Assembly Standing Committee on Revenue and Taxation

Assembly Committee on Revenue and Taxation. As always, please make sure to submit position letters at least one week prior to the Committee hearing in order for them to be reflected in the Bill analysis. Additionally, pursuant to our Committee rule, Bill with a fiscal impact of plus or minus $150,000 will be referred to our expense file, which will be taken up at later hearing. We don't have a quorum right now, so we will be starting out the subcommittee.

So we will start with file item number one, AB 1973, by Assemblymember Lackey Assemblymember. Please begin when you are ready. Thank you.

Well, thank you, chair and Member, for allowing me to present this Bill. AB 1973 was a good year, too. I'd like to begin by thanking the Committee for their Hard work on this measure. Of course. And we will be amending the Bill on suspense with the amendments as outlined in the analysis. The Bobcat fire of 2020 tore through the Angeles National Forest, destroying over 115,997 acres of precious land and burning the homes and livelihoods of many.

The toll of this tragedy is immeasurable, and the scars it has left upon our community are deep and very enduring. However, now following the settlement, our constituents must face attacks on the payments that are intended to alleviate their losses. To me, it is a cruel irony that those who have already endured so much must now shoulder the burden of taxation on their journey towards rebuilding their lives.

AB 1973 will ensure that those well deserved settlement payments are received in their full amounts and would be exempt from taxation. This legislation is not new. It draws upon the precedents set by SB 1246, AB 1249, which provided similar exemptions for victims of past wildfires, such as the Camp Fire, Thomas Fire, and Woolsey Fire.

By passing this Bill, we not only provide crucial financial assistance to those who have lost everything in the Bobcat fire, but also reaffirm our commitment to standing with communities in their time of need. And that's all I have.

Thank you so much, gentlemen. Lucky, right now we have a quorum, so Madam Secretary, Miss Hyland, so please call the roll.

Zero, there he is. Erwin. Ta.

Hi. zero, I'm here.

[Roll call]

Thank you so much. The quorum has been established, so go back to Assemblyman Lucky. So. Okay.

It's our duty as lawmakers to alleviate the burdens placed upon our fellow citizens as they strive to rebuild their community. And for that, I respectfully ask for your. I vote when it is appropriate.

Really appreciate that comes. So, do you have any. Any witness? Nope. Okay. So are there any. Any witnesses in the room who would like to speak in support.

Sorry, suspense, but I appreciate that.

Are there any witnesses in the room who speak in opposition? Okay, so we have none. Any question or comment from Committee Member? So send them on. Lucky, would you like to close?

Yeah, just when it comes the appropriate time. I would hope that it would get favorable consideration.

Thank you so much. As far too many of us know, the impact of this fire on our committees can be really concerned and I really appreciate that you introduced a Bill to provide some of the settlement payment. Really helped the community. So I think that really helpful and mean a lot to everyone who live in state California. Thank you so much. And without objection, this Bill will be referred to our suspense file. Thank you.

Thank you.

What would be the next Bill? So. All right, so we have to wait. So may I ask Sachin to call the next Member, please?

Okay. Come up now, please. zero, wow.

All right.

I like this.

So our next bill is file item number two, AB 29777 by Assemblymember Jackson.

Thank you so much, Mr. Chair and members, before you is AB 2977 which seeks to provide additional financial support to our most vulnerable families by expanding the young child tax credit due to the recent surge in childhood poverty. I intend to make some amendments which

is outlined in the analysis by adding a sunset provision and data reporting. I also will be taking out the Cal EITC provision and I intend on adding additional provisions that have been requested from the Franchise Tax Board. AB 29,777 aims to expand California young child tax credit to cover children under 18 and adjust the credit income threshold to 50,000 in household income.

Because this is a year to establish priorities, I am proposing to adjust other tax credits were already given out to ensure that we prioritize our children. This means adjusting or eliminating capital gains step up basis on inherited assets and removing the exception to the minimum Franchise Tax for new corporations. According to the LAO, revenues from these changes are expected to be in the billions of dollars and would be deposited into the child tax credit expansion fund.

To finance this expansion, I respectfully ask for an aye vote.

Thank you so much. You have any witnesses? No. Okay. Are there any witnesses in the room who would like to speak in support?

