Senate Standing Committee on Revenue and Taxation

The Committee on Revenue and Taxation will begin in 30 seconds. The Committee on Revenue and Taxation will come to order. It looks like there's a quorum, so I would ask the secretary to call the roll.

[Roll Call]

We have a quorum. I would like to state right off the bat that we have 12 bills to get through. So I'm going to ask the authors to be as brief as possible and for the me toos to state your name, your organization and your position clearly and quickly.

We need to be out of here by 1:00 and if we aren't finished, then we'll have to come back and I don't think anyone wants to do that. So we will proceed. The first. What's that line? Item four has been pulled by the authority one Bill. File item 13 is proposed for consent.

This is a Committee Bill 863. If there's no objections, consent. I'll call the roll on that. Forms have been established.

[Roll Call]

3-0 is on call. We will now move with the first Bill. And this is item three. SB 94. Senator Strickland.

Thank you Mr. Chair, Members. SB94 is a simple Bill. Just to give you a historical context. I was here 13 years ago and the last vote I had in the State Senate was on the high speed rail.

And at that time I said as proposed to the people of California, this will never be built the way it was proposed and it would be much more expensive than what we were talking about 13 years ago. 13 years ago was sold as a train that went from San Francisco down to Los Angeles for $9.95 billion.

When you look at where the train it was supposed to already be completed as of today were not even close to being completed. In fact, this train has no date in sight in terms of completion. In fact, the cost of the train has skyrocketed to now $128 billion and counting.

When you look at how much $128 billion was that year budget that it first passed, the whole entire budget for the State of California was 98 billion. So you're talking about a project that is bigger than the whole enchilada of the state budget 10 years ago. My dad always taught me if you're digging a ditch for yourself.

The best way to get out of that ditch is to stop digging. I think that this project should be pulled the plug of the high speed rail. And I think there's other ways that we could spend $100 billion on. This year alone they're asking for $7 billion from the high speed rail in order to keep it going.

I think a better way to use those funds right now, especially with the cost of living in California, is take those funds and then lower our gas prices. Our gas tax. Our gas tax has moved up across the State of California every year for the last three years.

And when you talk about the gas taxes falls disproportionately on hard working California families who are trying to make ends meet living paycheck to paycheck. Some of us and some of our districts can afford the higher gas prices, but many of our California citizens cannot.

Many of them have to decide between a gallon of milk and a gallon of gas. And I think it's a better use of our funds here. When we talk about our budget Members, it's a blueprint of our priorities.

I think our priorities should be not to continue to waste money on billions of dollars on a project I believe no one believes is going to be built as proposed and instead lower the gas prices for the people of hard working California families. That's what SB94 does, and with that, happy to answer any questions you might have.

Are there any witnesses in favor?

I haven't seen any witnesses in support other than countless of people who call my office.

Anyone want to speak up in favor of the Bill or me toos? Anyone want to speak up opposed to the Bill?

Good morning, Chair McNerney and Members of the Committee. I'm Jonathan Cole. I'm with Climate Action California. California's high speed rail project will provide fast emissions free travel between California's major urban areas and and serve as the backbone for California's developing statewide rail system.

It will better integrate centers of economic activity, including the Central Valley, transforming the economy of our state. SB 94 threatens these benefits. In exchange for a temporary reduction in motor vehicle fuel taxes between 2006 and 2024. The California High Speed Rail project has supported 109,000 job years, $8.3 billion in labor income.

8 and excuse me, there are typically $21.8 billion in total economic activity. There are typically about 1200 to 1600 construction workers active on the project at any given time. These jobs would be threatened if funding was to be diverted in the active construction Package sections between Madera and Shafter.

96 miles of 119 planned guideway miles and as well as 85 of 91 planned structures are either complete or or under construction. And these include some significant structures like the Cedar Avenue Viaduct and the platform and viaduct for the New Kings Tulare Station. All these would become stranded infrastructure if the project is halted.

The Bill analysis points out that the temporary reduction in motor vehicle fuel tax would benefit gasoline suppliers and wholesalers, with no guarantee that the savings would be passed on to California drivers. It would also result in the loss of over $37 million in state and local sales taxes.

Finally, it's important to point out that this Bill proposes directing greenhouse gas reduction funds for a project that would likely increase greenhouse gas emissions. This Bill would endanger a long term transportation climate and economic goals in exchange for dubious temporary benefits. Climate Action California respectfully opposes SB94 and urges a no vote. Thank you.

Thank you. Any other witnesses in opposition? With that, we'll turn the Committee to the Committee Members for comments. Senator Grayson, you recognized.

Thank you, Mr. Chair, and thank you for at least keeping this a discussion to the author. I'm willing to agree to disagree. I have this hope or aspiration one day to be able to see high speed rail operating in California only because I believe it's not a liability, it's an investment.

Now, granted, you're bringing out some great points about how something could be done more efficiently and effective. And I wholeheartedly agree. We're always looking for better ways and more efficient ways to get things done.

I do believe that this high speed rail will be a catalyst to economic development throughout what was described as the backbone, but also just a vital corridor of California connecting two economic hubs, SoCal with Northern California.

And as far as trying to provide relief for those still using or driving combustible engines, there are other probably more effective ways to help bring down cost at the fuel pump than to wipe out high speed rail and the benefits that would come with that.

Again, I appreciate your efforts and definitely appreciate your conversation and keeping it alive. And we'll be willing to agree to disagree on the concept of the high speed rail. Thank you. So I can't support the Bill today.

Okay, well, I thank the Senator for comments and I thank the Senator Strickland from Huntington Beach for your efforts here. But I'm going to have to oppose the Bill. I was just overseas and took high speed rail across the country. It took a few hours, which would have taken half a day and a car ride.

So I see, the United States needs to establish high speed rail for a number of different reasons. But the original intent of this Bill was of the project is to establish high speed rail, reduce greenhouse gas emissions and I think that's a laudable goal. This Bill as proposed would raid the greenhouse gas reduction Fund to subsidize gasoline.

So in other words, it would do exactly the opposite of what the intent and the voters asked for in the original project. Additionally, if we're concerned about high prices, I think we're going to see a lot more effective high prices with the President's tariffs and other imaginations with the economy.

And I think people are going to feel that immediately and they're going to feel it very badly. So I think we need to figure out how to get by those pending effects as soon as possible. This Bill also strips the High Speed Rail Authority of its primary source of revenue which would effectively kill the project altogether.

It threatens the future of greenhouse transportation in the state as well as Central Valley construction jobs. I have a Central Valley district and my people will be hurt by this. Will also result in short lived gas savings if suppliers don't pocket the revenue themselves instead of passing it on, which is a bad bet.

For these reasons I will be opposing the Bill. And again I thank the author for his efforts here. Does the author wish to close?

I do. As one of my favorite lines is I could agree to disagree without being disagreeable. I respect your, your comments and your stance. But I will say I just met with the High Speed Rail Authority yesterday and by their own projections they said they would increase $28 billion into the economy. 28 billion.

This is a project that's going to cost over $120 billion and counting. By the way. This was proposed to the people of California as less than a $10 billion project. This project has been a disaster from day one. The planning has been horrific. It should have already been finished. We don't have an end in sight.

This is a $37 million tax cut for hard working California families. And most of Californians do still drive cars, believe it or not. Especially in my district in, in Southern California. And this is the time where they need that economic relief. And I'm willing to put everything here as proposed.

This trail, this high speed train will not be built as proposed. And I'm willing to put my name out on the line and say that's not going to do it. We'll see. You know 5, 10 years from now I'm going to say I told you so, I told you this Train. And we will.

We'll be wasting billions and billions of dollars more. And then on top of that, again, most people don't know what $100 billion is because it's a huge number. There's 128 billion. Again, think about it. 10 years ago, 10 years ago, the entire budget of California was less than this project.

The entire budget, the whole enchilada, Healthcare, CSU, UC transportation, K through 12, everything we funded in the State of California was less than the cost of this project. I understand what the Committee wants to do in terms of mass transit. I get it. But this project is so enormously expensive and it's spiraling out of control.

I don't know how you look to your constituents. And even by the high speed rails numbers, they told me yesterday their economic growth was 28 billion. You're going to spend 128 billion on a project that has economic incentives of their estimates of 28 billion in the positive side.

So you're asking the people of California to spend $100 billion on something that you're only gonna have $28 billion economic growth of their numbers, knowing if their numbers are even, accurate. So I'm here to tell you I can agree to disagree without being disagreeable.

I respect the Members here, but I think we're making a wrong choice if we don't move forward on this and again, as my dad said, we've dug a hole for ourselves. We've now spent billions of dollars and have nothing to show for it.

The last thing I want to do, and I said this by the way, on the floor, my last speech, I got the permission to bring my young son. He was I believe 4 years old at the time. And you can get the tape.

And I told the Members of the Legislature then when my son goes to college, he's going to ask me why there's a train from nowhere to nowhere. And this happened. It's because we didn't have the foresight.

We're saying we're going to get all these billions of dollars from the Federal Government knowing full well we're not going to get that money from the Federal Government. And the state is picking up the cost for this high speed rail.

And by the way, also when we talk about Southern California, I love riding trains in the East Coast as well. And I like mass transit when I go to New York because it drops you off 1 block from where you have to go.

But the way we, we built California, San Francisco works because it was built around the horse carriage but cities like Los Angeles, San Diego, and cities like St. Louis and Indianapolis were built around the automobile. They're built out.

And if you look, most people don't use mass transit unless you're in an urban center because you can't get dropped off one mile or two blocks from where you need to go. And so for those reasons, I think cars are part of the California culture. I think cars are important. When you look at.

Most people use cars, they don't use mass transit that masses don't use. And I think this is a very important piece of legislation that would help hardworking California and families that need help today. So with that, I asked for, aye vote, I, I see that my Vice Chair is not there to move the Bill, so.

Oh, she did? Okay. Yeah, you need a motion in the room. So I'm hopeful, I'm hopeful that you allow her to at least move the Bill when she comes back. I know you have a.

I don't know if that's within the rules, but I respect you and thanks so much for your time and I'm looking forward to working with you. This won't be the last time you hear my voice on this issue. So thank you. Thank you.

That is on hold until the Vice Chair returns. Senator Choa Bogue is here to present.

Tony.

Proceed when ready.

Thank you and good morning, Mr. Chair. Members. I'd like to begin by accepting the Committee's amendments and thanking the staff for working with my staff in making this Bill more cohesive. The proposed amendments will allow a tax deduction for tips providing relief to Californians in service and hospitality industries.

