Assembly Standing Committee on Revenue and Taxation

Want to say good afternoon and welcome to the hearing of the Assembly Committee on Revenue and Taxation Advocates. Please remember to submit your position letter through the porthole at least one week prior to the hearing in order for your organizational position your position to reflect the Bill analysis Please note that File item number 9 SB863 by the Senate Committee on Revenue and Taxation is on the consent that will be heard today.

Pursuant to the Committee rules, bills with a fiscal impact greater than 150,000 rather in revenue or gain or loss will be will not be eligible for a vote immediately after the presentation.

Instead they will be referred to the suspense file according accordingly Other Other than one item proposed on the Consent Calendar on the consent, only two bills today on the agenda will be voted on and that's File item number 2, SB333 Senator Lair and also file item number 3 SB376 by Valadares we don't have a quorum right now, so we will act as a Subcommitee to get the ball rolling right so we see our first author.

If Mr. Seatto please approach and have a seat is File item number one SB284 and you can begin when ready. If you have any primary witnesses no. No, I don't bring witnesses. They talk too long.

No, I don't bring witnesses. They talk too long.

Thank you. All right, thank you. Honorable Chair, I'm here to present SB284. Proposition 19, which passed in 2021, included a restriction on the transfer of family homes between parents and their children, particularly regarding the retention of the property's Proposition 13 protected tax base. Under Prop.

Okay. You may proceed when ready, sir.

19, a recipient must move into the home, claim it as their principal residence, and file for their basic homeowner exemption within one year of receiving the property. Under current law, individuals who inherit a property that is held in probate have found themselves unable to possess the property under the one year timeline and have lost their Prop.

13 protected tax valuation. Furthermore, under current interpretation, any attempt to change the title to remove other siblings and consolidate the ownership of the home currently triggers a reassessment of the property tax base. This measure will clarify that Prop.

19 calendar year for individuals who are undergoing a probate process starts when the home is legally declared to be theirs. This measure will also also seek to clarify that individuals may consolidate ownership within the Prop. 19 year without triggering an assessment, and I did not bring a witness today and I respectfully asked for an.

I vote when the time comes. Thank you.

One Anyone in the room wishing to speak and support, would you please line up If I can please have your name, organization, please.

Thank you. Good afternoon, Amy Garrett with California Association of Realtors. Pleased to offer our continued support for SB284. Thank you.

Thank you very much. Any primary witnesses in opposition to this measure, SB284, would you please come and approach and you may have a seat at the table. This is an opposition primary opposition of 284. You have two minutes, please.

Great. Thank you so much. Members of the Committee and Chair Gibson Joaquin Torres, Assessor Recorder in San Francisco, representing as Chair of the Legislative Committee for the California Association of Assessors.

Since the passage of Prop. 19 in 2020, our Association has been a committed partner in refining the law, streamlining administration, ensuring relief for families seeking these intergenerational transfer exclusions. We support the provision in SB 284 which protects families from losing that parent to child or grandparent to grandchild exclusion. As just stated by the author Seyarto.

However, we do remain concerned about another component of SB284, specifically the creation of a new exclusion allowing sibling to sibling or cousin to cousin transfers, which is in our minds a significant departure from the original scope and intent of of Prop . 19. Current law already allows flexibility in family distributions.

Transfers made proportionately on a share and share alike basis can qualify for reassessment exclusions if aligned with the state interests. By introducing exclusions for subsequent transfer transfers, SB284 would create legal ambiguity and administrative complexity. It would we would be forced as assessors to interpret intent behind complex multi step transactions designed to circumvent the one year window.

This opens the door additionally for step transactions which would increase appeals, legal reviews and additional administrative burdens. As a result, we would anticipate a surge in appeals challenging reassessments. Our office would be tasked with untangling timelines, reviewing legal documents and interpreting family relationships, increasing the complexity and cost of administration.

For these reasons, the California Assessors Association remains opposed to the inclusion specifically of Section 630. We once again thank Senator Seyarto for authoring this important legislation. And thank you as a Committee for your time and thoughtful consideration. We're happy to continue doing any work on this as allowed.

Thank you very much. Thank you very much. Anyone in the room wishing to speak in opposition of this measure 284, please line up your name hearing and seeing none. We'll bring it back to the Committee. Mr. Demaio.

Thank you. I want to applaud the author for listening to so many constituents who are pretty upset by the implementation of Prop 19. A lot of folks felt misled in the campaign and now we have all these families that are suffering because of it.

I think your bill does as much as it can do within the confines of the law to provide a little bit more clarity and flexibility in response to the opponents concerns. Obviously they want this language stricken. What would be your response to that?

Well, I think part of it is the response to they may have challenges, legal challenges to them reassessing a property. I think it's important for them to first note what this is all about. This is all about allowing and in this day and age with our housing the way it is, way too expensive.

This is sometimes the only means for a child to or an adult child to live here after their parents are gone. Because that family home is the only thing they have.

And even though they may have substantially paid down the mortgage, the property taxes themselves can drive them out and they will not be able to enjoy the benefits of home ownership that their parents work so hard for them to have. This issue with sibling transfers is a firsthand knowledge issue.

