Assembly Standing Committee on Revenue and Taxation

So I need to be here for the first thing.

Yes.

I'm doing it right. We're moving right into it.

Are you going to do that one right away?

Yeah.

Well, I mean, I have to first. Good afternoon everybody. And good afternoon everybody and welcome to this hearing of the Assembly Committee on Rev and Tax. Before we take on the bills, 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're accepting written testimony through the portal.

Zero, good.

Make sure to submit letters at least one year week prior to the Committee hearing for them to be reflected in the analysis. We have reinstated our suspense file bills with a fiscal impact of plus or -150,000 will not be eligible for a vote immediately after presentation. Few housekeeping items. First Assembly Member Calderon is replacing Assemblymember Grayson for this hearing only. Additionally, file item 10, SB 890 by the Senate Committee on Governance and Finance is a proposed consent item. Finally, ACA 11 by Assembly Member Ting has been pulled by the author. It looks like we have a quorum. Ms. Highland, please call the roll.

Irwin. Here. Wallis. Bains. Here. Calderon. Here. Pacheco. Here. Jim Patterson. Petrie-Norris. Luz Rivas. Ta. Here. Valencia. Zbur. Here.

All right. And can I please have a motion and a second on consent? All right. We have a motion by Assemblymember Calderon and a second by Assemblymember Pacheco. Please call the roll.

Irwin? Aye. Erwin, aye. Wallis? Baine? Aye. Baines, aye. Calderon? Aye. Calderon, aye. Pacheco? Aye. Pacheco, aye. Jim Patterson? Petrie-Norris? Luz Rivas? Ta? Aye. Ta, aye. Valencia? Zbur? Aye. Zabur, aye.

All right, Mr. Zbur, we are ready for you. File item zero, I'm sorry, the consent calendar has passed. Next up is file item five, SB 516 by Senator Skinner and Assemblymember Zbur will be presenting on the Senator's behalf. And then I would also tell all everybody that's watching we are in need. Senators, for the Committee. Ready

Ready? Yes. Madam Chair. Members, I'm presenting SB 516 on behalf of Senator Skinner. Today, Senator Skinner commits to working with the Committee to find a reasonable compromise that addresses the opposition's concerns. Her intention is to take amendments that would one, require local governments to report completed collections to the Franchise Tax Board as soon as possible, but no later than 45 days. Two require local governments to refund double collected debt as soon as possible, but no later than 45 days after the debt was double collected.

If it takes the local government over 45 days, the entity would be required to pay 3% interest on the double collected money. SB 516 establishes basic rights and protections for people who owe debts to public entities. Local governments often ask the Franchise Tax Board and the Controller to collect a debt on their behalf by deducting money from a debtor's tax refund and then garnishing their wages.

This public debt collection process is different than much of the collection processes for people who owe debts to private entities like credit card companies or banks. Unlike private debtors, public debtors do not currently have the right to receive a receipt of the paid debt and how much is still owed, or get a clear accounting of the sources of the debt, or receive a statement of the debtors rights and protections under the law.

Without these basic protections, debtors cannot determine which debts have been collected or how much they still owe. This makes it difficult to prove what has already been paid, and it makes it almost impossible to appeal and correct errors or overpayments. SB 516 provides similar protections for public debtors that exist for private debts. These rights include one, requiring local governments to prevent double collections and mitigate the harms that come when they do occur. Two, requiring receipt after debt collection has occurred.

Three, requiring quick reimbursement if the debt has been double paid. Four, ensuring that youth criminal justice fees cannot be referred for collection, and five, requiring that debtors get notice of their rights under the law. With me today to testify, I think isuardo here great with me today to testify is Eduardo Lopez, an advocate for the Western Center on Law and Poverty.

Good afternoon, Madam Chair and Members, Eduardo Lopez, Policy Fellow with the Western Center on Law and Poverty, here in support of SB 516, which would require certain minimum standards for people who owe and pay government owed debt. Navigating the Franchise Tax Board is an intimidating and confusing process, particularly for low income Californians who are unlikely to have an advocate or attorney to advise them.

At minimum, people should have basic information about their debt and repayment options so that they can make a realistic plan to address their debts and contest any collection errors. SB 516 makes important changes to the information people will receive about their repayment options and about what income is exempt from collection. The Bill also extends existing protections for consumer debt to government owed debt, and most people who have debts referred to the Franchise Tax Board cannot afford to pay the amount when it was imposed.

Collection actions that leave Californians without enough income to pay their rent, cover food, transportation, or meet other basic needs drive individuals and families into financial and social instability. This is wrong and costly to the state. SB 516 ensures the Franchise Tax Board's collection practices are transparent, fair, and accurate, and we urge your aye vote. Thank you.

All right, thank you. Do we have anybody else in support? All right, then. Witnesses in opposition.

Good afternoon, Madam Chair. Members Karen Lange. On behalf of the California Association of County Treasurers and Tax Collectors. We were opposed. Thank you very much to the chair and your consultant for helping work through some issues related to the county's involvement in the Intercept program. I think we're going to get there and we look forward to withdrawing our opposition at that time. So thank you so much.

All right. Thank you. Any other witnesses in opposition? All right. And do appreciate the Senator committing to working with the opposition. Do we have any questions from Members? All right. Assembly Member, would you like to close?

I respectfully ask for your aye vote.

Okay. And this is a vote?

This is a vote.

The do pass is amended to appropriate.

Yes.

Okay, so do I have a motion and a second? All right. Luckily, we have a visiting Assembly Member here today that moves all the bills. A second is Assemblymember, Petrie-Norris. Motion by Assembly Member Calderon. A second by Assembly Member Petrie-Norris. And the motion is do pass as amended to appropriations. Ms. Highland, please call the roll.

On SB 516, the motion is do pass as amended to appropriations. Irwin? Aye. Irwin, aye. Wallis, not voting. Baines? Aye. Bains, aye. Calderon? Calderon? Aye. Calderon, aye. Pacheco? Aye. Pacheco, aye. Jim Patterson? Not voting. Jim Patterson, not voting. Petrie-Norris? Aye. Petrie-Norris, aye. Luz Rivas? Ta? Not voting. Ta, not voting. Valencia? Zbur? Aye. Zbur, aye.