Tips aren't regular income, despite the fact that existing tax law treats them as such. Tips are not guaranteed. They're not consistent. They're not enough to make ends meet. Members of my own family, including my mom and my dad, and my mom is a single mom, have lived on the daily struggles of working in the service industry.

SB17 is a bipartisan recognition of the unique nature of tips as a gesture of gratitude for exceptional service rather than a dependable source of income and underscores the importance of this issue. Both parties have acknowledged that we must make every effort to help working Californians.

We have an opportunity to make history by coming together to provide relief to millions of people that support our state's world class service and hospitality industries, which lead in California. I hope you'll join me in supporting this important effort to help Californians keep more of their money in their pockets.

And with me is Scott Kaufman with the Howard Jarvis Taxpayers Association and Kelly Larue with the Cal Chamber.

... witnesses are recognized.

Good morning, chairmembers. Kelly Larue with Resilient Advocacy on behalf of the California Chamber of Commerce, representing more than 13,000 Members. And I just want to note. Okay. More than two thirds of our Members have 100 or less employees.

The service sector is a vital component of California's economy, employing hundreds of thousands of workers who rely on TIPS as a significant portion of their earnings. The earning potential from TIPS is a reason people choose to work in the service industry. And the tax credit in SB17 will help bolster this workforce.

At a time when it's difficult for businesses to fully staff. Providing tax relief to workers in these industries will increase their earnings and improve affordability. And it's an issue that's top of mind for many Californians and businesses. For these reasons, we ask you to support SB17. Thank you.

Scott Kaufman, Legislative Director for the Howard Jarvis Taxpayers Association. My thanks to the author, the chair and the Committee for Giving me the opportunity to speak today. And per your request, I'm going to keep my comments as short as possible. As the Committee staff report notes, the vast majority of tipped workers are women.

Women of color are more likely than other women to be tipped workers. Tipped workers are also younger. The typical tipped worker is a full 10 years younger than the median non tipped worker.

The author has also noted that they are also more likely to be single parents with with three out of 10 with a child under the age of 18. The overrepresentation of vulnerable groups makes the need for this Bill clear.

Allowing exclusion from the income from income for the state tax purposes for TIPS will go a long way to help these predominantly young women of color take more money home and save for the future. Californians pay some of the highest state taxes in the country, and tax relief for hardworking people is long overdue. I ask for your aye vote and I thank you. Again.

I thank the... Witnesses. Any other witnesses care to come in favor of the of the measure?

Thank you, Mr. Chairing Members. Matt Sutton with the California Restaurant Association. I had anticipated giving more extensive comments, so I will be brief and I appreciate your indulgence. I know you've had two witnesses.

SB17 is one of many responses in this building trying to get at the affordability crisis, and we're very supportive of the concept of addressing that. Nearly 64% of wait staff are people of color. More than 80% of chefs are people of color, and 60% of owners of restaurants are people of color.

We think this measure will go a long way in addressing affordability issues and we hope it stays part of the larger discussion on affordability and the solutions for tackling that. Thank you. Thank the witnesses.

Any me toos care to come up in favor of the Bill? Any witnesses in opposition? Any witnesses at all in opposition? Thank you. Well, in that case, I'm going to move to the Committee for Comments discussion. The Vice Chair is recognized.

Yes. Well, first of all, thank you, Senator, for bringing this Bill forward. I am a joint author with you on this Bill. And for those of you that don't know, once upon a time I was a bartender at a phenomenal restaurant and counted on those tips often to make, you know, my car payment or rent.

And I can just tell you that this Bill will go a long way to impact the people that need the help the most. And it's also bipartisan. We saw this issue come up nationally last year.

We had both our presidential candidates support this concept because if you want to put money back in the pockets of people who deserve it most, this is a phenomenal way of doing it. Which is why I'm hopeful that my our Committee will take that this bipartisan Bill and move it forward. And thank you for bringing it and working on it.

Senator Ochoa Bogh, thank you for bringing this forward. I'm happy that we're able to come together in agreement and you accepted the amendments. I think with that in mind, there's. The Bill will help the people that it's intended to help and not do more to the economy.

If Congress enacts a similar piece of legislation, we'll work together on that again in the future. With that, I'm going to support the Bill. And is there a motion? Okay. The Bill is moved. Will the secretary call a roll?

Senator Ochoa Bogh, to close.

Oh, Senator, I'm sorry. Senator, would you like to close?

I just respectfully want to say thank you to the chair for allowing me to work with you on this particular Bill. I was very enthusiastic when I see chairs coming in, especially in a bipartisan effort to make a move forward, legislation that helps Californians as a whole. So very, very grateful, Mr. Chair.

SB17 has the potential to bring tangible benefits to millions of workers in California, particularly those in the restaurant, hospitality and service sectors, many of whom rely on tips to survive. I respectfully ask for an aye vote.

Will the secretary call the roll?

[Roll Call]

The Bill is on call. Thank you.

Senator Grayson can present his Bill.

Senator Grayson care to present his Bill now?

Okay. This is item number 10, SB328. Senator Grayson, you may proceed.

Thank you so much, Mr. Chair. Members, I would like to begin by thanking the Committee for their work on this Bill and accepting the Committee's proposed amendments. Thank you so very much.

SB 328 is a necessary Bill that would help prevent significant cost increases for housing developers who have remediated contaminated soil and returned that land to productive use. In 2022, the Legislature passed SB158. It was a budget trailer Bill that had the goal of stabilizing the budget for the Department of Toxic Substance Control. We know it as DTSC.

In order to achieve this, SB158 made changes to one of the major fees that are paid to DTSC when remediating a site. Before SB158, DTSC used a tiered model with a fee that ranged depending on the project. These fees were also capped at 100,000 for most housing projects.

However, this model was replaced with a fixed price per ton model of $46.20 per ton. These changes to the hazardous waste generator fee have had a significant impact on development and have increased costs for several essential housing projects and projects that provide community development.

This fee significantly increased the cost for remediating contaminated soil in urban infill sites or in situations where developers encountered naturally occurring toxic materials. For instance, there was a housing project in San Francisco that saw these fees rise from $100,000 to $800,000.

The increased fee has made several projects infeasible at a time where California is already struggling with rising costs. To help provide relief and also reduce costs for these important and essential projects.

SB328 would establish a cap on the hazardous waste generator fee at $100,000 for housing, nonprofit and park and open Space projects and $250,000 for master development or developed projects. This cap would only apply to those who did not create contamination.

And this Bill would also place timelines on DDSC for responding to development related actions to help prevent delays in the development process. So at a time where California is facing increased development costs, we must do what we can to create a more favorable environment that allows us to build housing that is actually affordable.

Builders who are repurposing the land for productive use should not be penalized, especially those remediating pollution rather than actually causing it. So SB 328 would provide much needed relief at a time where costs are constantly increasing. And I through the Chair will have my witnesses self introduce.

Good morning Mr. Chair Members. My name is Louis Bronte, here on behalf of the Bay Area Council, one of the co sponsors of SB328. The barrier council represents over 350 of the region's largest employers. We have since our founding worked on resolving major problems facing the region, including the region's immense housing crisis.

This Bill would help us build more infill housing and lead to more cleanup of pollution by capping the generation and handling fee. As the Senator mentioned, the surprise Bill that many developers got resulted in many of them stopping in their tracks.

And this Bill is going to give them the certainty they need to continue not just with the infill housing projects that they have, but also with the site cleanup that makes the community a cleaner place to live. These projects have in the past paid for remediation of the soil they've excavated.

This fee is to pay for the monitoring and verification that the cleanup is being done. This Bill doesn't affect whether or not a site has to be cleaned up. It still has to be as an effect of this Bill. The Bill also applies key principles from the state's Permit Streamlining Act to the cleanup review process.

The Bill would require DTSC to review and provide initial response to cleanup plans within 30 or 60 days, depending on the size of the project.

DTSC would include in their response, their request for additional documents and the relevant timelines that the project would go through, again increasing the certainty that projects will have so that they know how to navigate not just building the housing but also cleaning up the site.

We believe that these changes strike the right balance between allowing DTSC to cover the cost of their work and also allowing important projects that benefit the community and clean up toxic soil to continue. For these reasons, the Bay Area Council is proud to urge your support for this Bill. Thanks.

Good morning Chair and Committee Members. My name is Ali Saberman and I'm the Advocacy and Policy Manager for the Housing Action Coalition, or HAC. HAC is a Member supported statewide organization that advocates for building more infill homes at all levels of affordability. Our Members span across the building industry.

I'm here today as a proud co sponsor of SB328, a Bill that would provide certainty to housing projects on the amount of fees that they are required to pay the Department of Toxic Substances Control, when cleaning up contaminated development sites.

Since the previous witness covered the history and intent of the Bill, I'm going to provide some practical examples from our Members on how the impact of the fee has had on projects. In August of 2023, UC Law San Francisco, formerly known as UC Hastings, which is a public independent law school, opened a mixed use building that provides 656 housing units for students.

Site preparation for the project resulted in the disposal of hazardous waste, approximately 89 tons in the winter of 2020 and 2,400 tons in 2021. For 2021, UC Law paid $104,932 for a fee.

For 2022, they protested what was first believed as an erroneous double billing, but in the end, UC Law paid the new 2022 fee, totaling $117,445 for the same 2021 waste that was already assessed and paid for, as well as penalties and interest totaling in $21,814.22 for a total of over $240,000.

The new fee passed weeks before they ceased generating. There is no way that UC Law could have planned for it when underwriting the housing project. While the project itself was privately financed, most of the student body receives aid and every resident pays rent, meaning some of these costs were already borne by taxpayers.

We surveyed our Members and paying an additional $600,000 in fees was a regular occurrence. This issue is not simply the fee, but the unanticipated increase of fees without a fee cap. We appreciate the vital role the Department plays and we understand the challenges the state is facing.

However, the imposition of the increased fee to make up for budget shortfalls has placed an unreasonable burden on a public University. Building, housing, and the burden on builders at large.

Would the witness please wrap up?

Yes, at large, in the expensive real estate and construction market of California. I respectfully request your aye vote in Committee today. Thank you.

I thank the witnesses. Any other witnesses wish to voice their support for the Bill, please state your name and your position.

Thank you, Mr. Chair. Members Dylan Elliott on behalf of San Francisco Mayor Daniel Lurie in support.