I had that issue before, long before Prop 19. And it is very important to be able to try to consolidate into one person so they can do the work.

And in an estate environment there's other parts of the estate that they can transfer around so that the title can be held by the one person that is going to stay in the house and that's the child. And that's what this is all about.

It's supposed to allow the one child to be able to inherit the house without that reassessment. Now are there complexities? Yeah, because Prop 19 was complex. It was not, it did not address some of these issues. And that's why we're left to come back after the fact and try to clean up some of those points.

And so I we are going to continue to work with the assessor on some of the issues that they have and we have given them that commitment. And so if they have outstanding issues, we'll work with them.

However, at the end of the day, this needs to be able to enable this parent to child transfer to be able to be done the way it was supposed to be done.

So it's specifically to their argument that this may require a constitutional amendment.

It's interesting, it needs to be pointed out that the tax raisers in the State of California, they don't seem to have a coherent argument here because when they oppose something like the Taxpayer Protection Act, they say the Legislature should have the authority to set taxes and make these rules and make requirements but then you come along and say, okay, let's have the Legislature clarify a poorly written initiative, Prop 19 and they suddenly say no, no, no, no, no, the Legislature doesn't have the authority to do that.

It always seems to be that whenever they get more money, it's based on their arguments. So if they want to raise this red herring argument, that's fine, take it to court. I don't think you're going to prevail, but I think the Legislature is well within its authority to make the clarification that you're seeking here.

And again, we're talking about families who certainly fit under the Prop 19 framework already and this simply just provides a bit more flexibility. I know that we're likely to see this on suspense. My hope is that the chair will be open minded when you weigh consideration of this important relief to these families for home ownership retention.

Yeah, we've researched that. And yes, the Legislature has authority to define terms not specifically defined in the Constitution. Furthermore, the legislative council has policies surrounding legislation they believe may violate the Constitution and nothing in this measures has triggered those standards.

So may I respond also to the constitutional part of this?

Sure, you may.

So nobody has brought it up in our legislative council. And in fact, as stated by the Member there that it doesn't really hold water to say it's unconstitutional.

At the end of the day, the Constitution says parents should be able to give it to their children and when there's problems there, we need to be able to sort those out and still be able to accomplish the goal which is homeownership for those children.

Any additional questions for the author? Just want to say I think that when you were in the Assembly, I think we talked about Proposition 19 and how you've been working in terms of trying to fix Proposition 19. I think there are some issues there and appreciate your efforts and at this time you may close.

Thank you. I simply ask for an aye vote when the time comes. I think all the previous comments can serve as a close.

Thank you very much. This Bill is. Thank you very much. It's been brought to my attention that we should establish a quorum. Madam Secretary, would you please call the roll to establish a quorum?

Roll Call

We have a quorum. We have a quorum. So thank you very much. So it's SB 2284. That Bill will refer to the suspense file. Thank you very much. Since we have a Quorum now we'll take up the consent calendar. One item is proposed for consent. File item number 9.

SB860 863 by the Senate Committee on Revenue and Taxation. Is there a motion? Second motion by DeMaio. Motion by DeMaio. Second by Mr. Ta. Madam Secretary, please call the row.

[Roll Call]

Consent calendars out 6-0. Next follow item number two SB 333. Senator Laird, thank you very much. And you may begin when ready. File item number two SB333.

Thank you very much. Mr. Chair. I was a Member of this Committee when you were in elementary school. So so it is is nice to return. I'd like to begin by accepting the Committee Amendments and thank the Chair and the Committee staff. Thank you for working with us.

Senate Bill 333 would allow the San Luis Obispo voters to decide if the County of San Luis Obispo should raise the combined local tax rate limit above 2% to support essential transportation services the SLOCOG and there's a representative here.

The San Luis Obispo Council of Governments is working to establish a funding mechanism to deal with shortfalls in transportation projects. Highway 101, 46, 227 and make San Luis Obispo a self help county. Right now there are a couple of the cities that are a half a cent away from reaching the maximum.

If either one of them went to the maximum it wouldn't allow it to go into effect. If it passes countywide this will allow for the tax rate up to 1% to be imposed by the voters not considered within that 2% tax rate.

The there are seven cities in San Luis Obispo county that run the political gamut right to left. All seven endorsed this Bill and the voters three cycles ago came within a fraction of a tenth of a percent of meeting the two thirds.

And so they are getting ready to consider that and they could do it if this Bill passes. With me today to testify and support is Eric Branson on behalf of the San Luis Obispo Council of Governments and and at the appropriate time I would respectfully ask for an aye vote.

Thank you very much. Your witness.

Thank you Chair and Members Eric Johnson for Gus Corey, Corey consulting on behalf of the SLOCOG San Luis Obispo Council of Governments in strong support of this bill. We are really we have strong belief that we can get there with that 2/3 vote that we need in order to become a self help county.

We have transportation needs that are enormous in the county and we just seek the help that we need to get there. So thank you. Thank you very much.