Hello, my name is Sam Wilkinson and I'm representing the CalEITC Coalition here to provide a statement of concern. We serially appreciate the intent to expand the young child tax credit and to pursue equitable progressive revenue streams in AB 2977.

We just can't endorse any proposal that would lower the CalEITC's maximum income threshold but as Chair Jackson just shared, there's an amendment waiting and we're very encouraged by the amendment as well as our meetings with staff and plan to move to a support position once the CalEITC maximum income threshold proposal is removed from the legislation. Thank you.

Thank you so much. Are there any, any witnesses in the room who would like to speak in opposition? Any questions or comments from the committee members? All right, I see none. So this bill. Oh, Doctor Jackson, any who would you like to close?

Sure. We know the expansion of the child tax credit under the American Rescue plan significantly reduced childhood poverty, with 90% of low income families utilizing additional funds for essentials like food, housing and education. California still faces a significant poverty issue, with childhood poverty rising from 13.8% to 17.6% post the expiration of the federal child tax credit, which makes this even more urgent. To make sure that we mitigate the impact that this has done to our children.

Most importantly, not only as legislators, but also as adults in this state and in the world. It is every generation's sacred responsibility to provide the next generation with everything that they can to thrive and to leave them with better opportunities than what we have had. Unfortunately, we will be the first generation to fail in that responsibility if we don't act now and aggressively. We cannot allow child poverty to stand in California. I ask that this committee allow me to continue with this very important work.

Along with this work, this bill will be budget neutral as we continue to crunch the numbers with LAO AB 2977 represents an opportunity for California to address childhood poverty effectively by leveraging these tax adjustments to fund the stability and economic growth for our future generations. I respectfully ask for an aye vote. Thank you so much, Mr. Chair.

Thank you so much for that. And this bill will be referred to as expand file. But I really appreciate your presentation.

Thank you.

Are you ready? Thank you so much. So the next. The next is file item number five, AB 2400 by Assembly Member Rivas.

Thank you, Mister Chair. And Members, I want to begin by thanking David from the Committee for his thorough evaluation of this measure and for working closely with my staff. AB 2400 would extend the sunset for the sales and tax exclusion program, or STE, of the California Alternative Energy and Advanced Transportation Financing Authority, until January 1, of 2031.

The purpose of the STE program is to promote the creation of California based manufacturing jobs that would stimulate the state economy and incentivize the manufacturing of green technologies that will help reduce greenhouse gases, air and water pollution, and energy consumption. Since the program's inception, over 335 projects located throughout the state have been awarded tax incentives to help spur investment in over 14.8 billion in manufacturing equipment without state intervention. The STE program is set to sunset on January 1, 2026.

This would jeopardize the creation of manufacturing jobs and the production of vital green technologies like solar panels, biofuels and wind turbines, all of which are vital towards reducing the state's carbon emissions. Allowing the program to expire would leave the state with one less resource to assist in its bold climate plan, potentially causing California to fall behind in meeting its ambitious climate goals. Today I have with me to provide testimony Lawrence Gaydon, Policy Director for the California Manufacturers and Technology Association.

And I also have with me to provide answers to any technical questions. Khaim Morton, deputy treasurer with the California State Treasurer's office, and Jennifer Gill, senior manager at the California Alternative Energy and Advanced Transportation Financing Authority. I think I got it right.

Good afternoon, honorable Committee Members. Lawrence Gaydon, policy Director for California Manufacturing Technology Association. We're proud to support AB 2400, which extends a key tool for California manufacturers who are global leaders in advancing the state and its emission and renewable energy goals. California manufacturing, particularly our advanced and green manufacturers, are really always in the process of being courted by other states for various opportunities. CAEATFA is a tool for investment and really encouraging growth in one of the most competitive industries in the world.

AB 2400 really illustrates a greater sense of commitment from the state to promote California jobs, California manufacturing, and the creation of technology that will help reduce our greenhouse gas emissions, reduce air and water pollution, energy consumption, as well as really supporting the lithium development and semiconductor manufacturing. California truly wants to demonstrate leadership and continue further to grow the innovative and green economy of the state. AB 2400 and the CAEATFA program is a vital tool to do so. Thank you.

