high wage jobs for Californians. Pre-pandemic, California's manufacturing sector had already faced a decline in total employment. Much of this decline has been a result of California's steep cost of doing business, which is one of the highest in the nation. The Covid-19 pandemic has further challenged California's manufacturing sector.

Over the last two years, California has attracted less than 1% of the country's manufacturing investments, with other states aggressively attempting to lure our state's manufacturers with attractive lower business cost and location incentives. This bill will help to reverse these trends and make California more attractive to investment, especially in light of the fact that 38 states already have a full sales and use tax exemption for manufacturing equipment purchases. Another five states have no sales tax at all.

It is imperative that the state find ways to mitigate financial burdens, promote increased production, and ensure the growth of high wage jobs for a variety of skill levels and backgrounds in one of the state's essential industries. A stout manufacturing job base is key to the global and domestic competitiveness of our economy because of its breadth and its variety. There is a misconception that all manufacturing is done on large industrial scales, but over 70% of manufacturers have less than 20 employees.

Small and medium sized manufacturers face a disproportionate share of economic burdens, increased capital costs due to the pandemic, and one of the highest state and local sales tax rates in the nation. AB 52 would help to ease some of these economic burdens. California has comparative manufacturing advantages to other regions of the world due to the strength and depth of its innovation in technology.

Not only does the industry employ 1.3 million people in California, but it also plays a key role in creating new jobs, with its multiplier effect supporting 2.5 jobs for every one manufacturing job. Manufacturing plays a crucial and essential role within our state's economy, supporting high wage jobs and small businesses with room for growth. It is my hope that AB 52 can be the tipping point to encourage a new quote invent here manufacture here quote reality by incentivizing companies to plant roots in our state and grow.

This measure has been designated as a job creator bill by Cal Chamber, is supported by such groups as California Life Sciences Association and the California Business Roundtable, and is sponsored by California Manufacturers and Technology Association. With that, I respectfully ask for an aye vote when the Committee takes action on this bill. And with me, through the Chair, today to testify is Lance Hastings, President and CEO of the California Manufacturers and Technology Association.

Thank you very much, Mr. Grayson. Madam Chair, appreciate the opportunity to testify today. Never has the appetite for incentives like this been more apparent than it is right now. A year ago, we were before the Committee on a sales and use tax exemption proposal that, while moving through the Legislature successfully, was vetoed by the Governor. So we have an artful solution, I think, before you today.

Manufacturers will be leaping at the opportunity to take advantage of something like this, particularly in the intervening year from last year to now, inflation and interest rates increase have made capital much more expensive than it was even a year ago today. So the timeliness of this bill is very important. I also wanted to thank the staff for their work. Mr. Ruff, very good, Ms. King, very good as well.

We appreciate the work that goes in behind the scenes, including the staff of my own over at CMTA, getting the bill to the state that it's in now and before you today. And we're joined by a member of our board of directors, Chris Belle from Tri Tool Technologies here in Sacramento.

All right, good afternoon. How about now? Perfect. All right. Good afternoon. My name is Chris Belle, and I'm the CEO of Tri Tool Technologies. I'm a new Californian and will have been here three years this May. Tri Tool has been in California much longer. It was born in Placerville over 50 years ago. California is a place where 76 of our employees choose to call home. Our company remains held by the family who founded it and is not backed by private equity or outside lending. Tri Tool is focused on growth in our nation's defense industries, the safe maintenance of our established energy industries, and innovation with our nation's high tech industries.

I'm here today to ask you to vote yes on AB 52. AB 52 provides the state of California an opportunity to lay the groundwork for a resurgence of manufacturing, giving our local communities high wage job growth that we all desire. We have many jobs that require a degree, but we have far more that do not. We have field machinists without college degrees making well over $100,000 a year. Manufacturing is an industry where non-college bound Californians can earn a very competitive living.