And that Bill is out. Six to zero. And it appears that the Senate is still in session. So we are going to I won't call a break, because that's exactly when the Senate will get out of session. But feel free to go wherever you need to and make sure to keep an eye on when the Senate is out. We are right now going to give you the opportunity to add on for the consent calendar.

Wallace aye. Jim Patterson aye. Petrie-Norris aye. Luz Rivas. Valencia.

Assembly Member Valencia. We will allow you to add on.

On the consent calendar. Valencia aye.

We want to make sure you can get out as quickly as possible.

All right. We're very happy to see you, Senator Portantino. Senator Portantino is going to take up SB 96 whenever you are ready.

Thank you. Madam Chair and Members. SB 96 is the historic venue restoration and resiliency act. As you know, California is proud to be home to a number of large historic live event and entertainment venues, such as the Rose Bowl in Pasadena, which I'm proud to represent, the Hollywood Bowl in Los Angeles, the Cal Memorial Stadium in Berkeley, amongst many others.

Many of these venues are 100 years old or older and continue to be vital catalysts for our local communities and the state through hotels at capacity, full restaurants, and enhance retail operations and, of course, tourism. Unfortunately, given their advanced age, these venues are in desperate need of reinvestment surrounding infrastructure, environmental sustainability, patron, safety, preventative maintenance, and accessibility. Members, these venues have been critical to California's culture for over a century.

And in order to ensure that they survive for another century, SB 96 provides some of the sales and use tax generated during a qualified event back to the locals to improve and secure these sites. The Bill defines a venue as being qualified if it was built before 1940, is designated as historic landmark, or if it has been used for live ticket events for more than 50 years, and also has a seating capacity at least 15,000, and hosts live entertainment or sporting events.

As you can see, in some respects, it's a very, very narrow niche of very important historic venues in California which help our economy thrive. Simply increasing ticket prices or fees will not be enough to cover the costs of repairs for these important venues. It's similar to what we've done for state fairs and also when the Mills Act was enacted years ago to provide assistance to historic properties.

I would argue that keeping these crown jewels of our local communities safe, reliable, and competitive with newer venues supported by wealthy ownership groups is critical to their continued operation.

With me. I have Mayor Victor Gordo from the City of Pasadena. Carlos Singer, Director of Government and Community engagement at the Los Angeles Philharmonic and obviously would appreciate support at the appropriate time.

Madam Chair, Members, thank you for the opportunity. Thank you, Mr. Senator. My name is Victor Gordo. I'm the mayor of the City of Pasadena. We're here to urge that you support this legislation. The City of Pasadena has invested tremendously into the Rose Bowl. Over $200 million in bonds to do the initial renovation a few years ago. We also have a nonprofit profit, legacy foundation, That's raised over $50 million in private donations. As Senator Porntino mentions, this is about protecting California's historic assets.

That's very important that we do that, because once they're gone, they're gone. But let's keep in mind that the Rose Bowl is also an economic engine for California. When the Rose Bowl holds an event, the State of California just for the Rose Bowl game receives $12.9 million per event coming back to the State of California. Businesses and hotels fill up. Of course, we all know what happens on New Year's Day, and it becomes one big commercial for the State of California.

People don't just come for one game, one parade. They come and they stay in Southern California, visit the Bay Area, and make a vacation out of it. We're asking for your support. Again, local residents have done their part and continue to do their part. The local residents alone spend $48.5 million every year around Rose Bowl time. And I can't say it better than Governor Newsom was quoted as saying in the newspaper. There was a gold rush, then there was the Rose Bowl.

And so it's been a long part of our lives in California. I think the Governor crystallized what we believe about the Rose Bowl. It's been such a cultural icon and economic engine for our entire state, and it's important that we all do our part to keep it that way. Thank you.

Good afternoon, Madam Chair. Members. It's a pleasure to address you here this afternoon. I'm Carlos Singer. I'm Director of Government Relations for the LA Philharmonic, which, as probably many of you know, we are the exclusive operator of the Hollywood Bowl, which would be subject to this Bill if passed. The reason that I'm here today is in connection with our stewardship, historic stewardship of the Hollywood Bowl.

We are a nonprofit organization that has been tasked with the opportunity, the privilege of maintaining a cherished, historic resource entertainment venue that has been there literally 100 years. And that comes with lots of opportunities. But it also comes, in part because of its age, with challenges.

One of the challenges is simply maintaining something of a level playing field with the other kinds of entertainment venues with which we compete for the talent that we need to bring in to maintain the vibrancy of a cultural resource like the Hollywood Bowl. So there's the economic force that is sort of unchangeable that we operate in.

In addition to that, because we're a nonprofit, because we view ourselves, the LA Philharmonic itself, as a civic institution, a civic partner, we subject ourselves willingly and openly to political and policy goals as expressed by the LA County, with whom we're in privity to operate the Hollywood Bowl. And that comes in the context of our focus on access.

And that means physical access for people with mobility and sensory disabilities, but it also means access by way of the extensive bus and shuttle programs that bring people from all corners of LA County to the bowl. And, of course, we willingly and happily do these things, but it also makes the business, from a business standpoint, the business of running a venue like this much more complicated. And it has a lot of more administrative burden and challenge.

And these are aspects that our colleagues in the private sector, they don't really have to contend with. I'm happy to answer any questions that the Committee has. I feel like I've spoken for a bit, so I'll heed whatever time I have.

All right. Okay. Thank you. Do we have any other witnesses in support?

Michelle Rubalcava on behalf of the University of Southern California in strong support.

Ben Triffo with the League of California Cities in support.

Do we have any witnesses in opposition?

Hi. Katie Hardeman with the California Teachers Association in opposition. We understand the intent here, but we don't believe that we should be taking money from our schools in order to pay for it. So we urge the Committee to consider other ways of funding these venues without taking away from our schools. Thanks.

Thank you. All right. Do we have questions from the Committee? Questions or comments, Mr. Zbur?

I'll move the Bill.

All right. Oh it's a suspense candidate. That's right. Questions? Assembly Member Valencia.