Thank you so much. And are there any witnesses in the room who would like to speak in support? Oh, I'm sorry. Do you have another witness?

Yes.

Okay, I'm sorry.

No problem, sir. Again, thank you very much, Mister Chair. Committee Members Khaim Morton, deputy treasurer for California State Treasurer Fiona Ma, sponsor of AB 2400 and their capacity's chair of Cave to the California Alternative Energy and Advanced Transportation Financing Authority. As noted, the program serves two purposes. First, the SCE program incentivizes the production and use of technologies to help greenhouse gas emissions, air, water pollution and energy consumption. Additionally, the program creates the creation of California based manufacturing jobs to help stimulate the economy.

Among other benefits, this program has created an estimated net benefit of 1.7 billion to communities and regional economies. In addition, over 128,000 jobs been created or retained with the support of the CAEATFA program. The sales and use tax exclusion program employs an evaluation process that considers projects location in high unemployment areas, workforce development partnerships, and regional industry clusters. Even so, program participation in oversubscription has increased year over year.

To address this high demand, CAEATFA has enacted regulatory changes to enhance the competitive criteria, project caps and allotments. These changes have allowed the program to continue to prioritize the state's environmental goals and support as many businesses as possible. As noted, without the passage of AB 2400, the program with sunset on January 1, 2026 and it would jeopardize not only the retention and creation of thousands of jobs, but also the future economic growth of regional economies in California.

Under AB 2400, the program's sunset date would extend to January 1, 2031 which would allow the state and the state treasurer's office to continue to experience the net benefits achieved by incentivizing eligible manufacturers. This is an important economic development tool for the state and it's proven to effectively marry the state's economic environmental goals. And the state treasurer is proud to support and be a sponsor for AB 2400.

Thank you. Thank you so much for that. Now, are there any witnesses in the room who would like to speak in support?

Good afternoon, Matt Kloppenstein and California Advisors on behalf of the Bioenergy Association of California, Energy Source Minerals, MP Materials and Searles Valley Minerals, all in sport. Thank you.

Good afternoon. Skyler Wonnakott, on behalf of the California Business Properties Association in support, and NAOP California in support.

Good afternoon, Chair Members Obed Franco, on behalf of the California Electric Transportation Coalition and the California Biomass Energy Alliance in support. Thank you.

Preston Young from the California Chamber of Commerce here today in support.

Hello. Keeley Morris with Edelstein, Gilbert, Robeson and Smith on behalf of the Los Angeles County Sanitation Districts in support.

Are there any witnesses in the room who would like to speak in opposition? I see none. Any question or comment from Committee Members? Okay, I see none. So, Assembly Member, would you like to close?

Thank you. And I respectfully ask for an aye vote

Thank you so much.

When it's appropriate.

Yeah, we appreciate, and this Bill will be referred to as expand file, but thank you so much.

Thank you.

Thank you. All right, so now we go back to file item number three, AB 3051, by sending Member Muratsuchi.

Thank you. Thank you very much, Vice Chair, Members of the Committee. I'd like to thank the Committee staff first of all for your work on this Bill. I will be accepting the Committee amendments to limit the spending of the voluntary tax contributions for Administration to 5%.

Move the Bill.

Second, AB 3051 will create the California K-12 Climate Change Education Voluntary Tax Contribution Fund on the personal income tax return form. I'm sure like many of you, I just filled out my taxes and saw the the list of wonderful causes. And so we want to make sure that we have funding, that we provide an opportunity for our California taxpayers to support climate change education in our California schools.

Here with me today to talk more about this proposal is Gillian Rodriguez and Barke, representing 10th strands, and Bill Andrews with the California Environmental Education foundation.

Good afternoon Mister Chair and Members of the Committee. My name is Bill Andrews and I'm the founder and ex officio advisor of CEEF, which is the California Environmental Education Foundation. CEEF is a registered 501 C three nonprofit and is co sponsoring AB 3051 with 10 strands.

On behalf of CEEF, I strongly urge your support of AB 3051, authored by Assembly Member Muratsuchi, to create a California K-12 Climate Change Education Voluntary Tax Contribution Fund, which would be used to provide grant awards to support K-12 literacy.