Ensuring our employees remain employed and earn that healthy living wage revolves largely around how well we can solve our customers problems. This requires constant innovation. In 2022, we spent $1.6 million purchasing new capital equipment to allow us to continue to grow and innovate. We purchased a five axis machining center, an automated CNC grinder, a 3d printer, and a few other pieces of equipment. Taxes on equipment like this can range from 7.25% to 10.75%, with a handful of smaller exceptions depending on the type of equipment being purchased.

At Tri Tool, we are not competing on having the lowest prices, but on providing the most value to our customers. We can only do that by continuing to out innovate and solve problems better than our competition. The taxation on our innovation and innovation investments make it harder for us to serve our customers while manufacturing in California. There's no place I'd rather call home than here in California.

It's here where I'm raising my two children and trying my best to guide them on a path of reaching their full potential. Much like I want for my children, I would like California to reach its full potential. Environmental goals, sustainability goals, housing goals, and all of our other lofty goals can be achieved through the robust economy that comes from having a strong manufacturing base.

I implore you to support AB 52 and kickstart a new golden age of manufacturing in the Golden State by keeping and attracting more investment into our communities. Thank you for your time today and listening to the perspective of a small business operator in California.

Thank you very much. Do we have any other witnesses in support?

Mike Robson, here on behalf of the Glass Packaging Institute, the four glass manufacturing plants and their 2000 union employees, support this bill.

Thank you. Preston Young from the California Chamber of Commerce, here in support.

Good afternoon, Chair and Members. Kate Bell, on behalf of Ryan LLC, a tax consulting firm, in strong support. Thank you.

Madam Chair, Chris Micheli on behalf of Niagara Bottling, in support.

Hello, Chair and Committee Members. Voleck Taing with the Silicon Valley Leadership Group, in support.

Thank you, Madam Chair. Matt Robinson on behalf of the Specialty Equipment Market Association, SEMA, in support.

Margie Lie on behalf of the California League of Food Producers, in strong support.

Good afternoon. Natalie Boust with the California Business Roundtable, in strong support.

Very good. Do we have anybody that would like to speak in opposition? Questions from the Committee? Assembly Member Valencia.

Thank you, Madam Chair. To Mr. Grayson, really appreciate you bringing this bill forward. I know it's been attempted in the past in one way or another. And with the unprecedented time that we're engaging with now in California, I think it's extremely critical that we go ahead and take a look at every option possible to make sure that manufacturing continues in our state. I have the good fortune of representing the 68th Assembly District, which isn't in the heart of Orange County.

We're definitely not Newport Beach or South County. We're blue collar Anaheim, Santa Ana, and Orange folks, and proudly represent that district. A stat that is critical to my district is that we actually have over 1200 firms, manufacturing firms. And as an Assembly District, we represent the most and have the most firms within the Assembly District. We're the number one district, like I said. And then also when it comes to the number of employees at about 30,000, and I think we rank about 7th in the state. So if Mr. Grayson would have me, I would love to co-author this bill

Would be honored. Thank you.

Thank you.

Assembly Member Petrie-Norris.

Thank you. And to echo some of the comments from my neighbor in Orange County, want to say thank you for bringing this measure forward and crafting a good alternative solution to accomplish the same goal that you worked on last year. And I, too, just think this is an incredibly important, and as Mr. Hastings noted, very timely measure.

And I think sometimes in this Committee, we're asked to consider a whole range of proposals around tax credits and tax expenditures, and we're kind of speculating about what the benefit might be. And I think when we're talking about this manufacturing tax credit, I know that there is robust, extensive analysis that demonstrates every dollar that we are going to be investing is going to be repaid to the state many, many times over.

And so we know that this is a really, really important lever, I think, for us to pull to stimulate economic growth, to stimulate investment, and ensure that we're creating good jobs all across the state. So very happy to support. And I, too, would love to be added as a co-author.

Would be honored as well.

Assembly Member Pacheco.

You can add me as well. I would love to co-author. Thank you.

Done. Thank you.