Thank you, Senator. Really appreciate you bringing this Bill forward. As a former San Jose State football athlete, I have a firsthand experience of not only the benefit that these types of historic venues have in the immediate communities, but also the significance as a state and as a nation as well. And it is a challenge to maintain these facilities at a level that the individuals who participate in these facilities should have the ability to do.

So so happy to continue the conversation about this Bill, and hopefully it moves forward.

Thank you. Any other, Assembly Member Zbur?

Hollywood Bowl is in the 51st Assembly District. And so go, there a lot. It is really one of the crown jewels of our artistic and civic life in LA County, benefiting not only people in my district, but people throughout LA County and, in fact, the entire state. These are publicly owned venues, and they're losing their economic viability and are really in bad need of repair. And as I think the witnesses have said, they're in competition with the for profit, more modern stadiums and really just need this injection in order to maintain their viability.

On certain days and certain events, the state would give back its share of the tax collected from food and merchandise sales to the venue, and it would be restricted for repairs only. It's important to maintain the investment in these facilities, and I'm just strongly in support of it, these venues.

The Philharmonic is a nonprofit, and as I think the witnesses said, it really benefits really all the people throughout the Southern California and the State of California, including some of our most disadvantaged communities, so strongly in support.

Anybody else? I have just a couple of questions in the analysis. I only see I think it's four venues listed. I just heard somebody testify from USC. You're expecting that the Coliseum would also be on that list. Do you have an idea of the total number of venues that we're talking about in California?

I don't have the total.

I think approximately six venues would be affected, including Berkeley Stadium? Including Berkeley Stadium.

And what would we expect at, for instance, the Rose Bowl or the Hollywood Bowl? How much of a benefit would this be per year?

So we don't exactly know. But we have done some sort of thumbnail calculations. If the Bill as currently drafted would pass, we're estimating that the refund to the county, which is the seat of government that owns the Hollywood Bowl itself, would be on the order of one to 2 million per year. I guess it may depend on how the fiscal lines up, but in a calendar year, That's what we would anticipate.

And what do you think your repair costs are per year?

Vastly in excess of that.

Okay.

I'm going to ask Jens Weiden, our General manager, to address that issue.

Thank you for the question, Chair. For us, it's actually a similar number. Using the Hollywood Bowl and the Rose Bowl as examples. The Rose Bowl has less events, but our events are larger. Hollywood bowl has a smaller capacity, but they also have more events. We anticipate that our number is probably going to be between 1 and 1 and a half million per year based on load. So that depends on how many events we book and the type of events that we have there.

And to answer your question of how those funds would be used or what our budget looks like, as an example, next year, our preventative maintenance budget is $1.4 million. So that shows what we're already we put away every year for preventative measures around the stadium That's repairing roofs and cracking cement and just things that have to be done just to stay the same as we are now.

So these funds would be very helpful to us because then that would free up some of those monies to go out and do even more of the preventative maintenance that needs to be done. And in 100 year old building, we actually share a birth year. As you know, if you have 100 year old home, it's a beautiful home. I think the Mills Act was brought up earlier, and we really want to incentivize people to invest in those structures so they stay around.

But, you know, when you have 100 year old home, there's a lot of repair and maintenance that needs to be done just to keep it at the standard that it's at now. And so our numbers are similar, but we get there in a little bit different manner.

So the repair is currently paid for by, I heard, fundraising and then the City of Pasadena. Is that generally where the funding comes from every year?

So we run our own budget, and we try and balance our budget every year. It becomes more and more difficult every year. But that sounds like everyone's business. But yes. So we run a budget every year. We include this year, upcoming year with 1.4 million in preventative maintenance. In addition to that, our foundation fundraises for capital projects. So capital projects are things above and beyond preventative maintenance. So we may need to replace all of our gas and water lines because they're coming to end of life.

That's not included in our preventative maintenance. Our preventative maintenance is the things that we do every year, and then our foundation goes out and fundraises for larger capital projects. And as the mayor mentioned, we're very proud that private citizens have fundraised over $50 million for the Rose below over the past 10 years. We think That's a reflection of how much people care about the structure that we try and maintain.

And Madam Chair, if I could add, these are not ginormous numbers, but they're significant to the health and safety of each one of these venues, and it's a return of the revenue that they generate. And so I think that's important. It's a reinvestment of their own success to help them continue to be success with not as far as the dollar amounts we're talking about. It's critical to them, but it's not a huge number.

And then, I appreciate that. Just one other thing. It was not quite clear in what I read. You do not expect to do this type of funding source for privately owned venues. Correct?

Correct. We're focusing on the publicly held venue.

Okay. It just wasn't that clear from the language. Just wanted to make sure. All right. Anything else?

If I could also add on the capital improvement side, the Rose Bowl has about $100 million in capital improvements that need to be funded. And so while we're focused on the maintenance, the city will continue together with our private partners, to raise dollars towards those capital improvements. And so this is really a piece of the puzzle, but it's an important piece of the puzzle.

All right, well, I certainly appreciate that. And, Senator, would you like to close?

Just, when appropriate, hope we get out of the Committee and keep this conversation moving. And I just think it's important both for the economy and for the history of California. As been said, these are venues that touch so many lives across the State of California. And even though it's a limited number of venues, the reach of each of these venues is statewide.

All right, well, I certainly appreciate that. And then, without objection, this Bill will be referred to our Suspense File. Thank you.

Thank you.

All right, we have Senator Archuleta coming up next. Good afternoon, Senator.

Good afternoon, Madam Chair and Members. And today I'm today I'm presenting Senate Bill 388 on behalf of the California beer industry. And this Bill balances the scale between the beer industry and the wine industry. Senate Bill 388 allows beer manufacturers tax information to be made public upon requests to assist the beer industry in planning for future trends.

Senate Bill 388 is a model, and it is modeled after Senate Bill 518 by Senator Leard, which passed unanimously out of this Committee last year to help the California wine industry. Senate Bill 388 is a carbon copy of that Bill and extends the same benefits to our state's beer industry. For decades, the Board of Equalization has provided beer manufacturers return and schedule information to the beer industry.

The data released to the Board of Equalization and by the Board of Equalization has largely been uncensored, including specific business information. However, beginning in 2019, the Board of Equalization has reevaluated the release of this data and determined that they did not have sufficient statutory authority to provide the data unless specific information was anonymous. This decision has significantly limited the data's usefulness. Senate Bill 388 directly addresses this issue and equips the beer industry to make well known and well informed business decisions.