My experience in education spans nearly 50 years, having served 11 years in the classroom, 19 years at the California Department of Education, and 21 years with CEF, which currently conducts annual teacher institutes and best practices of environmental education and presents annual cash awards for excellence in the field. Support for climate change education has never been needed.

More than now, parents know their children are being barraged with news about sea level rise, flooding, firestorms, heat waves, and drought, all of which is anxiety producing for over a third of our young people. That's according to Edweek that published last year. Moreover, NPR found that 80% of parents in the US support the teaching of climate change, yet 65% of teachers report they don't see how it's related to their subjects they teach, and 34% admit they lack the resources and knowledge.

Support for environmental literacy has chronically been underfunded for decades in California. This current fiscal year, only $827,000 was allocated from the California Environment License Plate Fund, to be divided between CDE and the California Coastal Commission, and that is about 15 cents per student this year. Clearly, our students and teachers desperately need more funding to support environmental and climate literacy, and AB 3051 bridges that funding gap provides vitally needed support to enhance K-12 climate literacy.

CEF is thankful for the leadership of Assemblymember Muratsuchi, and we're grateful to share the co sponsorship of this Bill with California's premier environmental education organization, 10 Strands. Thanks for your time today and here to speak for 10 strands is Gillian Rodriguez Mbarchi.

Good afternoon. My name is Jillian Rodriguez Mbarchi. I am the chief advancement officer at 10 Strands, a California based nonprofit focused on advancing environmental and climate literacy in our K-12 public school system. As a field catalyst, our organization works with partners across the state to advocate for public funding.

To support this mission, we work with school districts and county offices of education to build capacity across the education system, and we strengthen the network of formal and non formal providers who develop educational journeys that center on the interdependence of humans and natural systems. In 2013, we partnered with Calrecycle on the Education and Environment initiative curriculum. Through that partnership, more than 13 million environmental lessons were delivered across 6000 schools, with only 10% of the teacher population having received training and support.

In 2021, the state Legislature invested in the development of a new set of curricular resources focused on climate change and environmental justice. Together with San Mateo County Office of Education, we are leading the development of those resources. Scheduled to be delivered next spring, AB 3051 would provide an avenue for individual taxpayers to supplement the state's investment in climate change education by creating a sustainable source of funding to address the urgent need for teacher professional learning.

Last week, our coalition launched a campaign in support of this Bill. In just over 48 hours, 79 organizations and 303 individuals signed on to signal their belief that education is a key climate solution. We are grateful to assemblymember Muratsuchi for his dedication to education, the environment, and our communities, as well as the many legislators, both past and present, who have worked tirelessly to pass legislation that laid the foundation for this Bill.

Our coalition believes that even in a year with a challenging fiscal outlook, we can continue the momentum that has been building for decades. 10 Strands is in strong support of AB 3051. Thank you.

All right, do we have any witnesses in opposition? Support in the room. Okay. Questions from the Committee, Miss Reeves.

First, I want to thank Assemblymember Muratsuchi for bringing this important issue to our Committee today. You know, as you may know, last year I authored AB 285, which made climate change education a course requirement for grades one through 12.

And based on that experience, I was able to interact with, like you mentioned in your testimonies, lots of people that want just parents, teachers, young people that want to learn about climate change, or parents and teachers that want to teach and have their kids learn about climate change. So the demand is out there, and we need more funding to provide that, especially the professional development for the educators.

And that's why I, you know, I'm 100% in support of this Bill and very happy to see this being brought forward to our Committee today. And I respectfully want to ask to be added as a co author.

Thank you. Thank you. Miss Rivas, as chair of the Education Committee, I'm very familiar with your leadership in promoting climate literacy, climate education and so would very much appreciate your co authorship of this measure.

Thank you.

Any other comments or questions from the Committee, Mister Muratsuchi, would you like to close?

Respectfully ask for aye vote.

[Roll call]

All right. And the motion moved by Assemblymember Gibson. Seconded by Assemblymember Grayson. The motion is do pass as amendment appropriations. Miss Hyland, please call the roll.

Thank you.

That is out 6-0 and Mister Gipson is going to this file, item four, AB 3141. And you may begin whenever you are ready, Mister Gipson.