All right. Anybody else? I just had one question. Are you going to have a budget request along with this piece of legislation?

We are in conversation and definitely working on that avenue as well. Understanding the cost of this bill, we are interested in making sure that we do have a cover from the budget side.

All right, very good. Assembly Member, would you like to close?

Madam Chair and colleagues, manufacturers really do want to partner with the state government to reach California's bold leadership goals, including carbon neutrality, a sustainable economy, and a reliable and affordable energy. But manufacturers, especially small ones, are hampered in their ability to be a part of that opportunity because of the high cost of scaling up production in California.

AB 52 is uniquely designed to send a serious signal to companies across the country that are looking for cost competitive regions to scale up production that they can compete right here in California. I respectfully ask for an aye vote for this bill at the appropriate time.

All right. And thank you. Without objection, this bill will be referred to our suspense file.

Thank you, Madam Chair.

All right. Next up is file item six, AB 1500. Madam Chair, please begin when ready.

All right, thank you and good afternoon, Vice Chair and Members. I'm pleased to present AB 1500, which will give the Woolsey and Camp Fire victims an additional three years to rebuild and retain their base year property tax values from before the fires. Rebuilding after a wildfire is a difficult task. Residents must not only deal with the trauma of losing their homes possessions, but often long negotiations with insurance companies and contractors and navigating the sometimes complex permitting requirements of local governments.

The victims of the Woolsey and Camp fires in 2018 have worked diligently to rebuild their lives, but various obstacles outside of their control, like Covid, have left hundreds of properties yet to be rebuilt. I am pleased to have with me as my support witnesses Bruce Silverstein, the mayor of Malibu, and Rose Tryon, the vice mayor of Paradise.

Thank you. Good afternoon, Madam Chair and Members of the Committee. My name is Bruce Silverstein. I am the mayor of the city of Malibu. Malibu is proud to support AB 1500 and appreciates Chair Irwin authoring this important piece of bipartisan legislation that will provide much-needed relief to Malibu residents who lost their homes in the Wolsey Fire, as well as residents in many other jurisdictions. Because I'm the mayor of Malibu, I'm going to speak about Malibu.

In late November 2018, the Woolsey Fire devastated multiple communities in and around the Santa Monica Mountains, burning nearly 100,000 acres and more than 1500 structures. Malibu was hit hardest, losing 457 single family homes and 18 multifamily homes. After losing their homes in a matter of hours, many of our residents have been unable to rebuild their homes as we now approach the fifth anniversary of the fire, largely due to delays in their ability to obtain legal recoveries from Southern California Edison, which caused the Woolsey Fire.

Litigation typically takes years to wind through the judicial system. Additional years were added by COVID-19 which initially shut down and later slowed down the civil justice system. The pandemic also caused unprecedented supply chain delays, labor shortages, and increased construction prices. All in all, it was an unprecedented conglomeration of difficulties following an unprecedented wildfire of immense magnitude. At the same time, another fire was burning through Northern California.

In Malibu alone, the owners of 157 single-family homes and 18 multifamily homes are still trying to rebuild this day. AB 1500 accounts for the delays of the pandemic by extending the base year tax value of the reconstructed property, creating a much-needed safe harbor for victims of the Wolsey fire and the campfire.

Without this extension, residents who lost their homes and have persevered through the pandemic's delays and other impacts of the rebuilding process will be victimized once again by increased property taxes that make it economically unfeasible to continue their efforts.

AB 1500 does no more than give victims of these fires back the three years of rebuilding effort they lost to COVID-19. We are hopeful that you will find it in your hearts to support Chair Irwin's effort to help our friends, neighbors, and community members rebuild their homes and their lives. Thank you for your time. I respectfully request the Committee Support AB 1500.

Good afternoon, my name is Rose Tryon. I am the vice mayor of the town of Paradise. Mr. Chair and Members, I am here on behalf of the town of Paradise and strong support of AB 1500 by Chair Irwin. We are proud a co-sponsor of this important Bill with the town of Malibu. I would like to thank Assembly Member Irwin for bringing forth this Bill.