Anyone in the room wishing to speak in support of this, would you please come and if you can just please give me your name, your organization, and this is support only.

Clifton Wilson on behalf of the San Luis Obispo County Board of Supervisors in support. Thank you.

Thank you very much.

Anyone in our primary opposition, would you please come and take a seat at the desk? Hearing none. Anyone in the room wishing to express opposition, your name, organization, hearing and seeing none. I'm going to bring it back to the dais Mr. Demaio.

Comes as no surprise that I'm going to oppose this bill. The cost of living is a crisis point in California and yet it just takes my breath away when I see legislators bring forward ideas to make it easier to raise taxes, particularly a sales tax which is regressive. Working families end up paying disproportionately higher burdens with a sales tax.

I'm old enough to remember a sales tax that was a nickel. You all, turned it into a dime, goes from 5% of every transaction to 10%. And we're not talking about when people say, well, you know, things have gotten more expensive, we're talking about percentages. Government used to take a 5% rake.

You can sell a home for less than 5%. Now they're demanding a 10% rake, an 11% rake. And that's just insanity, nothing says you don't care about working poor more than saying I'm going to take 11% of every transaction you're buying at every single store.

And I know that the argument will be made, well, they're doing this to themselves. Have you seen your ballot titles? It says the Save Kittens and Puppies initiative on all these tax increases. And it never makes it clear that people are actually voting on a tax increase.

And so I'm sure that there's some important programs that you'd like to fund. I would suggest that you do what most working families have had to do under this regime of tax and spenders, tighten the belt. You can do a whole bunch of things by tightening the belt. And we ought to lead by example in government.

Yes. Ms. McKinnor

Yes. I'd like to thank the author for bringing this Bill forward. As tight as our budget is right now and the things that we're going on, what's going on in our cities and counties we definitely need the revenue.

But also you know I'm agreeing a little bit with my colleague here when we know we need to raise, we need to have some money, not just tighten the belt. We need to and we need to put taxes on our billionaires here.

So I think that the Legislator needs to start Legislature needs to start thinking about taxing the billionaires, having a billionaire tax so that we can have the income to do all the things we need to do in the cities and the counties and states. I look forward to working with my colleague on that.

I'm sure he can understand taxing the big big billionaires and not the little people. But with that I will be supporting your Bill. Thank you.

Ms. Quirk-Silva

I appreciate the comments from both of my colleagues from here and there. Coming from a self help county, Orange County and who would believe they actually taxed themselves many years ago on transportation and have been excellent stewards of those dollars putting it to good work on our roads. I definitely will be supporting this today.

But I do find it interesting the comments. As I believe just today at the Federal Government there was a big beautiful bill that was just signed that adds trillions of dollars to our deficit and who's the beneficiary of that? Certainly not our lowest income Californians.

Matter of fact analysis says that they will actually be paying more people making under $10,000 or under 30,000 that when you get to those very low incomes they're going to be paying more compared to our billionaires.

So when we talk about taxing, let's talk about who the taxes benefit and who the people are going to be paying for these taxes. And since we are in the Rev, Rev and Tax Committee this is certainly open for comment.

But asking the voters in your district to say yes or no because we certainly are saying yes or no, we're saying yes to allow them to make this decision for them is something that I do support. With that I move the Bill.

Thank you very much. The author indicated in his opening that he will be accepting the amendments and that agreed to a five year sunset. Is that correct? Thank you very much Senator. Thank you very much. It was. Thank you.

Robust conversation and you may close and certainly may answer any questions that has been articulated by my colleagues here in your close.

Thank you very much. I would just say that we shouldn't trust the voters just when they elect us. We should trust the voters when they vote on individual issues as well.

And in this case we're allowing them to do a 2/3 vote when all of us that are sitting here deliberating this have been elected by a simple majority. It is really about their right to do it. That's what this Bill would do. I respectfully request an aye vote.

Thank you very much. It's been moved. It's been properly moved. In second. The motions do pass, as amended with the amendment adding a five year sunset. Madam Secretary, please call the roll.

[Roll Call]

The vote is five to two. That Bill gets out. Thank you very much, Senator. Much. Next we have File item number three, SB376 Valedares. Thank you very much. And you have witnesses?

I do.

They may join you at the desk and you may proceed when ready.

Thank you. Mr. Chair. It is great to be back here in the Assembly. Good. I want to first of all thank the Committee for working with my staff and the small technical changes to the bill and will be accepting the Committee's amendments.

Thank you.

I'm here today to present SB376, a straightforward and necessary measure which clarifies how certain types of trust are defined within California's tax law. Under current California law, the state addresses how incomplete gift non grantor trust, or ings, as I've learned is the terminology, are taxed for income purposes.

The Revenue and Taxation Code also mirrors a federal provision that was intended to ensure a smooth process in how ings are taxed across California.

While the intent of this code section is clear, there has been confused, there has been confusion on if Charitable remainder trust, or CRTS, also qualify as Ings and are subject to the same taxation rules. SB 376 will eliminate any confusion and reinforce the CRTS are not subject to the same rules that Ings are under California's tax code.