This Bill has no opposition and is supported by the beer industry, including brewers, guilds, and organizations throughout the state. For these reasons, I respectfully ask for your aye vote. And with me today, I have Chris Walker on behalf of the California Craft Brewers Association in support of the Bill and is prepared to answer any questions.

Thank you, Senator. Madam Chair, Members of Committee. Chris Walker, on behalf of the California craft Brewers Association, for decades, we had access to these production numbers, helped establish economic forecasting and trends for our industry. Like the wine industry, we would like to have access to this information once again, and I'm here to answer any questions.

All right, do we have any other witnesses in support?

It's a vote item. Any witnesses in opposition? Any questions from the Committee? I do have one question. I think it was last year that we saw SB 518, and we're looking at the opt out numbers and they're, I think, higher than expected. How are you going to educate your Members about the benefits of sharing that information? Or would you expect the same type of opt out numbers?

I'll turn that over to Chris.

Madam Chair. Great question. We too were shocked to see 65% were opting into continuing to maintain their disclosure, information being barred. That's new to us. That's for the wine industry. We're hoping that 35% that continues to provide that information are the larger producers, so we can continue to get that information. Certainly knowing that now we will be reaching out and letting folks know more about what that checkbox means and how important that information is for the industry.

Yeah, I would certainly encourage that to educate upfront because it's going to be a little bit more difficult to get people to opt in after they've opted out. So, any other questions? All right, we have a motion by Assemblymember Petrie Norris and a second by Mr. Wallace. Was that Mr. Wallace? Okay. And a second by our co chair. And do you have any closing thoughts?

Well, I thank you all so very much and I respectfully ask for your aye vote.

All right. The motion is do pass to the Appropriations Committee. Ms. Highland, please call the roll.

On SB 388. The motion is do pass to Appropriations. Irwin aye. Wallace aye. Bains. Calderon aye. Pacheco aye. Jim Patterson aye. Petrie-Norris aye. Luz Rivas. Ta aye. Valencia aye. Zbur.

That Bill is out 8-0. Thank you very much.

Thank you once again, Chair, Members. Thank you.

All right, and next we have Senator Roth. Please begin whenever you are ready on SD 419.

Thank you. Madam Chair and Members. As you may know, 10 years ago, California created a property tax exemption that launched a new and exciting, or I should say relaunched a new and exciting aerospace industry in this state. This Bill will extend the sunset on the tax exemption for another five years, from 2024 2029. As you know, real property and personal property used in a trader business is generally taxable in this state unless it's exempt. Business inventory.

Property held for sale or lease in the course of business is exempt. The problem here is California tax policy was not designed to address the unique aerospace industry. Launch vehicles and spacecraft, unlike most manufactured commodities, are not built to be sold or leased. Rather, they're built as a delivery service of satellites and cargo, primarily for the International Space Station.

Now, this has created an ambiguity in the tax code as to how spaceflight property sitting in a manufacturer's facility, such as SpaceX or Virgin or some other, should be assessed for tax purposes. The Board of Equalization first clarified that business inventory built to go into space was not subject to personal property taxes, in essence, was exempt through its written tax opinion dated December 24, 2013. This tax opinion was subsequently codified by this Legislature into law in 2014 by Assembly Bill 777.

Now, it should be noted that this is a BoE exemption from the personal property tax and not a tax credit against income. This, we would say, sensible shift in policy paved the way for commercial space companies to replace the well paying jobs that left the state, along with their Department of Defense contractors when the aerospace industry originally left California back in the 1990s.

Some of you may remember that over the past decade, thanks to our tax policies, California's aerospace industry is robust once again producing satellites, rocket engines, fuselages and capsules. The production made possible by this tax exemption has also birthed a group of sub vendors, thousands of them, frankly, around the state, who manufacture and provide support services to aid the industry.

These vendor relationships with California based suppliers have resulted in an increase, they tell me, of $2.4 billion in revenue for California businesses, half of which are considered to be small businesses. So, in order to continue to further encourage such innovation in manufacturing, certainly beyond those companies currently involved. An extension of this business inventory personal property tax exemption, originally provided by the earlier Assembly Bill, is essential to ensure that aerospace industry stays in California and continues to grow.

I accept the Committee amendments changing this to a five year sunset extension and ensuring the proper reporting requirements while maintaining appropriate confidentiality and privacy. I understand this is a suspense item and respectfully ask for an I vote if and when that time comes. Thank you, Madam Chair. Here with me to testify is Richard Lee, the Senior Director of Tax and treasury for SpaceX.

Madam Chair and Members of Committee. My name is Richard Lee and a Senior Director of Tax and treasury for SpaceX. I'm honored to be here to testify in support of Senate Bill 4119. I'd like to start by expressing my appreciation for the Members and staff on this Committee who worked very hard in recent weeks to enable us to be here today.

The amendments offered by this Committee improve the Bill and will provide valuable information to help this body and the California people evaluate and demonstrate the important, long standing, substantial impact that targeted value driven incentives like those included in Senate Bill 419 can have to grow jobs, compensation, investment, economy in California. SpaceX is just one chapter in the positive story there is to tell about Senate Bill 4119.

Founded in 2002, SpaceX designed, built and launched the world's most advanced, safe and reliable spacecraft and launch vehicle right here in California. The tax exemptions for qualified property used in Spaceflight, first passed by this Committee in 2013, enabled SpaceX to grow from a startup into a world's leading launch and space service provider with over 11,000 employees.

Today, SpaceX has now completed over 230 launches to orbit in support of critical national priorities, including astronaut missions to the International Space Station that return human spaceflight capabilities to the United States, deploying national security satellites, commercial satellites, and next generation broadband services. In 2022, SpaceX returned the majority of the world's space launch, previously ceded to Russia and China to American shores, an unprecedented development in American access to Space that could not have been achieved without greatly expanding our network of California based suppliers.

The provisions included in this Bill enabled SpaceX to spend more than $2 billion or more on more than 1700 California suppliers last year, supporting more than 44,000 small business jobs across the state. This Bill also helped SpaceX expand its engineering and manufacturing operations in Hawthorne, where more than 3800 additional high skilled manufacturing and engineering jobs have been created since 2013, representing a 10% annual job growth each year that this Bill has been in effect.