Thank you very much Madam Chair and also Committee Members, thank you for allowing me to present Assembly Bill 3141 which sees seeks to defer potential increase in property tax for tenants at the California ports on the value of new infrastructure bills to improve air and water quality. And I bring this Bill also, not only as the author of this Bill, but also the chair of the Select Committee on Ports and Goods movement in the Assembly. Our ports in California are the absolute backbones of our economy.

We import nearly 40% of all goods used in the nation and are responsible for billions of dollars in commercial as well as thousands of good paying jobs in the goods movement sector. At the same time that the State of California has set out about some of the most ambiguous, excuse me, ambitious environmental standards that the country has ever seen.

Our ports have been great partners with these goals and have many times seen themselves going over and beyond the call of duty in terms of the obligation and responsibility in meeting these goals. While California ports are public entitles the ship line that leases out terminals and the ports operating as businesses.

While these shipping lines have been supportive of the shift to zero emissions as well as there are being seen to impact of the infrastructure being brought into our ports, this Bill, Assembly Bill on 3141 seeks to delay reassessments of property value until a change of lease happens. This Bill would also not affect any lease agreements that currently under contract, meaning that they would not have any immediate impact on the revenue of property tax.

Here supporting this Bill, Assembly Bill 3141 is Mike Jacob, the President of the Pacific Merchant and Shipping Association who will speak in support of 3141.

Thank you, Mister Gipson. Good afternoon, Madam Chair Members. Mike Jacob with PMSA, representing ocean carriers, marine terminal operators, and as Mister Gipson stated, we're in support of this Bill, sponsoring this Bill in order to make sure that as we're moving forward with making investments in the types of infrastructure that we need to clean air and water impacts from our operations.

We're also not making those increases in the actual infrastructure improvements translate into increases in our taxes, at the same time making those improvements more expensive than they already are. We want to make sure that as we move forward, we have a mechanism for capturing that additional value ultimately in the tax base. And we believe that occurs at the end of our lease term.

And so what we'd like to make sure we're doing here is capturing that value when it's part of a new revenue compact which is done between our members as marine terminal operators and the ports as our landlords, as opposed to in the middle of our lease term, which for many of our members can run several decades. So we have various different times where there are reassessment events currently, and we would like to make sure that these environmental improvements don't turn into one of them. Thank you very much.

All right. Thank you very much. Are there any other witnesses in support? Witnesses in opposition? I'll turn it to the Committee. Any questions or comments? All right, Mister Gipson, so I have here that there, in the analysis, there were some constitutional issues raised. Do you have any response to one of you, to the.

Yeah, I'm happy to address those. Thank you. This is a very interesting issue, and I'm glad that the analysis raised it. There are several questions about whether or not you can have any type of property interest, and a possessory interest is a property interest, and that's the basis on which we're taxed, where you don't have an assessment when you have a change in value like this. And so what we're proposing is similar to what occurred in another Bill which was passed earlier this session.

And that was a Bill that didn't have any flags with respect to constitutionality. We expect to continue to have this conversation, and we actually had a proactive conversation with the assessors who reached out to the author's office and to us as sponsors to continue to have that conversation and see if we can elaborate on that. So we know that that's a concern. This Bill has been flagged with that potential issue by Ledge Counsel. So we're actually somewhat positive about that leading into it, but we do understand that's a conversation that needs to continue.

All right, very good. Mister Gipson, would you like to close?

Yes. Again, thank you very much for allowing me to present this Bill. In conclusion, this Bill aims to make sure that shipping lines continue to do do business and operate inside California supports to ensure a competitive and also efficiency. Again, California supports is the economic engine for California and we want to maintain that footing and all that it brings and all that it offers. I respectfully ask, your aye vote at the appropriate time.

Thank you very much, Mister Gipson, and without objection, this Bill will be referred to our suspense file.

Thank you very much.

We do have one final item, file item number six, AGR 15, and it is authored by Chair Irwin and we will look forward to hearing you present. Please.

Thank you very much and good afternoon, colleagues. Today I'm presenting AJR 15, which urges Congress to revisit the misguided decision to to cap the state and local income tax deduction at $10,000 for both individuals and married couples filing jointly. As outlined in the analysis, the salt deduction has been a feature of the federal tax code that dates back to the very first income tax that was imposed during the civil war.