This will codify how the Franchise Tax Board has consistently interpreted the law up until now and will provide much needed clarity for this tax professionals, estate planners, and will prevent any unintended tax consequences today. Testifying in support of this bill is Mark Mullen from the California Lawyers Association.

Thank you very much. You have two minutes. Thank you. Chair Members, my name is Mark Mullen and I'm here on behalf of the Taxation Section of the California Lawyers Association, which is a co-sponsor of SB376, together with the trust in the state section of CLA.

I'm an estate planning attorney and a counsel at Charts Freestyle in San Francisco. I'm familiar with the income tax issues associated with the two different types of trust at issue in this Bill and can illustrate how the issues raised by this Bill come up in the real world.

Ings are trusts that are designed to void state income tax. That changed with the enactment of Revenue and Taxation Code 17082 in 2023. Under that section, ANGS, as defined in that section that are created by California residents now have their income subject to California income tax. CRTs, in contrast, are designed to benefit charities.

To promote their use, they are given federal tax benefits. California conforms to the federal rules governing CRTs. The design and structure of the two trusts differ significantly. They are created for different purposes. Nobody in the estate planning space would ever refer to a CRT as a ning.

However, as a result of the technical definition of an ing in Section 17082, certain CRTs could be treated as Ings, thereby losing the favorable tax treatment and discouraging individuals from creating CRTs that could result in less charitable giving.

SB376 would avoid this result by amending the statute to clarify that the definition of an ING does not include the CRT consistent with what the FTB has said. I would be happy to answer any questions and respectfully ask for your aye vote.

Thank you very much. Anyone in the room wishing to speak in support, please line up and would like to have your name, your organization, and this is support. Hearing and seeing none. Anyone in opposition? Primary opposition, would you please approach? Hearing and seeing none. Anyone in the room wishing to Register opposition against SB376? Hearing and seeing none.

When I bring it back to the Committee, I skipped the room.

Right. Any Member wishing to ask any questions of the author? Hearing and seeing none. Okay, Senator, you may close.

I respectfully ask for an aye vote.

She knows when she's ahead. Fantastic. Okay, Madam Secretary, with. We have been properly moved and seconded, please call the rope. This is Again, the motions do pass to appropriation, as amended on SB376.

[Roll Call]

That Bill gets out on the what? 7-0. Thank you very much. We have file item number six. Senator Valladares.

Oh, I might take. Yes. All right, let's do it.

File item number 6, SB 591. And you may proceed when ready—your primary witness.

Thank you, Mr. Chair, 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 Taxation 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 payment via the electronic funds transfer system risk disproportionately high penalties when they remit payment by a check, even if the payment otherwise arrives in full and on time.

Specifically, under CRTC Section Code 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 this burdensome penalty without a statutory cap for failure to pay an EFT, leaving taxpayers vulnerable to potentially exorbitant penalties, even if there was no intent to avoid or delay payment. In these situation, current laws offer no meaningful recourse for penalty reduction, reinforcing the necessity of a more balanced approach.

SB 591 addresses this issue by replacing these percentages' base penalties with a fixed penalty amount set at $100 for initial failure to use an EFT and $500 for each subsequent failure, unless it is shown that the failure was for 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 also preventing taxpayers from incurring penalties that are excessively punitive.

Under SB 591, the penalty fits the violation. Before I hand it over to my witness, I want to highlight that this Bill has received no no votes and has received no opposition and is bipartisan. Today, to testify in support of the Bill is Mark Apreya, on behalf of PricewaterhouseCoopers.

Mr. Chair, Members of the Committee. Mark Apreya with Capital Advocacy, on behalf of PricewaterhouseCoopers, in support of SB 591.

First, we want to thank Senator Valladares and the bipartisan group of Senate and Assembly coauthors for introducing this measure, which seeks to limit the penalty for failure to pay the personal or corporate income tax through an EFT transfer to $100 for a first time offense and $500 for each subsequent violation.

Under existing law, let's say an individual taxpayer required to pay via electronic fund transfer makes an estimated tax payment by check of $60 million. The penalty is $600,000 plus interest. The penalty is not reduced if it's later determined that the taxpayer only needed to make a $30 million estimated tax payment. Under similar circumstances, the taxpayer requested a waiver.

Unfortunately, the FTB denied that request. In this instance, there was no fraud, there was no underpayment, there was no delay in payment. The error was simply that the amount paid was paid by check, not EFT, and therefore, they were required to pay a $600,000 penalty.

This is an egregious example of how the existing penalties under the Rev and Tax Code and its implementation are not commensurate with the associated violation. But Senate Bill 591 will not make California an outlier. To the contrary, of the 41 states that have a personal income tax, 32 have a penalty for failure to pay via EFT.

SB 591 will provide that California is in line with many of the states that do, such as the Commonwealth of Massachusetts, which provide a penalty of $100 per violation.

Further, and finally, while SB 591 will make a violation by a taxpayer to be in line with a tax preparer's violation under California Rev and Tax Code 19170, if a tax preparer fails to file a required return electronically, they are subject to a penalty of $50 for each failure and there is no ratcheting up for subsequent, subsequent violations.