Good morning, Mr. Chair and Members Raymond Contreras of Lighthouse. Public affairs on behalf of SPUR as. A proud co sponsor and Abundant Housing. Los Angeles and Habitat for Humanity California in support. Thank you.

Any of the witnesses in support? Any witnesses in opposition? With that, we'll turn to the Committee. Well, thank you, Senator Grayson, for bringing this Bill forward. We need to look at everything that we can do to reduce the cost of building new housing in California. And this is one step in that direction. I appreciate the effort.

It should reduce cost for much needed housing development in the state. And with that, I will offer my support for the Bill.

Respectfully ask for an aye vote.

I think the author. With that. Do we have a motion? Okay, we have a motion. Will the secretary call a roll?

McNerney, aye. Valladares.

Aye.

Valladares, aye. Ashby. Grayson.

Aye.

Grayson, aye. Umberg. 3-0. That's on call.

Motion is do pass as amended to appropriations. Senators McNerney.

Aye.

3-0. The Bill is on call. I see that Senator Hurtado is now in the audience. Would you like to present your Bill?

Good morning, Mr. Chair and Members of the Committee. I'm here to present Today Senate Bill 661, the Airport Expansion and Regional Optimization Act.

At the outset, I would like to state that yesterday I committed to the Senate Transportation Committee that I will continue working with the California airports to develop a funding distribution plan that is equitable to all airports across the state by the end of June.

I asked this Committee to allow me to continue this conversation so we can work to develop a fair funding distribution plan that all airports across the state can benefit from. And we have reached a goal of getting that done before June. I'm bringing this bill forward because in a State as vast and dynamic as California.

Access to air travel shouldn't depend on your zip code or the region where you live. We know that transportation is about more than moving people from point A to point B. It's about mobility, opportunity and infrastructure that binds our state together.

But right now, too many of our regional airports, like Meadows Field Airport and Bakersfield, are falling behind. Not because of the demand isn't there, not because the need isn't urgent, but because a state has never created a sustainable, reliable way to Fund their growth and invest in their future.

We've seen this kind of neglect before, when rural transit systems were left underfunded, when highway expansion skipped over communities that needed them most, when smaller cities had to fight just to keep a single commercial route.

And now those same communities, growing communities, are being told that if they want affordable flights or new airline service or updated terminals, they need to wait again. SB661 says no more waiting.

It redirects dedicated funding stream by using existing aviation fuel sales tax revenue, which is revenue already generated at our airports, to invest back into our airport infrastructure, air service expansion and aviation workforce development. It's not a blank check. It's a targeted tool guided by market studies, performance metrics, and stakeholder collaboration to strengthen connectivity where it's most needed.

For the Central Valley, this means shorter commutes to access flights. It means better infrastructure to support cargo and commerce. It means jobs in aviation logistics, hospitality, and maintenance that don't require leaving town. I know that all too well, having to commute from the City of Bakersfield down to Burbank.

So for California as a whole, it means a more resilient, balanced transportation network. SB661 supports our transportation goals and it complements our climate efforts, and it strengthens regional economies by making sure our airports can serve the public efficiently, affordably and equitably, which is what California is all about.

With me here, I have Jim Lights representing the California Airport Council.

Jim, you're recognized.

Thank you, Mr. Chair.

Jim Lights, on behalf of the California Airports Council, representing the 31 commercial airports in the state, we're in very, very strong support of Section three of this bill, which finally moves California into compliance with the FAA's revenue use rule, where all taxes levied on fuel sales should be used for an aviation purpose.

The FAA notified the state over a decade ago that we were out of compliance, and we are still not in compliance, and so this bill will take care of that.

Airports are very comfortable with the commitment that the author made yesterday in Senate Transportation to revisit the allocation formula that's currently in the bill to ensure, as the author stated, a more equitable distribution of those funds. So we ask your Aye vote today. Thank the witness.

Any of the witnesses in support?

Chair, Dylan Elliott, on behalf of the Kern County Board of Supervisors in support. Thank you.

Seeing no other witnesses in support. Are there any witnesses in opposition? Seeing none. I'll turn this to the Committee. Any Committee Members wish to comment on the bill? Well, I think this. Senator Hurtado for. Oh, I'm sorry. You didn't come up quick enough to catch my eye there.

Sorry, I was standing outside. Kathy Van Austen, I represent United Airlines. want to thank Senator for the bill. We very much support the notion of kicking these revenues back to the airports as required federally. So we're very supportive. We do look forward to conversations about the formula in the bill. And we do have a commitment and we appreciate that. On that front.

Thank the witness.

Thank you.

Again, I thank Senator Hurtado for bringing this bill forward. It's much needed. I've got two airports in my district that could use improvement, and I think this is well accepted. We don't see any opposition. Was very concerned about the distribution formula. I'm still not quite comfortable that that's going to happen.

And so I'm going to depend on the Airport Commission, the Airport Council to make sure that they follow through. And I will be supporting this bill at that point. So with that, I will ask the author to close.

Thank you. I really appreciate the comments. And we will continue working together and ensure that all Californians can benefit from this measure moving forward. And I respectfully ask for an Aye vote.

All right, the bill's been moved. Will the secretary call the roll?

This is SB661. Motion is due. Past due. Appropriations. [Roll Call]

3-0. The bill is now on call. I see. Senator Allen, would you like to present your bill? Senator Allen has two bills to present.

I do, Mr. Chair. Now, SB630, which is in line to be presented first, Senator Menjivar would love to present with me. She's one of our joint authors. She's finishing up another bill. So with your indulgence, I'd like to start with SB799, if that's possible.

And then hopefully, by the time we get to 630, Senator Menjivar will be ready.

You have my indulgence.

Okay. I appreciate that very much. Okay. So. So just for folks, this is SB 799 on ag tax fraud. So thank you, Mr. Chair, and thank you for. First of all, I want to thank you for the Committee amendments. And I just want to. We're going to accept them.

Those Committee amendments, as you know, provide taxing authorities the power to dismiss an action unilaterally. And so we're certainly going to accept those amendments. Now, this bill is ultimately about fraud and false claims against, you know, within the context of taxes.

And, you know, the vast majority of people are doing everything that they need to do to pay their fair share of taxes. But there is, you know, a small portion of folks who try to hide behind complexity and make, and quite frankly are defrauding the public of their. Of what they owe.

And that ultimately deprives state and local communities of vital funding for services like education, Healthcare, public safety, infrastructure. And we also know that our governments on every level are facing massive budget shortfalls and deficits. So the protection of every public dollar is crucial. The California False Claims act was first established in 1987.

It was modeled after federal law. It is not Ada, it's not PAGA, it's a totally different thing. It doesn't have anything close to the kinds of complaints and concerns of those of those systems. And basically it's modeled after federal law.

You probably know it from your time in Congress, Senator, but it ultimately incentivizes whistleblowers, whistleblowers who are aware of fraud that was knowingly committed against the state or local government to bring a claim on behalf of the state. And in return, the whistleblowers receive protections against retaliation, and they can potentially receive a portion of the recovered funds.

Now, the claims are first filed by the whistleblowers under seal and the Attorney General or the local prosecuting attorney authority. Right. Who might have been impacted by the tax fraud in this case may investigate to determine whether to intervene or to allow the plaintiff to proceed.

Now, if the AG or prosecuting authority declined to intervene, then they maintain significant control over the case, including the ability to intervene later if the plaintiff is not adequately representing the state. Interest approval of any settlement agreement, dismissal of meritless cases, they can pull the plug anytime on the case.

And this act, the False Claims Act, has successfully recovered over $2 billion owed to the public since 2001. Now, the false Claims act currently does not apply to tax fraud. And we know that tax fraud can often be difficult to uncover because it requires information that only insiders have access to.

And there are various estimates out there that this gap may be is estimated to be around $25.5 billion of what's voluntarily reported versus what's actually paid. And that of course, creates a lot of unfairness in the system.

There are those that voluntarily put forward all their information and pay a robust amount of taxes, and then there are those who don't do so. And it creates massive unfairness in addition to depriving the public of of money that it is owed.

So this bill reinforces traditional tax enforcement to leverage otherwise unknown information provided by whistleblowers by extending the False Claims act only to cases of egregious tax fraud where damages exceed $200,000. We're not talking about small cases here.

And the taxable income, gross receipts or total sales of the individual or entity against whom the action is brought exceeds $500,000 per taxable year. And in that it's modeled after New York's False Claims act, which has successfully insulated taxpayers from frivolous lawsuits and recovered nearly half a billion in its first decade of use.

A 3,000, over 3,000% return on investment for program administrative costs. And let me say, you know, folks have brought up the law in Illinois, which really is not what we are modeling this on. We don't want the situation in Illinois. I will say I'll be the first person to say that that has been subject to abuse.

Of course, there's no limits. There's no bottom limits. So you can literally bring a case, there was some case for several $100 that's been sitting there in court for years. That is not what we want to see here. So we've put these high thresholds.

I'm quite frankly willing to raise them higher if that's something that folks feel the need to do. And we've also put in place additional protections. So first of all, the confidentiality of tax documents, they are not available for the private attorneys to see under this bill. They are under seal.

They can only be seen by the public prosecutors. We mandate consultation with the taxing authorities. Now with your amendments, any of the taxing authorities can pull the plug on the action. We have these minimum dollar thresholds, of course, again subject, we can negotiate them higher if that's of interest.

We also clarify any attempts to shake down business for quick payouts are a violation of the cfca. You can't just try to do some pre settlement. That's just not, that's not going to be allowed just to try to shake people down by threatening action.

And so we're also happy to work with the Committee put some additional protections on as appropriate. And with me today to testify in support of the bill, we have Evan, who's special assistant to the Attorney General, and Rick Acker, who's the supervising Deputy Attorney General with our Department of Justice.

Well, I thank the author, and I asked the witnesses to limit the total conversation to five minutes. The total?

Yes. Good morning, Mr. Chair and Hon. Members of the Committee. I'll be very short because Senator Allen gave an extensive introduction and detailed description of the bill. I don't want to repeat anything. I'm Evan Ackrion. I'm a Special Assistant Attorney General.

I advise the Attorney General on white collar crime and corporate fraud issues, including false claims, civil prosecutions. We want to thank Senator Allen for his leadership on SB799.

And we've worked with the taxing authorities, we've worked with stakeholders, and we think we've created a bill here that is reasonable and has all the safeguards in order to put in protections and respond to all of the potential criticisms.