The logic then, which still applies today, is that tax payments to state and local government are not optional. The Federal Government should not be taxing income that is already spoken for and for which people do not have control over. Doing so would constitute a tax upon a tax. By recognizing yhis simple fact assault deduction, reflected a key principle of federalism and non interference by the Federal Government in state and local affairs.

Only very recently, in 2017, did this bipartisan consensus give way when the tcp was passed out of Congress. Republicans in DC were not shy about using the salt deduction as a tool to put their finger on the scale and punish blue states. This was not about thoughtful tax policy, as evidenced by the fact that married couples and individual filers are allowed the same deduction amount. After the TCGA went into effect, I think we all heard loud and clear from our constituents that they were very upset.

People that previously received refunds on their federal taxes are now surprised to find that they owed money to the IRS, even though their income stayed the same. Overwhelmingly. I have heard from married couples that they were rightfully offended, that they would have been better off if they would file their taxes separately.

AJR 15 urges Congress to fix this penalty on married couples and lift the salt deduction, consistent with how it had operated months before the TCGA with me here today is Vanessa Chavez with the the California Association of Realtors.

Thank you, Chair and members, Vanessa Chavez with the California Association of Realtors in support of AJR 15. This measure calls on Congress and stresses the urgency of repealing the salt cap, which was enacted under the Trump Administration. The change penalized high cost states such as California, New York and New Jersey by limiting the state and local taxes the taxpayer is able to deduct.

For example, in San Francisco, the median household income as reported by the US Census Bureau states that it is roughly $136,000 as compared to the national figure, which is half that amount coming in at roughly $74,000. The salt deduction includes property income and sales tax. To be more specific, a taxpayer who itemizes can deduct property taxes, but the taxpayer needs to choose between deducting income and sales tax.

Taxpayers of states with high income taxes typically opt to deduct their state and local income taxes, while taxpayers of states with high sales tax typically deduct their sales taxes. Generally, taxpayers deduct property and income taxes using the salt deduction. One of the more notable, if not the most damaging, provisions of the Tax Cuts and Jobs act was the limitation of state and local taxes for taxpayers who file jointly, as the limitation is capable, capped at $10,000.

Meaning of that a taxpayer who files single has the same limit as two taxpayers who filed together. This change has led to disproportionately penalizing families in California. As a result, we have families who are already dealing with the many hardships of these changes and homeowners in California who are incurring high costs of housing, which includes increased insurance costs and high interest rates, just to name a few.

The salt cap creates a burden to our state's families and reform is necessary to ensure residents of the state are able to meet the basic needs of their families. For these reasons, we ask for your aye vote.

Thank you for your testimony. And do we have any other witnesses in the room wishing to speak in support? Seeing no rush for the microphone, we will ask for opposition. And seeing no rush for the microphone, we will bring it to the Committee. Any questions or comments? Comments? We do have a motion, a second.

Member, would you like to

Respectfully ask for your aye vote.

Thank you so much for that close. And we do have a motion and a second motion from Assemblymember Gibson and second from Assemblymember Luz Rivas.

Oh, was it?

Yes.

It was Bains, Yes.

That's right, it was Doctor Baines. Oh, it was Doctor Baines. All right, Doctor Baines, you're the second with that secretary. Will you please call the roll on AJR 15?

[Roll Call] The count is 6-0, the bill is passed.

The Bill gets out 6-0.

Thank you Members.

Now. Well, is Mister Cha coming back?

We will hold. Will we hold that open for absent member?

Sorry about that.

That looks exactly like something I would do. Thank you very much. And we will. We will hold the roll open for 10 minutes. You have everything? I just wanted to check to get voted for everything? Yes. Thank you very much.

We're just missing Mister Todd.

Can I have the secretary please call the absentee. But now present member

On AB 3051 that Bill has been passed to appropriations, absent member Ta.

not voting.

Ta not voting. And the last measure, AJR 15 which has been adopted and passed to appropriations, absent member Ta. Ta not voting.

And with that, this meeting of the Assembly Revenue and Taxation Committee is adjourned.