This expansion, helped by the provisions including Incentive Bill 4119, allows SpaceX Hawthorne based employees to play a critical role in the development of SpaceX's next generation vehicle called Starship. SpaceX is proud that engines built by Californians will power the vehicles that will return American astronauts to the moon for the first time since 1972 and make humans a multiplanetary species.

On behalf of SpaceX 8000 California based employees, thank you for your time and your work to ensure California maintains a strong commercial space industry for decades to come.

All right, thank you very much. Do we have anybody else in support.

Lawrence Gayden on behalf of the California Manufacturers and Technology Association, as well as the Aerospace and Defense Alliance of California in support. Thank you.

All right. Thank you. Do we have any witnesses in opposition? Okay. And appreciate your work with the Committee. Are there any questions from the Committee? Questions or comments? Okay. Senator, would you like to close?

Well, at the appropriate time when the suspense calendar is called, respectfully ask for an aye vote, but I do appreciate your patience and consideration. Thank you very much, Madam Chair.

Thank you very much, Senator. And without objection, this Bill will be referred to our suspense file. We are still missing Senators.

Senator Rubio. Are you available?

Yes.

Ready to go. You are slipping in front of all the folks that are showing up late. Good for you.

Ready to go.

All right, this file, item eight, SB 714.

Me?

I don't have my glasses on, there 734.

Thank you. Well, first of all, thank you for taking me ahead of everyone else That's really appreciate it. So today, thank you so much for hearing SB 734, which is an important Bill that will bring tax relief to low income families and particularly tenants who live in government owned housing. We have an affordable housing crisis currently, and this Bill attempts to help in that regard.

One solution in supporting families that are struggling to be housed is supporting public housing projects owned by government entities that can offer housing units at an affordable price, especially to low income tenants. As many of us know, California has exempt government owned property from property taxes. However, the law is currently very ambiguous. We don't know whether it applies when a publicly owned housing project leases housing units to low-income tenants.

Over the past few decades, the California State Board of Equalization has addressed this issue in many ways, but through several legal opinions. Those legal opinions state that low income tenants living in public housing projects should not be considered to hold a taxable interest in the property because it would be against the state's interest in providing affordable housing units to impose a tax on these tenants.

My Bill, SB 734, would codify that outstanding legal opinion of the board and make it clear that the state law exempts these Low income tenants from paying property taxes themselves. I know that a few cities have recently expressed concerns, and I'm still talking to a lot of them currently, and we will continue to work on it just to make sure that the information is clear, because they would like to exempt tenants making up to 120 mi from property tax.

However, that goes beyond the scope of this Bill. Again, working with the BOE, we just wanted to codify the opinion that they currently have just to make sure that the lowest income tenants don't get stuck paying a Bill that they cannot afford, which would only push our housing crisis into turmoil because they will essentially be thrown out. But I do want to be just very clear, because, again, there are some misconceptions about what SB 734 does, will do.

If it doesn't pass this year, and that is, as soon as next year comes around, Low income tenants could be receiving unexpected property tax bills that they cannot afford and will be forced to pay, at which point those folks may become homeless due to their inability to pay for them. California, again, cannot afford to go backwards on the progress we've made on providing affordable housing units.

As California continues to confront an affordable housing shortage, SB 734 will ensure that public housing projects can continue to be part of the solution that we've been making to address the housing crisis. The Bill is supported by the Board of Equalization, and it passed Senate with a unanimous vote, 400 today. With me is BOE, and he's here to add his voice to this measure. If I can turn it over to Mr. Vasquez.

Thank you, Senator. Thank you. Thank you, Chair Irwin, and Members of the Committee, especially my Senator here, Rubio. We're here as the State Board of Equalization also in support. We heard the case and it was brought before us, and it was unanimous among ourselves to support SB 35. It's critically important at this time because there is no Codified law allowing county assessors to exempt units in government owned Low income housing from property tax.

There is no constitutional provision and no statute that applies the welfare exemption to the units that low income tenants rent in government owned housing without an exemption. Assessors are required by law to assess and build tenants who rent these units because they are occupying government owned property for their own private use. To address this problem, the Board has published opinions rulings for the past 27 years at the request of assessors, even legislators.

Former Assembly Member Norma Torres, for example, holding that even that there is no specific law, assessors should not impose possessoring interest taxes on low income tenants because it would frustrate the state's interest in providing low cost housing for 80% of those folks at AMI levels owned by local governments. And Gapas. The opinions are based on two things case law from California, Supreme Court decisions, declarations of legislative intent in Bill, and state housing policy.

This Bill, SB 734, would, one, codify the Board's long standing legal position on this, and two, provide clarity, certainty, and uniformity of all counties throughout the state. In conclusion, therefore, I urge your approval of SB 734. It is a functional legislative as we need in order to move forward. And it is completely consistent with the declaratory of existing legal interpretation. And it will ensure that low-income tenants are not taxed for units that they rent. Thank you for your time.

All right, thank you very much. Do we have any other witnesses in support in the room? Any witnesses in opposition? I'll bring it back. oh, I was really fast. Are you support or opposition?

Opposition. Kyra Ross on behalf of the City of Pasadena, we are one of the communities that have concerns. We are opposed unless amended. We'd like it extended to 120% of AMI. We have a very successful program that we have run with multifamily in Pasadena, where the people that live there have seen incredible savings. They're largely low income. If this Bill does pass, 60% of those tenants today will see a new Bill in the future. And so we'd like to see the middle category be captured under this Bill. Thank you.

Thank you. All right, any questions? From the Committee. Assembly Member Petrie Norris.

The concern that was raised from a representative from the City of Pasadena was actually also flagged in the Committee analysis. Can you just address that concern that there may be some unintended consequences? And I think she said 60% of the tenants in that particular development had not been receiving tax bills, and now they will be. Do you think it's been an error that they hadn't in the past?

No, I think the reason we use the 80% cut off is because we're talking about Low income tenants. One of the problems we have and one of the things, as a chair of the BOE, one of the things as people are coming to us, especially the Ford development developers that are trying to build affordable housing, now, they're willing to do it, but I'm telling because they want the tax credits.