As the Senator said, this will not result in shakedown suits, mainly because this is when a whistleblower uncovers what they think is fraudulent activity or unreported income and believes there may be a tax issue. It's not their claim, it's the government's claim. So there's nothing for them to shake down.

They can't go to a target and say, if you don't pay me $1.0 million and settle this case, I will. And the X is, it's not their case. The best they can say is, I will not report you to the authorities. They can't say, I will settle this case because it's the government's case.

We have to be involved in any settlement. So there's no shakedown. Once they file a lawsuit, it's under seal, which means they cannot approach the defendant and attempt to negotiate with the defendant. Their claim then becomes our problem, not the defendant's problem. We have to review the complaint. We have to investigate it.

We have to ensure it's meritorious, and if it's not, if we think it is a shakedown, we dismiss it. And the defendant never even knows that it happened because this all happened under seal. We have large dollar thresholds to eliminate even the temptation of anyone bothering anyone over small claims. And this doesn't involve disputes over taxes.

This is tax fraud. This is when targets have not reported large amounts of income, cash, businesses, that there's indications that they have gone unreported. This is when businesses or entities are engaged in illegal activity and therefore can't report the income based on their illegal activity. People who are selling. We had a recent situation where people were selling.

Were illegally importing cigarettes into California and then selling them under the table. They weren't paying the cigarette taxes, and they certainly were not paying the income taxes from all the profits that they had accumulated.

So you've already used half of the five minutes.

Thank you very much. Your Chair. And with that, I will cede to my colleague.

Thank you. Thank you, Chair McNerney and other council Members. My name is Rick Acker. I am a supervising Deputy Attorney General with the California Attorney General's Office in the Corporate fraud section. And I have 20 years of experience in investigating and prosecuting false claims cases.

I'd like to address also the main complaint we've heard about this, that it would be. It would unleash the floodgates of frivolous shakedown lawsuits. We've been doing these cases for 40 plus years at the Attorney General's Office. We have not received one complaint of a shakedown lawsuit. And the reasons are the ones that Mr.

Akron was talking about. The complaints have to come to us. They cannot go to the. They cannot go to the target and say. And demand money. That. That's probably extortion. They have to come to us. We get the complaints. That would be made explicit in this Bill with respect to. Well, I think respect to all claims.

They cannot go directly to the target and ask for money. They have to come to us, bring the lawsuit to us. And as was just discussed, the Bill was amended so that not only do we essentially have a veto over these cases, the taxing agency does. So you have to get through those two gates. A plaintiff does.

In order to be able to even make. Even to let the defendant know that they are the target of a lawsuit. So unless the experts in the field have vetted this and said, yes, this is not a frivolous lawsuit, the defendant doesn't even know it exists. Mr. Akron mentioned the.

So you have 30 seconds left to.

Okay. All right. Now, I would just point out the New York is what we're modeling this on. New York has had. In the first decade of the time they had the law, they had 30 private lawsuits. So three per year. That's not a flood. That's not a stream. It's not even trickle.

I'm happy to answer any questions the Committee may have. Thank you.

And I would just point out Anthony Luz here. He's staffing this bill for the Attorney General. He's available for technical questions. Thank you.

Okay. Thank you. Are there any other witnesses in support, Any witnesses in opposition?

Good morning, Mr. Chair. Chris McKayley, on behalf of the Civil Justice Association of California, we appreciate the engagement with the Attorney General's Office and particularly with Senator Allen yesterday over the weekend and at other times discussing the bill and our concerns.

I must compliment your consultant in the excellent analysis, as always, but particularly here, a few things jumped out at me in particular. First and foremost, we don't in any way condone fraud in any form, let alone in taxes.

But our biggest issue, as it was in 2019 and 2020, when the prior Attorney General sponsored a similar bill, that we don't think that this is necessary, that taxes are a specialized area. That is why the vast majority of states in the Federal Government preclude tax cases from coming under the False Claims Act.

On page four of your analysis, tax enforcement. Few say that FTB and CDTFA's current tax enforcement efforts are less than robust. Couldn't agree more. There's no showing that the tax agencies are understaffed. They don't have adequate penalties or enforcement mechanisms, et cetera.

If they were here clamoring for this expansion of the False Claims Act, that might be a different story. I know a lot has been pointed to about New York.

Your consultant did an excellent job noting in the analysis on page five that the current Attorney General settled for a mere $100,000 over a transfer pricing dispute, which is a technical tax issue, as Mr. Grinnell well knows, that the Quitam plaintiff claimed was worth at least $13 million.

Just like at the federal level with the IRS chief counsel, written rulings, taxpayers can obtain those from the BoE, the FTB, CDTFA, that generally for the taxpayer provide a defense from the tax agency enforcement.

So despite getting those, the AG brought a claim that was dismissed by the court where they said those advisory opinions were persuasive support of the taxpayer's position. This is our fundamental concern. You know, in 2020, the Franchise Tax Board, although they didn't have a position they did raise in their analysis on AB 2570.

Please wrap up.

Sure. It is unclear whether and how a claim under the act and deployment of the Department's existing enforcement would be coordinated. If a taxpayer is currently under examination or investigation, what would be the effect of these provisions? Thank you.

Good morning, gentlemen. Good morning, Chair Members. Peter Blocker with the California Taxpayers Association respectfully in opposition, we agree with Mr. McKayley's comments and believe this bill is unnecessary, duplicative and will cause serious harm to California's business climate and I would just like to address the first address the $25.5 billion tax gap that was referenced.

This number does not represent 25 and a half $1.0 billion of tax fraud. The FTB Taxpayers bill of Rights report from which the number is cited first details the steps that FTB is taking and much to close this gap. Much of that is education and outreach.

And that's because this number includes non filers underreporting and underpayment unrelated to fraud. An example would be money that isn't recoverable because a taxpayer went out of business and cannot pay. And as for the potential fraud in the number, the agencies already have tools to go after it.

They have employees physically trained to determine the proper amount of tax owed and divisions solely dedicated to investigating and prosecuting tax fraud. For example, FTB has a criminal investigation bureau that investigates and prosecutes tax fraud related to financial crimes in California. FTB has 83 penalties available to impose and five specifically target fraud.

The fraud penalties imposed at a rate of 75% of the amount of tax owed. That's in addition to the tax amount, interest and any other penalties that might apply. And as Chris said, as far as I know, this Bill is not something that tax agencies are requesting.

Finally, I do just like to stress that this bill will make California a less attractive place for businesses to conduct their operations. Increase costs for taxpayers, but because taxpayers have to. But not because they'd have to pay more for bad behavior, but because taxpayers would have to litigate to defend themselves against frivolous lawsuits.

And it would have a chilling effect, discouraging taxpayers from taking potentially aggressive but legal and defensible position positions on tax returns. And just to give it more context, because it's difficult to overstate this point, as an example, this past week I talked to a number of tax directors from large business tax taxpayers who in.

Their time is up now.

Yeah, it's just in their opinion, they feel this would be more costly for California businesses with their experience from other states than a corporate tax rate increase. And for these reasons, we respectfully ask you to vote no on this bill. Thank you.

Any of the witnesses in opposition?

Chris Rosa, on behalf of the Silicon Valley Leadership Group in opposition.

Missy Johnson, on behalf of the California Society of Certified Public Accountants in opposition.

Good morning. Robert Mutri, California Chamber of Commerce and opposition. Thank you.

Megan Loper, on behalf of the United Hospital Association in opposition.

David Krieger, for the California Hospital Association in opposition.

Skyler Wanaka, on behalf of the California Business Properties Association in opposition.

Good morning. Pam Tuohy Novinski, representing Governor for California in opposition. Thank you.

Good morning. Hayden Tallman with the California Trucking Association respectfully in opposition. Thank you.

Jason Lane, California Bankers Association in opposition.

Scott Kaufman, Howard Jarvis Taxpayers Association in opposition.

Annalee Augustine, on behalf of the Family Business Association of California in opposition. Thank you.

Jacob Brent, on behalf of the California Retailers Association in respectful opposition.

Jennifer Tannehill with Erin Reed and associates on behalf of the California Society of Enrolled Agents. Respectfully opposed.

We now turn to the Committee. Senator Grayson is recognized.

Thank you, Mr. Chair, and my high regard to the author. Thank you for bringing this forward and also the excellent personnel at the AG's office. So thank you. All are just top notch. I really appreciate your presence here today.

In one testimony we heard about a case of cigarette, an effort to sell cigarettes or and not pay taxes. Is it being implied that they cannot be prosecuted or they nothing can be done against them because this law doesn't exist or are you already taking action against them now with without this law?

Yes. So the answer is yes. So right now this is a potential criminal case. I was using it as an example, but we would like to have additional tools. So right now for us it's a criminal investigation. Investigation on criminal charges or nothing. Or turning it over to the tax authorities for just straight tax collection.

But this is a powerful alternative in cases where criminal charges, where it's corporations, we can't tag particular individuals. So it's a powerful alternative for these kinds of situations.

Okay. And I don't know whether this would be a question for supporter opposition or the sponsors or the authors.

So whoever wants to just jump to the chair, my next question is it's my understanding that there are four agencies, the FTB, the CDTFA, the AG and the BoE who have already the broad powers to enforce the tax code. That's my understanding. So is that accurate? And.

Sure, I'd be willing to jump in and I will defer when I surely say something wrong to any of my colleagues. Yes, there are a number of agencies, but we come at it from very different angles and it's work that would be very complementary. So the taxing authorities in General are audit agencies.

In other words, they receive tax returns and they look at them and decide what to do. They have red flags that maybe set them off for further proceedings or they conduct an audit, which is voluntary production of documents, and they make determinations.

So they tend to deal with legitimate companies and people who maybe have taken a tax shelter that they shouldn't, who maybe have claimed deductions that they shouldn't, and they deal with that directly and civilly. We come at it, or we would potentially come at it.

If this law is passed from the opposite angle, which is not from the returns but from facts on the ground, which means a whistleblower, a witness comes to us and says, I'm observing what I think is illegal activity.

The hotel down the street has barbed wire around some of the housing units and there are women coming in and out. We think there's human and trafficking going on. Can you take a look? And that might be something that would trigger an investigation on our part, looking at the tax angle of it.

And that's how we would come at it.

So question real quick and not back and forth, but through the chair, can a whistleblower come forward now or are they prohibited from coming forward now? That's number one. And then number two, I'd also like to hear from opposition on my question that you had just answered.