So, as reflected in the analysis, we know this measure is subject to the year's expense file. We would submit, however, that the State of California should not balance its budget by imposing egregious penalties, no matter the circumstances.

Rather, we ask that you preserve the integrity of the EFT requirement, while preventing taxpayers from incurring penalties that are excessively punitive. We respectfully request your support of SB 591. Thank you.

Thank you very much. Anyone in the room wishing to speak in support of this measure, please come to the microphone. Your name, organization, and support.

Good afternoon, Chair and Members. Jennifer Tannehill with Aaron Read & Associates, on behalf of the California Society of Enrolled Agents, in support. Thank you.

Thank you very much. Anyone in the room in opposition? Primary opposition. I know there was none registered. No primary opposition? Anyone in the room wishing to speak in opposition in the room, please come to the microphone with your name, your organization, and opposition. Seeing none. Want to bring it back to the Committee.

Any—Ms. Quirk-Silva.

I support the Bill, but I'm just kind of perplexed of why is it such a big deal to get a check versus an electronic transfer and when did this become a problem?

Assemblymember, I would—this the example that I provided to you was a real example. We of course did not want to name the taxpayer for rights of further confidentiality.

But I would point out, to our knowledge, that these are not errors of commission, but rather they are errors whereby the taxpayer is either improperly advised or makes a mistake. But these mistakes have significant consequences. And given the history where the FTB has not waived the penalty, we were compelled to bring the matter to the Legislature.

No, I don't disagree. It just seems to me like what, what is the bias against checks, or I mean, it seems like there's still people that do, I'm sure a dwindling amount. But and again, we're not going to—just an opinion here. Like I'm having a hard time understanding why it's a issue.

But I do defer to you.

Thank you.

And If I may, Mr. Chair, I agree with you, which is why I decided to take on this Bill because you shouldn't be penalized for wanting to pay by a check and I think the fees are fair. And thank you for your support.

In addition to question, I have a question. How common is this occur—how often does this occur?

Well, we did inquire with the FTB, as to the—as we brought this measure forward. They did not provide us with any specific data, but and it is not what we're told is a common practice, but it does happen.

And to follow up on Assemblymember Quirk-Silva's question, there is an interest in the FTB receiving electronic funds transfers, particularly for large amounts, so that it's better or easier and more secure for them to manage funds.

That said, there is a total disconnect between the violation of the risk to the state, the burden to the state to actually have to deposit a check and the penalties that are associated with that.

And again, we would submit to you that this is in line with what other states do and those other states that do have a penalty, that it's in line with those.

Furthermore, it's in line with California statute when a tax preparer who fails to file electronically, as they are—when they are required to do so, they have a $50 penalty.

Thank you very much.

So, it's, it's supposed to encourage, but we don't think it ought to be something where you are, you know, you know, egregiously penalized, as in the example I provided you.

Sure. Thank you very much. Senator, you may close.

Thank you, Mr. Chair. I want to thank the Committee for their consideration of this legislation. It will meaningfully improve California's Tax Administration and promote a fair and environment for taxpayers in a time where taxpayers are asking us to focus on affordability. This Bill does exactly that.

And for those reasons, I respectfully ask for your aye vote when the time is appropriate.

Thank you very much. This will be referred to our suspense file. And we thank the Senator and her witnesses for coming forward and presenting that this measure before us. Thank you very much. Next, file number four, SB 419, Caballero. Thank you very much, Senator, for waiting so patiently.

We appreciate you and you and your primary witnesses may begin at will.

Thank you very much. Mr. Chair and Members, I'm here today to present SB419, the Hydrogen Fuel Tax act, to ensure that California's system tax system does not discourage the adoption of clean energy. Our state has long been a pioneer in clean energy and zero emission vehicles.

Yet our current tax structure penalizes hydrogen powered vehicles by subjecting them to double taxation. Hydrogen powered vehicles currently pay both a sales and use tax at the pump and an annual $100 road improvement fee at registration, a burden that doesn't apply to gas powered vehicles.

The current system is outdated, resulting in an unnecessary financial hurdle for those seeking to transition to clean energy.

SB 419 would partially exempt hydrogen fuel from the state's portion of the sales and use tax and does not change the existing $100 annual road improvement fee to ensure that transportation infrastructure funding remains intact while making hydrogen adoption more financially feasible.

This Bill is a common sense solution that promotes fairness, encourages clean energy adoption, ensures economic viability for hydrogen powered vehicles. I respectfully ask for your support to ensure that tax policies align with our climate and clean energy commitments to make California's hydrogen future equitable, sustainable and competitive.

With me today to testify in support is Tom Knox with Valley Clean Air Now.

Thank you very much. You have two minutes.

Thank you. I'm Tom Knox of Valley Clean Air Now. We were fortunate to be able to donate 47 used Mirai fuel cell vehicles to low income drivers in severely disadvantaged communities, both rural in Coalinga and urban in South LA to see are these viable options for areas with a lot of challenges in accessing EV charging.