AB 1500 would ensure that victims of the 2018 campfire, like myself, whose homes were damaged and destroyed, have additional time to construct a replacement property without triggering a full reassessment of the replacement property. As you probably remember, the campfire completely destroyed our community. By the time the fire was 100% contained, 86 members of our community had perished, tens of thousands were displaced, and over 18,000 buildings were destroyed. To this day, the campfire remains the deadliest, most destructive fire in California history.

Although we are working towards building a stronger, more resilient community, efforts to rebuild Paradise have encountered significant roadblocks. The near-absolute destruction of our town resulted in a lengthy cleanup effort. The cleanup effort, which removed 3.6 million tons of debris, delayed reconstruction for a full year. Since then, difficulty finding home builders, skyrocketing cost of raw materials, and unfortunately even contractor fraud have slowed the town's recovery efforts. Many victims did not receive their PG&E settlement payments until last year, with some still waiting on payments.

These payments are needed to rebuild in their community. Despite these challenges, residents of Paradise remain committed to rebuilding our homes in a more resilient community in the process. This three-year extension is important to the resilience of Paradise so we can return to our community. For these reasons, I ask each of you to vote Aye on AB 1500. Thank you for your time today.

Thank you. Are there witnesses in the room wishing to speak in support?

Thank you Mr. Chair. Matt Robinson with Shaw Yoder Antwih Schmelzer and Lange on behalf of Butte County, in support. Thank you.

Vanessa Chavez with the California Association of Realtors in support. Thank you.

Scott Kaufman, Howard Drivers Taxpayer Association in support.

Thank you. Do we have any witnesses in the room wishing to speak in opposition? Seeing none. Questions or comments from the Committee? Assembly Member, would you like to close?

We remember this time when both of these fires started really within days of each other and devastation both in Malibu. And the stories we heard about Paradise, it was just so tragic. And this is just a very small thing that the Legislature can do to help your communities recover and I will certainly make sure that it gets through my Committee. Thank you.

Thank you. Without objection, this Bill will be referred to our suspense file. Our next item on the agenda today, file item number seven AB 1765 by the Assembly Committee on Revenue and Taxation.

Thank you for your support. It helps a lot.

Assembly Member Irwin. Whenever you're ready.

All right. AB 1765 is a Committee Bill and thank you all for signing onto this taxpayer-friendly legislation that will improve income tax administration. This Bill contains two proposals drafted by the Franchise Tax Board with technical modifications. First, this Bill allows more taxpayers to enter an installment agreement with the FTB if they meet specified requirements and extends the time for full payment of an installment agreement to certain situations.

Second, this Bill updates terminology to ensure that LLCs classified as partnerships or disregarded entities receive the same treatment as LLCs classified as association. The FTB expects these changes to improve taxpayer compliance, improve accounts receivable collections, and reduce taxpayer burden. With me today to answer any technical questions is Dennis Armstrong, Legislative Director for the Franchise Tax Board.

Thank you. Are there any witnesses in the room wishing to speak in support? Are there any witnesses in the room wishing to speak in opposition? Seeing none. Questions or comments from the Committee? Assembly Member, would you like to close?

Just would like your support when the time comes.

Great. Thank you. Without objection, this Bill will be referred to our suspense file.

All right, and I think all of you have voted. We will hold the roll open for Mr. Zbur and Ms. Rivas for five minutes. Thank you, Committee Members.

[Roll Call] And item number 2 is a do pass to Appropriations. It's passed. [Roll Call]

Ms. Rivas, would you like to add on to the Consent Calendar?

Yes.

[Roll Call] And then there's item number 2, which is already passed, AB 1361. [Roll Call] Thank you.

I think that's your laptop, too.

On item number 2, AB 1361, which Is a do pass to Approps. The bill has already passed. [Roll Call]

With that, this meeting of the Rev. and Tax Committee is adjourned.