Short answer, whistleblowers can certainly come forward, but they won't be rewarded. And that is the key thing that the False Claims act brings to the table. We will get the people. When there's two sets of books being kept and, you know, the disgruntled accountant or honest accountant is fired, we get them.

Otherwise, this person has no incentive to come forward. And the taxing agencies, yes, they do a terrific job. And there are multiple ways that we can come at it from looking at the returns. But there's a lot of fraud, especially the more sophisticated fraud with the more sophisticated financial entities that is not getting caught.

And that's what the False Claims Act Does across the board and we hope would be able to do with tax fraud as well.

So not only is there no incentive, there's active disincentive for them to come forward, as you can imagine.

So that's what we're trying to do. Thank you for bringing that up, Senator Allen. There's the California False Claims act also has whistleblower protection provisions which do not generally exist when you're just reporting fraud.

All right. And then also through the Chair, if I may hear from opposition on those same concerns.

Mr. Chair, may I respond?

You recognize.

Thank you. First on the first point that was made, things like tax shelters and whatnot, both under the Internal Revenue Code and the REVIN tax code here in California. Those types of things have to be disclosed on the original return. They are drawn. They basically draw attention to the tax agency.

So they're in a position to closely evaluate that many of the largest corporations in the State of California and elsewhere. Of course, because believe it or not, we have boe, CDTFA and FTB staff outside of the State of California to do audits and assessments in California.

Many of those large corporations have both FTB and IRS folks in their office literally 12 months out of the year. The last point I'll make on the second one that was made here about whistleblowers. Again, as your excellent analysis points out, since 1984, FTB has had a whistleblower program.

Perhaps the better option is what the Committee analysis suggests, which is funding that program. I think that the allegations of fraud are mere guesstimates. There is no factual basis that there is rampant corporate fraud going on in the State of California. But that's the fundamental basis for this legislation.

And I just want to say thank you to opposition, thank you to support and sponsors for answering my questions. I appreciate it. Thank you, Arthur.

Though I do have to respectfully push back on the idea that the premise of this is that there's rampant corporate fraud. That is, in fact, it's just the opposite. We don't believe there's rampant corporate fraud. We really are seeking to focus on those few egregious cases that merit their focus.

And that's why we're trying to keep this as narrow as possible. And we're open to narrowing it further because actually, that is out of so much respect to my friend Mr. McKayley. That's not the core premise of the bill.

Well, first of all, any other witnesses? I want to thank the author for your work on this. And you clearly are concerned about people paying their fair share. And we want to make sure that if there's egregious violators that they be brought to justice. So I appreciate that.

On the other hand, I'm glad that you accepted the amendments that will, I think, do a good job in reducing the opportunity for frivolous lawsuits for shakedowns. I think that's been answered pretty well. I certainly heard a lot more concern about the bill than I expected to hear, so. But I think we can move forward.

I'm going to offer my support on this with the amendments that were accepted.

Thank you, Mr. Chair. To close. Thank you Mr. Chair, and I want to say I welcome, you know, the engagement with the Committee and stakeholders, including the folks that we heard in opposition, to come up with some additional amendments. I keep saying this because I keep asking folks, you know, please help.

You're making some bold, bold claims about possible concerns about where this bill might go, and I want to make sure that those claims don't come to fruition. And we really focus on the kinds of cases that have been described here.

And so I welcome the Committee's continued involvement with suggested amendments, tweaks, changes to ensure that we really focus on those few cases where there may be fraud and not create the kind of challenges for our broader economy that has been threatened here today. That's not my interest. That's not my intent.

I'm anxious to make sure that this bill doesn't do anything in that direction. And I welcome the Committee's engagement to help hone the bill in that spirit. So with that, I ask for an Aye vote and look forward to working with you further. Okay.

The author's concluded any motions for the.

Sake of process and the fact that we have absent Members. I'll go ahead and move the bill. Okay. Even though I'm not going to vote.

The bill has been moved. Secretary for the roll.

This is SB799, file item number seven by Senator Allen. [Roll Call]

Thank you. 1-0. Okay. I'm 1-1 on call. Oh, yes. Okay. I see that Senator Menjivar is here. And Senator Allen, you're invited to present your original bill.

Thank you. Thank you.

All right, so, you know. We'Re going. To talk, we're going to switch gears to our creative economy and the fact that since 2009, the film and television tax credit that we have in place has been successful in creating nearly 200,000 jobs statewide, $26 billion in economic activity. But the program we've seen has been oversubscribed year after year.

It doesn't apply to many projects that could benefit from the program. We've seen other states and counties and countries around the world stepping up to offer their own incentive programs, and that's been drawing away production and making California's program less effective. I think there's 38 competing programs around the country, 36 in Europe.

There's programs in Australia and Canada and all over the place. So we're looking to strengthen, to make the program more effective. And so there's a few things. One of the problems, of course, there was a size of the credit, which was one issue, but then there's also the broader question of how useful it is.

And so one of the things we heard was we have to raise the base tax credit rate from 20 to 35% to cover more qualified production expenditures. We also maintain the uplift incentives to make sure that there's extra incentive associated with producing outside of the Los Angeles area.

And you know, I know we have folks from different parts of the state here and your districts have benefited from this tax credit in the past. And we want to make sure that there continues to be robust production outside of La. So this is something that we can truly all benefit from as a state.

And so we give extra credit to those productions that take place outside of the Los Angeles area. We're also looking to expand qualified productions to 20 minute TV shows, reboots of TV shows, animation, certain large scale competition shows. Those had been previously cut out.

And then we're also trying to increase the set aside for independent productions by a few percentage points. There's, there's the refundability that the Governor has talked about that we're improving under the Bill by removing the 10% discount to mirror other tax credit programs across the nation.

We're expanding access to the Soundstage Film Tax credit program by eliminating the 50% ownership 10 year lease requirement for productions under a certified soundstage. Talk more about that if you like.

And also providing more flexibility to the California Film Commission to move under, utilize tax dollars across different categories to ensure that all dollars are used up because there's not enough flexibility in the current system.

So this is ultimately about ensuring that this industry that has such a long and storied history here in the state continues to grow and thrive.

And you know, we've had, we've just been hearing so many disheartening stories, some of whom, some of which you may hear today about tens of thousands of workers throughout our state that have been unable to find jobs due to low production.

And we know that so many of the projects I'm on the film Commission, I think three quarters of the projects that have come to the film Commission asking for a tax credit that didn't get the tax credit from the state have just taken their production and gone elsewhere. Those are just, that's jobs.

These are people that wanted to do the work here, that didn't do the work here. This has led to $1.5 billion in a loss of production spending. And of course that doesn't, that's just on the spend itself. That doesn't take into account the lost jobs and the local economic spending and all the concomitant benefits.

Senator Valladares and I were able to see, you know, a production in her district, for example, that you know and when you go, when you go and see these productions, you realize how many contractors and caterers and how, you know, all the follow on the ripple effects.

And so we've just over and over again we've seen all these projects that have applied. They didn't get the tax credit because of the over subscription. They've gone off and they've done work elsewhere.

And you know, I mean this report from the Los Angeles Economic Development Corporation found that the lost production spending cost California nearly $8 billion in total economic activity, nearly 30,000 jobs, wages of nearly 3 billion. So the.

There's a lot that we're trying to protect here and there's a lot of work that's underway and I want to just have an. I want to give the opportunity to a great champion in this cause as well. Our colleague, Senator Menjivar.

Thank you, Mr. Chair, for allowing us to co present on this along with a fellow Committee Member here. We've been very engaged in this and have had various stakeholder conversations. I represent district 20 that has various studios, but it's not just the studios.

I have the union hubs in my district, I have the workers in my district that work in this industry. And what Senator Allen was mentioned about the domino effect that this is causing. This isn't a savior. We're not saving corporations, we're not here to save rich actors.

This is about the workers that are leaving California because this industry is leaving California. These are about the workers who came to California to work as grips, electricians, the food caterers, PAs who want to be directors, who want to be behind the scenes doing this and then find out that there's no work for them.

These are about the individuals who want a second chance. So many who are reentering into our community out of the justice system, who want jobs in these industries that are really good paying jobs.

I saw it within my district, Burbank and North Hollywood when during the pandemic the surrounding companies were impacted even all the way up to Northern California. This is impacting everyday Californians and we need to make sure that we're supporting them. Now why would we do this during potential budget deficit?

We want to remind you that this is going to help with the revenues and there is a lag in how the credits work because the credits don't come after until after the filming happens. And when the filming's happening, you are. Filming is happening. You have hired individuals, they are working. You have hired vendors already.

And the tax credit comes afterwards after the revenue has already hit California as a whole. I am asking for you to see this not just as an Los Angeles issue, this is a California issue. Californian leading in this industry. And we no longer are.

And it's unfortunate to say that we can't save film anymore, but we can save TV to stay here in California because it's going to be hard. We won't be able to compete at the level of London and so forth because there's other things we need to look at.

But we can have a fighting chance if we double these tax credits to save these amazing jobs here in California.

And I would invite any Member that doesn't have this active in their background in their backyard to come with us and visit a studio, see the individuals from as young as 21 to older individuals who are so excited to be working in these kind of industries.

I invite you to join us on a tour and see the impacts in California, which is why we are standing firm in asking our colleagues to support this increase. To say to these workers that we will save your jobs here and we will keep Hollywood. Hollywood.

And that the next generation, when they talk about Hollywood, they don't just think of it as a city, that they think about it as a. As a hub that creates magic and takes us to a different realm with, with their. With their TV turning to. Zero, okay. Sorry.

Yes, thank you. Thank you, Senator. So here with us in to testify and support, we've got Tommy Barra, who's here on behalf of Real Waste and Recycling, along with Rebecca Rhine, who's here on behalf of the Entertainment Union Coalition. So love to hear from them.

Witnesses are recognized. Please keep your comments to two minutes each.

Sure. Thank you so much for the opportunity to speak with you today. My name is Rebecca Rhine and I'm the Western Executive Director of the Directors Guild of America and the President of the Entertainment Union coalition. The EUC represents over 165,000 unionized men and women working throughout California's entertainment industry.

And at this moment, nearly half of them are unemployed. Since the day Governor Newsom announced his intent to increase incentive funding in the budget, our guiding principle has been ensuring that this additional funding provides and preserves as many jobs as possible. Just increasing the funding alone is not enough, however.