And I'm kind of hoarding a hard line saying if it's truly affordable, I think we should exempt them. But if it's not, I think it goes against what our principles and at the end of the day, I think it's going to hurt if we open it up that big to include more than the 80%. What's going to end up happening is it's going to hurt a lot of the local cities and schools that rely on this tax base. That's one of the reasons.

Understood. So it's less an unintended consequence and what you actually think is appropriate policy. Understood.

I mean, it's basically there's limited resources and you want to make sure that it goes to those most in need.

Exactly.

All right, anybody else? Do we have a motion? Oh, no. I'm sorry. Senator. Would you like to close?

Yes, thank you. But I don't want to dismiss the comments that Pasadena has made. I know that people have concerns, but I just want to make it clear that my intent of carrying this Bill is to ensure that those folks that are Low income don't end up paying the Bill next year.

There might be other ways to tackle the issue that they're referring to, but at this point, we really just want to make sure that those Low income families don't end up on the street because they can't pay the Bill. Thank you. And I ask for an aye vote.

All right. And thank you. Without objection, this Bill is going to be referred to our suspense file.

Okay.

Appreciate it.

Thank you.

All right, Assembly. I'm sorry. Senator. Senator Seyarto.

Thank you. Thank honorable chair and Committee Members, I am here to present SB 520. So SB 520 simply clarifies that individuals who are required to live in a care facility or an extended care facility are still occupying their principal residence for the purpose of qualifying for their homeowners property tax exemption.

Due to the passage of Proposition 19, there is some confusion that if a person dies or spends too much time in a long term care facility, or hospice that their home will not qualify for the standard homeowners tax exemption. This is important because under Prop 19, a prerequisite for the home to qualify for intergenerational transfer is that it must also be qualified for the homeowner's tax exemption.

People and assessors who are concerned over the vague definition in the statute that says the home would not qualify if vacant or being rented is kind of the issue here. So this issue is not only in my district, but is statewide. And enough attention was raised by the county assessors that they had to formally ask the Board of Equalization for guidance on this very issue. The Board of Equalization issued a letter to the assessors trying to give guidance on the matter.

So to the question does the dwelling occupied by the family of a son and owned by a parent who is confined to a convalescent home or hospital qualify for the homeowner's exemption? And the answer from the Board of Equalization was yes. The dwelling may be exempt if the claimant is expected to return to the dwelling and if he or she does not receive rent from any persons occupying the Premises.

An absence for more than one year would raise considerable doubt that the owner is expected to return. So colleagues, SB 520 will simply clarify this finding and give that clarity. Where there is currently doubt if a person is hospitalized or confined to a long term care facility or an assisted living facility, they can still claim the home that they own, that they came from, as their primary residence for the exemption.

The Bill also allows renting to a family Member, as defined under our normal definitions of a family Member, in the interest of allowing the elderly the ability to have a family Member stay and take care of the house.

And this is really important because when you're in the situation, if you've had elderly relatives, a lot of times trying to convince them that they need a little bit more help means promising them if they can just get to the condition that they were in, they can go back to their house. And so the house doesn't get sold, the house sits there and it needs to be cared for and it needs to be paid for in some instances.

And so a lot of times people do plan to go back to their house when they've regained their strength and been rehabilitated in the facility that they're going to for temporary purposes. So by giving this clarification under statute, people can have assurances that they are following the law under Prop 19 if their home qualifies for the homeowners tax exemption. This Bill has enjoyed zero opposition and unanimous support thus far, and I respectfully ask for it aye vote.

Thank you. And do you have any witnesses in support?

No, I did not bring any witnesses.

Are there any witnesses in opposition? Any questions from the Members. I appreciate with Prop 19 passing that there are a lot of things that need to be clarified. But are there actually cases that this is happening that you are aware of?

Yes, that's why it was brought to our attention by both the tax assessors and people in our district. And we found that, yeah, this is becoming a bigger problem because as people are moving along, they're finding that their houses lose their exemption because their physical address, even though that's where they actually, that's their property and that's what they own, and that's where they're supposed to live.

If they can't live there because of their physical condition, for temporary purposes, they certainly can't get their exemption from the facility that they're staying in temporarily, hopefully.

All right, well, I certainly appreciate your work on this. Would you like to close?

No, I just respectfully ask for aye vote when the time comes.

All right. And without objection, this Bill will be referred to our Suspense file. Thank you, Senator.

I appreciate it.

And next up, we have Senator Caballero file item seven, SB 565. Good afternoon, Senator.

Good afternoon, Madam Chair and Members. I'm pleased to present SB 565, which requires a Franchise Tax Board to implement changes to the free e-filing tax system for low-income Californians. I would like to first thank the Committee staff and FTB for further technical assistance and will accept the amendments as outlined on page six of the Committee analysis.

Many filers are eligible for a variety of tax credits, such as the California EITC or the Earned Income Tax Credit, the Young Child Tax Credit, and the Foster Youth Tax Credit that provide significant cash benefits to low-income individuals and families. These tax credits target specific populations most in need and are a proven tool to combat poverty. The federal EITC has been in place for 30 years, and the long-term studies that have been done show that it significantly improves the financial situation of families.

They are able to earn somewhere in the neighborhood of $6,000 a year back, and that makes a big difference in families that are really struggling. For our qualifying Cal EITC, they can earn as much as $3,400. So you put the two together, and that's fairly significant. Despite the significant benefits these credits provide, many complexities exist that discourage residents from filing their taxes

In 2020, I authored SB 1409, which tasked the FTB to provide a report to the Legislature with recommendations to reduce barriers that low-income or no-income filers often face that discourage tax filing using free state-sponsored services. In the study, FTB outlined a number of different issues that lead to lower-than-anticipated filing rates for low-income California Californians and opportunities to increase access to all the tax credits.

And the reason this became important to me, is that we were spending somewhere in the neighborhood of 5 million to $10 million a year, advising people that they're eligible for these tax credits. And to me, it seems ridiculous to be spending that much money when we could actually be putting the money in their pockets. SB 565 is a simple bill that begins a process to improve the state tax filing process by requiring FTB to enhance CalFile to create a more user-friendly experience.