What we found out was surprising. These customers love their fuel cell vehicles. We didn't hear about the fueling stations. We didn't hear about any challenges. What we do hear about all the time is the cost. These customers are saying, we found the perfect option. They're clean, reliable.

But we're concerned that the cost of hydrogen is so much that we can't continue driving these vehicles after our fuel card value runs out.

So this Bill, I think is a major step toward showing these customers that the state does have a plan to start to reduce the cost of hydrogen to restore fairness to all types of EVs. So thank you very much for your consideration.

Thank you very much. Next witness two minutes, please.

My name is Mikail Scavarro. I'm here on behalf of the California Hydrogen Coalition. As the Senator mentioned, hydrogen has been typically taxed as a merchant commodity. Its use in transportation is fairly nascent and new.

Adjusting the tax code to reflect that in this temporary and limited way will help us get the early adopters some necessary relief and also help us get new fleets into the trucks as we're starting to deploy those now in and around the ports in Southern California and Northern California.

As mentioned, we're paying both the zero emission fee on our registration and the sales and use tax for the same purposes for Rose Bridges, tunnels and the infrastructure there. We're just asking for a fair shake in relation to other alternative fuels that receive limited tax relief as well.

We're just trying to bring ourselves into parity, so appreciate an aye vote.

Thank you very much. Anyone in the room wishing to speak and support, would you please line up? Need your name, your organization, and this is support.

Good afternoon. Steve Wall, on behalf of the Alameda Contra Costa Transit District and Foothill Transit in support.

Thank you very much.

Clifton Wilson, on behalf of the Fresno County Board of Supervisors as well as Sunline Transit Agency, both in support. Thank you.

Chair and Members, Cesar Diaz, on behalf of the California Hydrogen Business Council in support.

Thank you. Thank you very much. Anyone in the room? Primary opposition. Would you please feel free to come up and take a seat at the desk? Seeing none. Anyone in the room wishing to speak in opposition? Name, organization, and this is opposition. Hearing and seeing none. Want to bring it to the Committee? I'm sorry. Opposition, yes. Primary, no. Okay.

Name, organization and opposition. Yes.

Right up, Ruth McDonald on behalf of Climate Action California and 350 Sacramento. In opposition, respectfully, unless amended.

Thank you very much. Bring it back to the Committee. Any Members wishing to. Yes,

Thank you Mr. Chair, Just want to thank the author for continuing to work in this area. Continue to be a champion, and I look forward to this being implemented. Thank you.

Thank you. Thank you. Appreciate that.

Any other Members wishing to. Yes, Ms. McKinnor.

Yes, I'm looking at the price of the savings, you say approximately $7 for every $180 worth of hydrogen fuel purchase. What does that compare to, like, oil when you're buying pumping gas?

It doesn't equate very well. It's a different way of calculating a tax. And there are two pieces to the tax. One that goes to local government and one that comes to the state with a. With a sales and use tax. All we've done is exempted the state tax, not the local government.

We didn't want to touch local government. They need the resources and so we have not touched.

So yeah, today it's the equivalent taxation to the gasoline and diesel would see. However, we are also paying that registration fee which was displaced on the for Battery station.

Vehicles and so we're picking one here.

So you double put so we don't know we can't give. I know it's not apples to apples but it's no like general, it's about savings or I think it's about 4%. Thank you.

Great. And seeing no additional questioning. Senator, you may close.

Respectfully ask for your aye vote when it's appropriate.

Thank you very much. This bill will be referred to our suspense file. And thank you very much your witnesses. And thank you very much, senator. Appreciate you. File item number five, SB 587. Mr. Grayson. Thank you very much for your patience, sir.

You have any primary witnesses, they may join you at the table as well and you may start when ready.

Thank you so much Mr. Chair, esteemed members of the committee, SB 587 seeks to incentivize long term investments in fuel expansion in California's manufacturing industry by providing a state tax credit for the local sales tax paid by manufacturers for qualified equipment purchases.

This will facilitate the growth, hiring and training of skilled workforces for the future and provide high wage jobs for Californians up and down the state.

Pre pandemic, our state's manufacturing sector had already faced a decline in total employment, with much of this decline being a result of California's steep cost of doing business, which is one of the highest in the nation.

The COVID 19 pandemic further challenged California's manufacturing sector and the sector is still recovering, trying to regain a foothold in a state or in our state once again. Unfortunately, California continues to attract less of the country's manufacturing investments, with other states aggressively attempting to lure our state's manufacturers with attractive lower business costs and location incentives.

According to the 2024 California Jobs Market Briefing published by the Employment Development Department, the manufacturing sector was one of only three industries that experienced job loss during the most recent reporting period.

As a matter of fact, even more notable and alarming about this information from our EDD is that manufacturing is one of the few sectors to have experienced consecutive year over year job losses, something that should give all of us pause as policymakers.

In fact, There are approximately 80,000 less manufacturing jobs in California now than there was in September of 2022, according to the latest data. We must do better. SB 587 will hope to reverse these trends and make California more attractive to investment from manufacturers.