And that is why SB 630 is so important to make the program competitive. Every suggestion and request about changing the program has been examined through that lens. And many changes could not be included because of the negative impact they have on getting the most people back to work.

And those are the jobs that make up the qualified experience expenditures. This is a jobs Bill for working families in our industry. So after consultation and collaboration with all stakeholders, here are the main changes we believe will rationalize the program. Making it competitive and flexible while creating and preserving the most jobs.

Raise the base credit from 20% to 35% with the 5%. Uplift the highest percentage reserved for work outside Los Angeles. Expand the type of programming eligible. Increase the size of the indy production bucket, increase the cap and increase the number of times you can apply for an allocation.

And reduce the amount of time recurring series have to resume production so we can release that money back out into funding other programs and other jobs. In addition, on July.

My two minutes is up. Would you please wrap up?

Oh, my God. Okay. Every position we have taken has been driven by analysis of the amount of funding available that is necessary to compete, which includes protecting and preserving the most jobs. Please support sb 630.

Hi. I'll try to make it quick. Your timer's fast. My name is Tommy Barr. I'm with Real Waste and Recycling. My family started a trash company when I was born. And 15 years ago, I started my own business. It services exclusively entertainment industry. My kids work with me, which at the time I thought was a great idea.

But now we are all dependent on this industry to support our families. I have my two boys that started their own business renting equipment and they're suffering. They've laid off several of their employees. My daughter has her own business printing signs, directional signs. And I have two great granddaughters.

They're beautiful granddaughters that are depending on us to support them as well. I'm going to tell you some stories about some other companies, though, that I've heard recently. Scott is a graphic designer that has been in business for 18 years and he's about ready to shut his doors.

He said this week is going to be it if something doesn't change. So he's really hoping that something does change quickly. And there's rows that shows up at the end of each film day and cleans the parking lot and makes sure that everything is left better than it was before.

I didn't realize how many people are impacted by this business. And I hope that you guys can see, like, I'm feeling a little bit emotional right now. I'm trying to keep my composure and I'm not even following my script at all.

But it's really important that you move quickly on this because there's a lot of people that are depending on this industry for their livelihoods. So thank you for your time.

Thank you for your testimony. Any other witnesses wish to speak in favor of the Bill, please state your name, organization and your position.

Mr. Chair, Chris Micheli , on behalf of the Hollywood Chamber of Commerce and strong support. Thank you.

Scott Budnik, CEO of One Community. Strong support.

Marco Flores, Local 80, strong support.

Renata Ray, busy rep, Local 44, strong support.

David Rivas, Local 80 grips and strong support.

Samuel Chavoya, Local 44, strong support.

Alex Aguilar, business manager for Liuna Local 724. I strongly urge you guys to vote aye and support this Bill. Thank you.

Bob Denny, business representative, Motion Picture Set. Painters and sign writers local 729 and strong support.

I'm Klee Harrison. I'm business rep for IATSI Local 600. We are the camera Department and also the publicists. And I'm also a Member of the Director's Guild of America and I'm in strong support.

Sheila Wagner, on behalf of the Writers Guild of America West. In strong support.

Kathy Garmezy, on behalf of the Entertainment Union Coalition. Strong support.

My name is Ann Lee. I'm a camera assistant in the International Cinematographer Skill. I live and work in the Bay Area and I strongly support this Bill. Thank you.

Miki Bersalian with the Cinematographers Guild Camera Department and publicist. Strong support.

Eric Cariaga, on behalf of the Latino Film Institute. In strong support.

Skyler Wonnacott, on behalf of the California Business Properties Association and our Members BOMA California and NAOP California. In strong support.

Part Sam Bim Pong Make It Bay. And the out of Bay Coalition. Strong support with amendments that support Geographic Equity.

Aaron David Roberts, co founder of the out of Zone Coalition. In strong support with continued discussion on out of Zone amendments. Thank you.

Hannah Wagner, Member of the Out of Zone Coalition. In strong support with continued discussion for out of Zone

Mittens Gabriel Docto, also without his own coalition. We're in strong support of the Bill. With continued discussion about out of zone amendments. Thank you.

Good morning. I'm Jason Seler. I'm the local AD Vice President. I'm also a small business owner and we desperately need this. I've been support. Thank you.

Good morning. Toby Bay, Local 44 business agent. I represent 6,000 Members and strong support.

Hello. Terry Friedman, I am from Concord and also an IATSE local AD Member as a craft service worker. I'm in a strong support of the Bill as is to help support my fellow Members and local businesses that I help support when I work. Thank you.

Hello, my name is Philip Collins. I am a grip, a Member of IATSE Local Lady. I moved to California 15 years ago. To work in this industry and I'm in strong support. Without your vote, we can't stay here. Thank you.

Hi, my name is Brigitte Romanov. I am the Executive Director of the Costume Designers Guild Local 892. I represent 12,000 or 1200 Members. I was a costume designer and I have strong, strong, strong support. Thank you.

Good morning. I'm Dejan Ellis Jr. Business manager of Local 80 Grips Craft Service and Medics. Also on the Creative Economy working group and strong support. Thank you.

Hello, I'm Leslie Simmons. I'm a field rep and political coordinator, fifth generation Californian, constituent of Senator Valaderis and I am in strong support.

Good morning. I'm Malachi Simmons, IATSC Local 728 Vice. President representing 3,000 Members in the craft of lighting. I'm in strong support of the Bill as presented.

I'm Jim Revis, the business representative for IATSC Local 871 in Hollywood. We represent multiple crafts and on behalf of our 3,000 Members, we strongly support this.

Hello, my name is Cheryl Lert, business representative for makeup artist and hair stylist. And I'm in strong support.

Good morning. Patrice Madrigal, Local 706, Assistant Business Rep and strong support.

Good morning. Greg Swissersal, President of IATSE Local 122, San Diego and Coachella Valley, in strong support.

Stephanie O'Keefe, President of the American Federation. Of Musicians Local 47 in Los Angeles representing 16,000 professional musicians, most of whom. Work scoring for film and television. Thank you. And we're in strong support.

Good morning, I'm Heidi Nakamura. I represent IATSC Local 695. Folks that work in sound, video and projection. Roughly about 1800 Members in very strong support. Thank you.

Good morning. Greg Hayes with Brownstein on behalf of Warner Brothers Discovery in support.

Good morning. Shane Gusman on behalf of the California Teamsters Public Affairs Council. In support.

Jeanette Moreno King, President of the Animation Guild, IATSE Local 839. We have 6,000 Members, 40% who are out of work. We are in very strong support.

Hello. Angela Moss, political coordinator for Local 706 makeup and hair Guild. Our Members are desperately in strong support. Thank you.

Melissa Patak with the Motion Picture Association in support. Thank you.

Amy Lemish, public policy with Netflix in support.

Rudy Reyes with the Anti Recidivism Coalition Local 728 set lighting technicians Member in support.

Good morning. Trent Smith, on behalf of the Walt Disney Company and support.

Thom Davis is President of the California IATSE Counci representing about 55,000 Members below the line film, television as well as exhibition and live entertainment workers. And strong support.

Joanne Desmond, IATSC Local 16, San Francisco Bay Area in strong support.

Hi Committee Lisa Gardner, Motion Picture Costumers Local 705. There is a project prepping set in. California that will be shooting in Port Portland. Please, please, please support this Bill.

Hi, Tycha Till, assistant Political Director and business agent with the Hollywood teamsters representing. Over 6,500 Members and we are in extreme strong support. Hi everyone.

Amy Gorton with the Teamsters also in strong support.

Good morning. Tara Khonsari on behalf of SAG AFTRA representing over 50,000 Members in the State of California and we are in strong support.

Thank you. Trish Suzuki, Blindship Teamsters Joint Council seven representing our Members in the industry in Northern California.

In support chair Members Tiffany Phan on behalf of Sony Pictures Entertainment in support. Thank you.

Tyler Ybarra, owner of Magic Rentals. Lucky enough to be Tom's son. But me and all of our team, we definitely strongly support this and thank you for your assistance.

Espon Nunez, on behalf of the Anti Recidivism Coalition in support. And then on behalf of my colleague Adam Kegwin, on behalf of the Association. Of Independent Commercial Producers. We are in support if amended if the Bill could include commercial commercials as well. Thank you.

Ed Duffy, teams Suzelco 399 Political Director in very strong support.

That was quite a line. Are there any witnesses in opposition? None Seeing. I will now turn to the Committee for Comments. Mr. Grayson, you're recognized.

Thank you Mr. Chair and commend both authors as well as support. This is exactly the kind of investment that California needs to be making all the time, but especially right now. So I am in full support as well. Thank you, Senator. Thank you, Vice Chair.

Yes, so first of all, I want to thank the authors for working so hard on this Bill to make it a better Bill, a more effective Bill and more usable for industry and for taking the time to come to my district to visit our amazing sets and our amazing workforce, the below the line workforce that live and work in my district.

Thank you for that. Because my district is so deeply intertwined in the film industry, I've seen firsthand the economic and cultural vitality it brings to a community. However, between 2021 and 2024. California experienced a 58% decline in production with many projects relocating not just out of state, but out of the country.

And I want to make it very clear we had a phenomenal long hearing, very long but well needed hearing on this. Thank you, Mr. Chair, for making that happen. But this doesn't just impact my district, this impacts the entire state.

The revenue generated by this industry contribute significantly to our General Fund and to supporting a wide array of programs and agencies across California. And expanding this tax credit does not isn't merely about retaining our status as entertainment capital of the world, but it's about safeguarding thousands of jobs and supporting local businesses.

And I am a strong supporter of this Bill and would like to move the Bill when appropriate. Thank you so much.

I thank the Members for their comments. I'm supportive of the governor's proposal. I think it's a good idea. First of all, this is part of California's identity. If we let that slip away, we're losing quite a bit of ourselves. And not only that, but if you watch film, you can notice a difference in quality.

Stuff that's produced here in California is better. That's just so. I'm going to support this. As the Vice Chairman mentioned, we had a hearing in March and it was clear that this is needed not only for California, but for the jobs, for the reentry. It's just a whole range of reasons that this is good for California.

But I am concerned about the 10% discount on refundable credits. I'm going to work with you a little bit on that if you're open to that. But we can move forward. And I like the out of zone work so that it's not just associated with Hollywood, which is great.

But there's a lot of other places in California that are good at this too. And I'm going to go ahead and support, support the Bill and ask the author to close.