The Bill does not automatically file taxes and provides each filer the opportunity to fully review and change information as needed. This step to modernize CalFile is the first of many to begin a transition to a reliable, safe filing process that encourages greater access to the state's free filing system for low and no-income eligible individuals due to scheduling conflict. We don't have any witnesses here today, but I would respectfully ask for your Aye vote.

All right. Do we have any witnesses in the room in support?

Good afternoon, Madam Chair, and Members. Andres Ramirez, on behalf of All Home in strong support. Thank you.

All right, thank you. Any witnesses in opposition? Any comments from the Committee?

Yes, I have questions. Senator, I want to thank you for your really good intention to provide technical assistance to a low-income family. However, I do have concerns. Is there any way that you can tell me that what does CalFile provide for the taxpayer now? And how or what method that would FTB use to send a pre-populated firm to those qualified individuals defying the Bill?

Yes. So thank you for that question. I appreciate it. The idea is that FTB and I've been working on this in conjunction with FTB, but the concern I was trying to get to a point where we would automatically create the opportunity to send checks to individual, at least a notice that they're eligible, so that they'd get something in writing at their place of residence.

And the problem with that is that it requires FTB to make some assumptions that the income of the following year is the same from the taxable year that they have. In other words, it would make FTB, it would put them in a position to say, are you making the same amount of money?

So what this form would do is it would pre-populate a very simple form, as simple as possible, because many of these filers are no-income or they have very low income, which means that they may not have an educational level to be able to read complicated tax forms. I don't know if you've filled out your own taxes in a while. I used to do it, and I finally gave up because it's complicated. I went to law school.

I should know how to fill out a form. But it's become much more complicated because there's deductions and things that you have to take and calculate on your form. So the idea would be that they would pre-populate a form, send it out, and say, is this the income you've had this year? And if it's yes, all you'd have to do is fill out the rest of the form, say yes, sign your name, and send any documents that may prove some of the information, like the forms that you get from your employer. In other words, it would be something that would be very simple, that would come to the household, they could sign it, send it back in again, and that would get them their tax credit so that they wouldn't have to do.

Many of these people have not had to fill out income taxes because they're low-income already. If they have not filed taxes, then they're, on purpose, not filing the taxes. They're not doing it. And so the idea would be this would be a way to get around some of the barriers that people have. One is that they may not understand the language, and so they may be reluctant to fill out papers they don't understand.

Two is that they may not owe any money, but not know that they're entitled to money. And so FTB would come up with the different forms that they would send to different people. The circumstances that are different for different individuals.

All right, any other questions or comments? Assembly Member Petrie-Norris.

Thank you. So, Senator, as you said, the EITC and CalEITC is one of the most important programs that we have for lifting California families out of poverty. And you made a very good point in your opening remarks that right now we're spending millions and millions of dollars to try to market the program. Isn't that money better spent in people's pockets?

But I do want to ask you about some of the concerns that were raised, I think, in the letter from the opposition, but also by the FTB themselves, You pointed out that if qualified individuals would need to correct the information on that pre-populated tax return prior to final submission. So I do just have some concerns about the ability of the FTB to give a complete picture to a filer, and that if we're concerned that the filers are not able to navigate tax terms as they exist, it's going to be even harder for them to identify where there's issues. So can you speak to that concern?

If I understand your question, what you're talking about is if the form ends up being complicated and they need to make some choices on it.

Or if it's incorrect or incomplete because the FTB may not have the full picture. That's an individual circumstance.

Well, I'm assuming that if they don't have the complete picture, that there will be boxes where you can check, like how many dependents do you have, for example, or the ages, those kinds of things. It's theoretically possible. A big part of what California does Fund and that we have good partners on are these free tax preparers. The problem is you need to know that they're there, and you need to know that their service is free.

Frankly, the biggest opposition to these kinds of bills in the past have been the tax preparers. And I won't name any of the names of them, but the ones that sell their services, but that people really don't need because their taxes are so simple. And so it's possible that on the FTB form, it could say, if you have any questions about this, go to this free tax service in your community and list the tax services.

I've visited these free tax services on a regular basis, and they're really very good. They're able to prepare pretty basic tax services for absolutely nothing. And so I think we want to set up that synergy so that people aren't thinking, I've got to go to someone and spend more money, and I'm not going to get very much money back, because some of the returns, while you can get $3,400, some of the returns are less than $100. So if you go to a tax preparer, you're going to pay more than $100 to prepare your taxes. It's not worth it.

And I think that's actually I don't know how to give the FTB that direction. I don't think it's captured in the Bill. But I think that additional step is actually potentially really important, because we certainly don't want anyone to submit a fraudulent tax return because the State of California sent it to them. And I, too, I've hosted my office. I'm sure many of our offices host these free tax prep events. And we just have a wonderful team of community volunteers who do that work.

So if there were some way to say, this is what we think, you're eligible for this. Go to one of these events to verify your information or see if there's even more money, because a lot of them will then be eligible for the federal.

Correct.

Obviously, we're not going to pre-populate that. So I think if there's any way that we can help folks connect those dots, that that would really strengthen the implementation from the FTB.

Yeah, I agree.

I appreciate the longtime work that you've done on this and the hearing that we had this year. It is a very difficult and frustrating problem that there are so many working poor folks that are entitled to this money that can really help them lift out of poverty when you combine it with the federal EITC, and we're just not getting everybody there.

I think as Members, driving people to these free tax prep services is critically important, but you still see a huge percentage of the eligible population that is not getting there. And we haven't really found the solution yet, but I certainly think this is a good step in the right direction. So with that, Senator, would you like to close?

Thank you very much, Madam Chair. I appreciate your comments. I'll adopt them as my closing. The one thing that, from my perspective, was interesting about this whole thing is that I thought it would be very easy to just pull from the programs that we have in the state that provide food or vouchers, housing vouchers, those kinds of programs. Say, look, if you're working and you are eligible for these, you're probably eligible for the EITC, for example. And it's much more complicated than that.

I was hoping we could get to a point where we could share information between the departments that have that data. And you probably looked at the same 1409 report that came back and there were like 10 options and it was complicated. It wasn't as easy as I thought it was going to be so this seemed to be the easiest and the most cost-effective way to go about getting it done. And so I respectfully ask for your Aye vote.