Especially in light of the fact that 38 states already have a full sales and use tax exemption for manufacturing equipment purchases and another five states have no sales tax at all, it is imperative that the state find ways to mitigate financial burdens, promote, increase production and ensure the growth of high wage jobs for a variety of skill levels and backgrounds in one of the state's essential industries.

A state, or shall I say a stout manufacturing job base is key to the global and domestic competitive of our economy because of its breadth and because of its variety. There is a misconception that all manufacturing is done on large industrial scales. But over 70% of manufacturers have less than 20 employees.

Small, medium sized manufacturers face a disproportionate share of economic burdens, increased capital costs due to supply chain issues and one of the highest state and local sales tax rates in the nation. This measure would help to ease some of those economic burdens.

And California has comparative manufacturing advantages to other regions of the world due to the strength and depth of its innovation in technology. Not only does the industry employ 1.2 million people in California, but it also plays a key role in creating new jobs with its multiplier effect supporting 2.5 jobs for every 1 manufacturing job.

Manufacturing plays a crucial and essential role within our state's economy, supporting high wage jobs and small businesses with room for growth.

As I come near to my close, it is my hope that this legislation can be a tipping point to encourage a new quote invent here, manufacture here reality by incentivizing companies to plant roots in our state and grow which will allow all of us to reap the rewards of the harvest we have a chance to create.

Through the support of this bill. This measure has no known opposition. I respectfully asked for an aye vote at the appropriate time and with me here today, a couple of witnesses that through the chair would have self introduced.

Sounds like a preacher as I come to the close. First witness, you have two minutes.

Thank you. Elizabeth Esquivel with the California Manufacturers and Technology Association. We just really want to thank Senator Grayson for his leadership and his commitment to advancing a critical tax credit.

This proposal has been a top priority for CMTA for the past three sessions and we also want to thank you, the chair for your long standing support during that time as well as the committee staff for their thoughtful analysis of this bill.

SB 587 is a timely and high impact measure recognizing how important this policy is to California manufacturing and the innovation ecosystem. We believe this reform is expected to generate an economic impact of 1 to 3 billion dollars while encouraging reinvestment job creation as was highlighted by the senator and author himself, and technological upgrades across the state.

Importantly, much of the new capital equipment purchased will be more energy efficient, helping California meet its sustainability goals while improving productivity and competitiveness. This credit is especially vital for small and medium sized manufacturers who have been hit the hardest by inflation and elevated interest rates. They will benefit immensely from reduced upfront costs while investing in new machinery.

Finally, we respect this committee. We respect and urge this committee and all legislators to include some of these provisions in the upcoming budget trailer bill so that California can join the other states that either offer manufacturing tax credits or other tax manufacturing equipment at all.

Thank you so much again for your consideration and request your aye vote on this bill.

Thank you very much. Next witness. Two minutes.

Chair and members, Alex Torres with Brownstein here on behalf of the Bay Area Council. We represent over 350 of large employers in the Bay Area. I understand I'm in front of a committee of mostly Southern California members, so I will try and build that a little bit.

This is I think something and I, you know, the easiest part of my job is being able to say what CMTA said plus one on all of that. I think we have the opportunity to level the playing field and send a strong message that California is serious about retaining and growing its manufacturing base.

Bay Area manufacturers report that without this kind of exemption they are delaying or scaling back investments in new production lines or moving them out of the state altogether. Now Southern California remains one of the largest manufacturing centers, but that tax base has eroded due to outdated infrastructure, high operating costs and limited support for modernized facilities.

I would note we've taken recent action in the budget for advanced manufacturing. I think that's really critical because coupled with this tax credit we have the opportunity again to state the seriousness of our desire to retain and grow the manufacturing base here. We now have offered some very targeted regulatory relief.

We now couple that with some resources to be able to have capital to address those high operating costs. So by reducing those costs of capital intensive clean tech investments, this bill can directly accelerate California's zero emissions and circular economy objectives. It's structured to include appropriate safeguards modest in scope again compared to other tax advantages in other states.

As a proud co sponsor alongside our friends at CMTA, proud to, proud to support here today. Urge your aye vote. Thank you.

Thank you very much. Anyone in the room wishing to speak in support? Name organization and this is support.

Good afternoon Mr. Chair. Chris Micheli here on behalf of the Los Angeles Area Chamber of Commerce in support of the bill. Thank you.

Thank you very much. Next witness.

Good afternoon. Meg Snyder with Axiom Advisors here on behalf of California Forever in support.

Thank you very much. Anyone, primary witness in opposition in the room, please come forward. Hearing and seeing none. Anyone in room wishing to speak in opposition? Hearing and seeing none I want to bring it back to the committee. Ms. Quirk-Silva.

I want to thank the author for bringing this forward. You know, once you spend enough time here at the legislative body, you start to identify certain authors with certain types of legislation. And you certainly have been a champion on manufacturing along with our chair here.

And- And when we talk about the support for manufacturing, we just move through a budget session where we know we can do big things when there's the support for it. And we certainly lifted a big tax credit with the film tax credit. And yet we were a little silent on this manufacturing.