Yeah. Thank you, Mr. Chair. And thank you to my colleagues for your strong support and leadership on this issue as well. I look forward to working together with each of you on a variety of the issues that have been raised.

And this is just so, this is so important about reigniting this critical industry for our state and maximizing job gains, increasing competitiveness, increasing look like I'm not economic activity and yes, providing a better experience for the viewer as well.

So thank you and respect for the astronaut vote and great thanks to all of our joint authors and co authors who've been such great leaders in this effort.

The motion has been moved with the Secretary Call the roll.

[Roll Call]

30. The motion is. The Bill is now on call. Senator Menjivar. Still here? Yep. Senator Valladess, you're invited to present your Bill. Senator is recognized.

Thank you and good morning. Mr. Chair and Members of the Committee. I'm here today to present Senate Bill 591. This Bill is a bipartisan measure designed to ensure that the penalties under the California Revenue and Tax Code are commensurate with the associated violations, thereby promoting fairness and consistency within the state's tax system.

Currently, certain taxpayers in California who are required to remit payments via the electronic funds transfer or the EFT system risk disproportionately high penalties when they remit payments by check, even if that payment otherwise arrives in full and on time.

Specifically, under CRTC section 19011 and 19011.5, corporations can face a penalty of up to 10% on the amount paid, while individuals face a penalty of 1% without regard to the actual harm or intent.

California is an outlier among states in imposing burdensome penalties without statutory cap for failure to pay via the eft, leaving taxpayers vulnerable to potentially exorbitant penalties. Even if there was no intent to avoid or delay payment in these situations, current law offers no meaningful recourse for penalty reduction, reinforcing the necessity of a more balanced approach.

So SB591 addresses this issue by replacing these percentage based penalties with a fixed penalty amount set at $100 for an initial failure to use the EFT and $500 for each subsequent failure, unless it is shown that the failure was for a reasonable cause and not due to willful neglect.

By instituting a modest tiered penalty system, the Bill preserves the integrity of the EFT requirement while preventing taxpayers from incurring penalties that are excessively punitive. Under SB 591, the penalty fits the violation today. Testifying in support of the Bill is Marc Aprea on behalf of pricewaterhouse Coopers. And Peter Blocker of Cal Tax is. Peter is currently not here for these. Thank you, Mr. Chair.

Oh, yeah. Okay. The witnesses recognized.

Mr. Chair. Okay, just. Mr. Chair, thank you for allowing us to come before the Committee. Senator Valladares, thank you very much for authoring this Bill. Marc Aprea here on behalf of PricewaterhouseCoopers in support of the measure.

And I think Senator Valaderis put it very aptly when she said that this is a Bill that matches the violation, the penalty to the violation.

I will also point out in support of her statement that 41 states have no penalty at all for an individual who fails to submit their payment via EFT when that is required by check.

So for all the reasons that she stated and submitted in our letter, and I know you're under a time crunch, I'll just respectfully ask for your aye vote

Peter Blocker the California Taxpayers Association. I'll keep it short as well. In agreement with the previous comments made and we are in strong support. Thank you.

That was pretty brief. Well, thank you Madam Vice Chair, for bringing this forward. This makes sensible change for taxpayers who have paid. Oh, I'm sorry. I'm not always paying attention to the witnesses. Please.

Good morning chairmembers. Jennifer Tannehill with Aaron Read and associates on behalf of the California Society of Enrolled Agents. Also in support of this measure. Just offering my. Me too. Thank you. Okay.

Thank you. Is there anyone wishes to speak in opposition with that? I will continue my comments again thanking the author for her Bill.

But we want to make sure that this is a sensible change for taxpayers who have paid correct amount of tax but paid it in what would be considered the wrong way, although they paid their bills. So I'm going to move. I'm going to support this Bill. Am I able to move it? I'm not able to move it as chair,

may I move my own Bill? Is that. Is that.

We'll have to. We'll have to postpone the moving on this. But please close.

I respectfully ask for an aye vote.

I would entertain a motion on Strickland Bill which is 94.. Would the secretary please call the roll?

[Roll Call]

The Bill is one to one and is now on call.

The chair will now present his own Bill, SB 711.

Thank you, Mr. Chair. So we're going to be moving to File item number 12, SB 711. Senator, you are recognized when you are ready.

Well, I thank the Vice Chair and Members of the Committee, which there are none others. But I'd like to begin by accepting the Committee amendments and comment 7.

Senate Bill 711 makes it easier for people and businesses in California to file taxes by updating California's Revenue and Taxation code changes that Congress has made to the Internal revenue code since 2015. Since January 1st of 2015, there have been several bills in the last 10 years to selectively conform to specific federal changes.

But there are more than 1,000 changes the state has not yet acted upon. These differences illustrate. These differences frustrate California taxpayers when they find that the state and federal tax laws treat the same issues in opposite ways. The Committee staff reviews each of these changes and made recommendations on each line on each item.

These recommendations can be found on the Committee website. There's also a helpful appendix to the Committee analysis that describes the changes made in each section of the Bill. The Bill is a consensus measure and implements recommendations intended to conform to a fiscally responsible manner that avoids policy disputes. Now, this is really a common sense Bill.

We want to make sure that there's a conformance between federal and state tax laws so the taxpayers can file the bills, their tax bills, their tax forms more easily at the end of the year. I have with me today to testify and support one of the leading experts in California tax law and policy, Gina Rodriguez. Thank you, Gina, for being here whose experience in matters of conformity is unmatched.

Thank you. My apologies. I would recognize the witnesses for two minutes each. Thank you. Thank you.

Gina Rodriguez. I'm a principal with Ryan llc. I'm in their advocacy services practice. However, I'm not here on behalf of Ryan or any other organization. I was invited to speak because of my many years of experience with omnibus conformity bills. Actually, decades of experience with omnibus conformity bills. Just a brief history lesson.

1983 marked the beginning of what we call the incorporation process, where the Legislature incorporates whole subchapters of the Internal Revenue Code, also known as the IRC or specific sections of the irc. We also use what's called a specified date. And in the handout I gave you, the specified date is in that right column.

And what's interesting on this, that's kind of the map. This is where you start for a conformity analysis. So what I want to point out is poor taxpayers have to use end practitioners. If you see the last date for taxable years beginning on or after 1115 we have to use the 1115 internal revenue code.

So as the Internal Revenue code read on 1115 that was 10 years ago. So you can imagine all the changes. We've done some specific conformity provisions. The governor's identified certain ones when we need. When we need some money. But. But this is almost unworkable really, when you're trying to do a conformity analysis. Why.

And you can see also we. The Legislature did pretty well from 1983 to 1997. And then we see some gaps. So we lost momentum. And the reason is conformity bills are so extremely hard to put together. And I recognize Colin and Haley, this is. It's a really, really hard thing to do. You have to balance the revenue.

You're going to have winners and losers. When I was working specifically on conformity bills, you know, you got to get the Democrats to vote for tax increases and you got to get the Republicans to vote for decreases. So extremely hard politically.

And you won't see a line of motion picture people or any support like that for a conformity Bill. It's just not sexy and not anyone knocking down your door to do it. So why is it important? Simplicity. So we need to make it simple for taxpayers. We all kind of rely on our tax software.

But that's not right. Some taxpayers don't use tax software. We need to make it simple. It does reduce administrative costs so we don't have to keep separate books and records, separate calculations, separate state and specific federal. Wrap up your comments. Yes, thank you.

Consistency, modernization and most importantly, too, fewer audit disputes so taxpayers don't end up in an audit trap because they didn't know.

Thank you very much. You're right. Thanks. Of technical support. Did you want to take an extra minute or two?

I think I covered everything.

Unless you have any questions. Do we have any other people in the room in support? Please state your name, your organization and your position.

Good morning, Chair and Members. Jennifer Tannehill. On behalf of the California Society of Enrolled Agents, we really want to thank the Committee for doing their work on this. As Gina had mentioned, it is a huge, huge lift to try and conform our separate codes.

And the enrolled agents work with taxpayers every day who are trying to reconcile these different standards and often have to keep two separate books of records to be able to comply. So anyway, I'll cut it off, but just thank you so much for all the work everybody's doing. And we are definitely supporting. Thank you. Thank you.

Name, organization, and position, please.

Peter Blocker of the California Taxpayers Association. We don't have a position on the. On the Bill quite yet. It's probably the longest Bill I've ever had to go through. But we wanted to thank the author. We're generally supportive of conformity and hope to be. Hope to support in the future. So thank you.

Jason Fox with the California Society of CPAs. I would align my comments with Mr. Blocker. We're still looking at the Bill. It's extensive tax season. Hard to get CPAs to look at that. But generally supportive of the concept and the direction and looking forward to working with the author and the Committee. Thank you.

Now, do we have any primary witnesses in opposition of the Bill? Is there any in the room that would like to express opposition? Seeing none, I will bring this back to the Committee. Senator, would you like to close?

Sure thing. Thank you. Vice Chair. You know, nobody likes to pay taxes, but let's make it as easy as possible. Let's make conformity so that taxpayers can get through this process as painlessly as possible. And that's basically what this Bill does. You don't want a lot of contradictions between federal and state law. So with that, I ask for an aye vote.

Thank you. Secretary, please call the roll. We have a motion by Senator Grayson.

[Roll Call]

That Bill is on call, and I will pass the gavel back to the Chairman.

Two bills remain, but the authors. Three bills remain, but the authors are not here. I'd like to entertain a motion on SB 591. Motion, please. Okay, motion is heard. Let the secretary call the roll.

[Roll Call]

The Bill is on call. The Committee will hold in recess until other authors are present. The Committee is now back in order. We have Senator Smallwood Cuevas here to present SB592. Senator, please proceed when you're ready.

Thank you. Senators, good morning. I am proud to present SB592, which excludes transfers of properties to a community land trust or limited equity housing cooperative from the definition of a change in ownership for the purposes of tax reassessment.

By excluding these transfers from the definition of change in ownership These properties would be exempt from tax reassessment in the early stages of the development of a community land trust or housing cooperative.

Importantly, this Bill does not exempt residents from paying property taxes, but rather keeps property tax bills low as residents begin the process of purchasing their units to maintain affordability. As we know, California is in the midst of a housing and affordability crisis.

In Los Angeles alone, 57% of our residents are rent burdened, meaning they pay more than 30% of their housing income. And I'm at about 55 myself. Every dollar spent on housing means less money to put food on the table, put gas in the car or attain an education. This picture becomes bleaker when looking at home ownership rates.