All right. And so thank you very much. And do we have a motion and second? You are good today. Motion by Assemblymember Calderon. A second by assemblymember. Petrie-Morris. Excuse me. Petrie-Norris. And the motion is do pass as amended to the Appropriations Committee. Ms. Highland, please call the roll.

On SB 565 the motion is do pass as amended to Appropriations. [Roll Call]

All right, that Bill is on call. It needs two more votes. And we will, I'm sure, get them when the absent Members show up. And for our last, thank you very much, Senator Caballero. Our last item is file item nine, SB 797. Welcome, Senator Padilla.

Thank you, Madam Chair and Members, I'm pleased to be among you. I'm glad to be your last item also. So I'll present SB 797, which establishes the Lithium Tax Oversight Committee to oversee and provide recommendations on how to best distribute funds that are collected from the Lithium Excise Tax established in 2022. It's a one-of-a kind lithium excise tax, with 20% going towards Salton Sea restoration efforts and 80% going to the county in which lithium is extracted.

As you may well know, in our state, in Imperial County, 30% of the county's revenues go to specific cities surrounding the Salton Sea specifically for community benefits. It's also home to the Salton Sea, which we estimate has nearly 30% of global demand. Global demand for all produceable lithium in the world. The Citizens Oversight Committee is necessary to be sure that the benefits accrue to the community in a way that the vessel is designed to do.

We expect the demand side of production to grow tenfold in just the next decade, and it will play a key part in California's and America's transition to clean vehicles. And it has the potential to unleash billions of dollars in economic opportunity. Most importantly, the Oversight Committee will lead to accountability and transparency, give voice to local stakeholders. It has had no opposition to this point. And Madam Chair and Members, I would respectfully ask for an aye vote.

All right. And do you have any witnesses in support?

No, Madam Chair.

Okay, and then so witness in the room. Are you...?

no, just going up in support.

Okay, thank you.

Alejandro Solis here on behalf of Comite Civico Del Valle in support.

All right, thank you. Any witnesses in opposition? Any questions from the Committee? All right, thank you. I actually just have a couple of questions. There was some question about the role of CDTFA, who is actually going to be hosting the meetings. Are you working with them, too?

Yeah, under the proposed legislation, the Oversight Committee is housed within the agency. It has Executive and legislative pleasure appointees, and it has reporting progress reporting requirements to both the Governor and the Legislature on an annual basis.

Just for clarity, this is an Advisory Committee to the Board of Supervisors for that 80%?

The Oversight makes sure that the distribution of funds and receipt of the funds allocated to restoration and community benefit are consistent with the plans that are adopted by the local stakeholders. And so it will be advisory in that capacity, yes.

All right, thank you very much. So we have a motion by Assemblymember Patterson and a second by Assemblymember Calderon. And the motion is do pass to the Appropriations Committee. Ms. Highland, please call the roll on.

SB 797. The motion is do pass to Appropriations. Irwin? Irwin aye. Wallace? Bains? Bains aye. Calderon? Calderon aye. Pacheco? Jim Patterson? Patterson aye. Petrie-Norris? Petrie-Norris aye. Luz Rivas? Ta? Ta not voting. Valencia? Zbur?

All right. And that Bill is on call. It needs one more vote, and I'm sure we'll get there as soon as we get those absent Members back.

Thank you, Madam Chair.

All right, thank you very much. All right, shall we?

I know I need Miss Bains on one. Let me go find it.

All right, so we will keep the roll open for 10 minutes.

Okay.

But we'll go through the roll call. We'll go through right now to make sure that everybody is.

On item number three, SB 388.

There you go.

Can we do that?

On item number three, SB 388. Bill has passed. Bains.

Aye.

Baines aye. Rivas. Zbur. I have you on everything. You're welcome. Okay, let me write them down.

I can read this. All right. We are calling Members that have missed a number of votes to join us as quickly as possible. And that is Mr. Zbur, Assemblymember Valencia, Assemblymember Wallis, Assemblymember Pacheco and Assemblymember Rivas. If your staff is listening if you're listening, please come as quickly as possible. We do need your votes.

Mr. Valencia here? Thank you. Your vote's needed. Oh, okay. All right. I will lift the call on item number seven. Call the absent Member.

Item number seven, SB 565. Wallis, Pacheco, Rivas, Valencia.

Aye.

Valencia aye. Zbur.

I'll call. It needs one. And then lift the call on item nine.

All right. Lift the call on item nine.

On item nine. SB 797. Wallis. Pacheco. Rivas. Valencia.

Aye.

Valencia aye. Zbur.

That Bill is out. That's 234560.

6-0. On what bill?

Item number nine, SB 797.

Okay, SB 797 is out.

And That's it. And then I'll check the rest of yours. No, I'm going to go back and check. Thank you.

Mr. Valencia on SB 516 Skinner. Yes, let's see. She didn't have you. We're going to do that again. You're welcome.

Thank you. Send some of your colleagues in this direction.

Ms. Rivas, Mr. Zbur, and Mr. Wallis, and Ms. Pacheco

Everybody.

All right. Shall we get Mr. Wallis there? Lift the call on file, item seven.

Lifting the call on file number seven, SB, 565. Motion is due. Pass to appropriations. Wallace. Wallace. No, replace the call.

All right, replace the call.

And we'll go back and make sure Mr. Wallis is on everything. Add-ons to item number nine, SB 797. Wallace? Wallace aye. Thank you.

Thank you. I appreciate it.

Thank you. All right. Okay. Thank you. All right. We are lifting the call for item number seven.

SB 565. Lifting the call. Pacheco, Rivas. Rivas Aye. Zbur.

All right, that Bill is out. Thank you. And we'll go through the other bills that you missed. Thank you for wrapping it up for us.

Ms. Rivas on consent. Rivas Aye. Item number three has passed. It's SB 388 by Archuleta. Rivas. Rivas Aye. Item number five, SB 516 by Skinner has passed. Rivas. Rivas Aye. 797. And finally, Item number 9 SB 796. That Bill has passed. Rivas. Rivas Aye.

All right, thank you so much. All right. And with that, we are going to adjourn this Committee meeting.