Home ownership remains out of reach for far too many of those in the State of US in the state and having the second lowest home ownership rate in the nation. I'll say that again, the second lowest home ownership rate in the nation. Just 55% of Californians own their home.

This number sinks to 46% for Latino households and 37% for black households. Ownership is one of the best tools we have to address both our housing and poverty crises, providing a valuable asset that can sustain families. For generations, community land trusts and housing Cooperatives have become a proven tool. Okay.

This is a lifeline that can increase access to ownership and alleviate poverty and improve living conditions for vulnerable communities throughout the state and the nation. In my district, Trust South Los Angeles has created real opportunities and I have seen it for myself. For many constituents.

Creating ownership for low income residents has served as a steward of community controlled land and a model for sustainable development. I remember when they purchased, it was a forgotten housing unit, multi housing, family housing. And the residents took complete ownership. They purchased, they did all that they could and totally.

Not just revitalize the apartment complex, but the whole neighborhood. Businesses came there, farmers markets came there. So when we talk about these kinds of investments and opportunities for ownership, that ownership and that pride of ownership extends not just to that one unit or building, but to the whole community.

But despite their success, I want to say at putting home ownership in the reach of low and moderate income households, California has lagged behind many states where community land trusts and housing Cooperatives paid no property taxes at all.

Because previous bills to create a property tax exemption have not been successful in this state state Due to constitutional challenges, SB592 takes a more focused approach to ease cost burdens for the early community land trust and housing Cooperatives. Specifically, this Bill will ensure that the property taxes remain low on the onset, keeping these properties affordable.

For tenants converting to homeowners. This Bill also includes provisions such as two year grace period to ensure that tenants have the chance to complete the long administrative process of transitioning to homeowners before reassessment may occur.

We have heard the concerns of the opposition and have worked to add language to clarify the documentation needed to qualify for this exclusion, ensure that it only applies to properties that serve a majority of low income residents, and several other technical changes and we will continue to work with them in our offices and our staffs.

We are very concerned that this fix is a fix and that it works. And with me today are Kyle Smeallie, Policy Director at the San Francisco Community Land Trust, and Hope Williams with the Sustainable Economies Law center. And Christina Oatfield is also here to answer any technical questions we may have.

Okay, the witnesses will be recognized for two minutes each. Please proceed. Good morning. My name is Kyle Smeallie. I'm the Policy Director at the San Francisco Community Land Trust and Member of the California CLT Network. I'm here to voice our strong support for SB592 which will create a greater pathway for tenants to purchase their building and become homeowners.

At sfclt, we work to preserve affordable housing in part through the creation of Limited Equity housing Cooperatives or LEHCs. LEHCs are a proven cost effective model for creating long term resident owned affordable housing. SB 592 is an opportunity to strengthen this model by reducing the property tax burden, thereby improving the feasibility of LEHC conversions.

It will not only help reduce costs for residents, but it will also ensure the long term viability of these properties, making them a sound investment for state and local governments. Allowing for the creation of more Cooperatives has a profound impact on the people who call LEHCs their home.

In 2005, SFCLT was approached by the mostly low income Chinese American families fighting to save their homes from demolition. Through an extensive community collaboration, SFCLT purchased the building and worked with the tenants to convert the property into a resident owned housing cooperative. One of those residents is named Mayoyan Mei. Ms.

May, as she's affectionately known, spent her whole career as a housekeeper earning a modest salary. At the time of SFCLT's intervention, she had lived in her home for more than 20 years then with a young daughter. Despite the cost of housing nearly tripling in San Francisco, since that time,

Mrs. May has been able to stay in her permanently affordable home. She was able to raise her daughter there as well, who went on to attend UC Berkeley and is now a licensed architect in San Francisco. This was made possible in part through the permanent housing stability of her Cooperative Home. SB 592 will help make stories like these possible throughout California. We urge your support. Thank you.

Good morning or almost good afternoon. Chair and Members My name is Hope Williams and I am the Director of Legislative Advocacy for the Sustainable Economies Law Center. We are in strong support of SB592, authored by Senator Smallwood Queen Cuevas.

The Law center has been at the forefront of advancing limited equity housing Cooperatives or LEHCs as a means to address the housing affordability crisis. To highlight the impact of LEHCs and what is possible in 2017, we co founded the East Bay Permanent Real Estate Cooperative in collaboration with the People of Color Sustainable Housing Network.

The Permanent Real Estate Cooperative Model, a cooperative corporation under California State law, builds upon LEHC principles by integrating the community as a whole to collectively own and manage land and housing, thereby ensuring long term affordability and community control.

Creative solutions like the Permanent Real Estate Cooperative are made possible through the foundational framework established by lehcs as we work towards creating lasting stability for future generations. SB592 will lay the groundwork for future models by helping to break down existing obstacles like the current property tax laws.

As it stands, when tenants form an LEHC to purchase their building, the transaction often triggers a property tax reassessment, increasing financial burdens and hindering the scalability of housing cooperative models.

SB592 addresses this issue by excluding LEHCs from from property tax reassessment and this legislative change is critical for expanding permanently affordable housing options and empowering communities to take control of their housing futures. We respectfully ask for your aye vote on SB592 and thank the Senator for her leadership on this transformative issue.

I think the witnesses. Are there any other witnesses that wish to up voice their support for this Bill? If so, please state your name. Organization and support.

Could I just say. I'm Christina Oatfield. I'm legal counsel to the California Community Land Trust Network which is a co sponsor of the Bill and I'm here. To express our organization's support and I can answer any technical questions if the Committee has any.

Thank you.

Hi, good morning. Leslie Rodriguez on behalf of the Mountain View Community Land Trust and strong support.

Hi, my name is Olga Melo from Mountain View CLT. We really strong support this Bill. Thank you.

My name is Sonia Siqueiros and I'm Mountain View clt. I'm very strong supporter of this. Thank you. Hi, good morning. My Name is Marilu Questak with Mountain View Community Land Trust. I support SB592. Thank you.

Hi, I am Nadia Mora, the Mountain CLT and support this. Thank you.

Hi, my name is Susana Castagnon and. I support strongly Bill. Thank you.

Amy Hines-Shaikh with Unite Here Local 11. And our 32,000 Members in Los Angeles. San Bernardino, Riverside and Orange counties in strong support. Thank you.

Any other witnesses in support? Are there any principal witnesses in opposition you recognize?

Proceed as ready. Thank you Mr. Chair. Members Rob Grossglauser representing the California Assessors Association. Definitely wish I wasn't here imposing the Bill. Would like to acknowledge that the assessors support the intent of the Bill which is to promote affordable housing and tenant ownership.

Would also especially like to call out the Senator and her amazing team and the sponsors for working with us over these last few weeks. Actually months now. But unfortunately we don't see the fix quite yet. As the Senator put it, we are committed to remaining at the table with them.

Whether the Committee chooses to hold the Bill today and turn into two year Bill or move it forward, we're going to continue to work on it. Our perspective though is that we want to make sure there's clarity and there isn't conflicts between the different sections within the law.

And we think that that would be the benefit for the tenants as well as the assessors as administrators and it also ensure consistent application across California's 58 counties. As the Committee analysis notes, there are at least three exclusions that are being proposed in the Bill currently.

And for example, one of them where the assessor would need to grant a tenant exclusion for a transfer, but it's contingent upon the LEHC exclusion which that itself is dependent on meeting the tenant ownership threshold and that's not yet been met.

And so if tenants are asking for the exclusion from us, we want to make sure we can administer it and grant it. So that would be our goal and we'll continue to work with the Senator Again. The Senator and her team and the sponsor have been great to work with. It's just really tricky.

Thank you. Any other witnesses in opposition? If not, I'll turn it over to Committee. Comments?

Thank you Mr. Chair and I commend the author for this incredible effort and I know it's a work in progress. You've been working and I know you'll continue to work.

Trying to find that sweet spot and fix home ownership is so incredibly important to our not just to the individual, which helps with generational wealth, but to our community and to our state and so anything we can do to promote that homeownership, especially if it's coming from a transfer of a rental environment into an ownership, we have to give our full attention to that.

As a matter of fact, the numbers, it's dismal, the number that you gave, how we are second to the bottom.

But the numbers, especially for black and brown home ownership in California, have sunk so low that it's actually prior to homeownership levels, as far as black and brown homeownership is, prior to when we had discriminatory practices that were actually legal decades and decades ago.

And so we have got to turn the corner and get people into home ownership opportunities across the board in a more equitable way. So with that, I fully support this Bill and would make the motion when it's appropriate.

Well, I thank the Center for authoring this Bill. I think it's a great idea. We need to move, as Senator Grayson mentioned, we need to move forward with homeownership, especially certain communities that have been left behind. It's not an acceptable situation.

My Committee consultants have raised some concerns about implementation hurdles, and I hope that your staff is listening and hearing and willing to work with those, especially after the comments of the assessors, if we can work together. But at this point, I want to empower you to move forward, and I support the Bill. Would the author wish to close?

Thank you. Yes, I would. Thank you so much, Mr. Chair. And we absolutely will continue to work because we know this is a model and a real important tool in our toolbox for fixing our housing crisis. I had the opportunity to spend some time with housing advocates looking at the Vienna model.

And Cooperatives are doing extraordinary work in building wealth, building wealth in real time for families at every spectrum of the economy. I think that we have invested in programs like Dream for All as a state. We've invested in down payments. I think the state needs to also invest in other models of home ownership and wealth building.

And I think this is a perfect opportunity to do that. And we look forward to working with the assessor's office because they have to be part of making sure that we have more properties to build property tax on. And that's what this is all about.

The final point I want to make is the point that you made, Senator Grayson, so important. The majority of our state is black and brown. So the future of our economic stability is on how these homeowners will be able to provide what is fundamental, the property taxes that sustain our state, our services and our programs.

So if we don't fix this problem now, which is already a crisis, our state will be in a point of no return later. And so with that, I respectfully ask for your aye vote.

Is there a motion? zero, motion has already been made. In that case, I'll ask the secretary to call. The roll.

Motion is do passed to the Committee on Judiciary. Senators McNerney. Aye. McNerney, aye. Belladeris. Ashby, Aye. Ashby, aye. Grayson. Aye. Grayson, aye. Umberg.

The motion is 30. The Bill has 30 and is now on call. Take the second Senator.