And we absolutely need to take this serious because if we are going to uplift California in the way it needs to be and look towards the future, we cannot ignore this. I had an opportunity to visit just right in my own city, Fullerton, the Fullerton foam factory, just about a month ago.

And they make all of the mattresses and actually the cushion underneath the flooring. So who would think here in Fullerton and had a very large manufacturing and they do use a lot of recycled foam in addition, all the cutouts.

So I want you in the audience to think about if you're wearing tennis shoes, all the foam in your shoes, which we don't even think about these everyday products where they use the cutouts. So if you make the Nike tennis shoes, all of that leftover foam has to go somewhere.

They recycle it and they put it back into use as either on the floor or in some cases mattresses. And yet they brought me in because they said that they had nine manufacturing in California throughout the state, and now they're down to three. So this is serious.

And we as legislators know that we can speak with one voice and yet we're not always doing it in this space. If we want those jobs, if we want this revenue that we are going to lose as we did with Hollywood, then we better get serious fast. So with that, I support it.

Thank you very much. Ms. McKinnor.

Yes, Senator Grayson. I just wanted to say we miss you over here in this. I wanted to start with that. We miss you this year. But I also thank you for this bill. We know that manufacturing jobs is our middle, our middle class jobs.

They help people buy a home, send their kids to college and live the American dream, take vacations and do all the things that our- that our families would like to do. And so I commend you for taking up this bill. And we, I know it's got.

It charges the budget, but this is an investment and we get the money back double. And so just like my colleague said, we have to think about manufacturing as we thought about the film tax credit. And with that, I'll be voting yes on this bill.

Thank you very much to the senator. No, this is not the first time, this bill. This is the second time. What are you going to do different and also have conversations taking place with the governor's office that you can elaborate on to try to move and, you know, get this bill across the finish line?

Yes, thank you so very much. We are in and have had conversations with administration. We do recognize that there's something similar that already exists through go biz, departmentally as well as programmatic. However, it doesn't provide the full benefit that this bill would provide. So this bill would enhance what already existed, become a part of.

So instead of trying to create and reinvent the wheel, what we're taking is what already exists and making it better and making it more competitive the way it exists right now. It really doesn't elevate California into a competitive field with the 38 other states plus the five that don't even have a tax on a sales tax.

So what we're really trying to do is take what we have, enhance it, make it bigger, better, and at least put us on a level playing field. And hopefully with everything else California has to offer, it makes it better and we become more attractive. So with that, we're going full on gusto.

Thank you for the great comments from my colleagues on the committee here about the fact that it may be what we see, a cost up front, but it is truly an investment that has a return that is measurably exponential.

Got it. Thank you very much. With that, you may close.

Oh, that was my.

That was pretty close to my close. But thank you, chair, for hearing us out and for the very kind comments. I do miss the assembly as well, having fun on the red side, but do miss you all over here. I respectfully ask for an aye vote at the appropriate time. Thank you so very much.

And thank you to staff. Thank you to the great sponsors that we have helping us as well with business. Thank you.

Thank you very much. This bill will be referred to our suspense file. Thank you and your witnesses for coming and appearing before this committee. Thank you.

Thank you.

We see an author has just arrived. Thank you very much. Senator Blakespear, would you please come and take a seat? We'll move to file item number 8, SB 710. And you may present when ready.

Well, thank you, Chair Gipson and thank you Committee Members. It's nice to be with you here today. I will be accepting the amendments.

Thank you.

On SB 710 that include a five year sunset on this tax exclusion, in accordance with the Committee's policy and I want to thank the staff for their work. It's more important than ever that the Legislature prioritize affordability measures for our constituents. SB 710 is one opportunity to do that.

SB 710 renews an important tax incentive for homeowners and small business owners to install solar panels, which is critical as the state works to increase green energy production, meet its climate goals, and prioritize affordability policies for Californians.

To illustrate the issue, the total cost to install a residential solar panel and storage system in 2025 is in the tens of thousands of dollars.

This incentive, which only applies to the first installer of a solar panel system, prevents the cost of the system from being added to the value of your home for the purposes of property taxes, saving residents between $200 and $500 per year.

If we don't get this one across the finish line and signed by the Governor, the current tax exclusion for solar that has existed for over 25 years will expire at the end of 2026. It's crucial to encourage people to switch to solar that we keep this property tax exclusion.

Due to reduced rates that homeowners now receive for providing solar energy to the grid, solar adoption rates have plummeted. Taking away this property tax exclusion would almost certainly reduce solar adoption even further. California made a commitment to achieve 100% carbon free electricity by 2045, but we are struggling to stay on track to meet that goal.

We need three times the amount of clean energy generation and eight times the amount of storage, compared to what we currently have, according to a joint report led by the California Energy Commission.

It will extend the sunset on the property tax exclusion for active solar energy systems and establish a new, limited exclusion for systems installed on or after January 1, 2026. Specifically, SB 710 will provide exclusions for systems including residential properties, small commercial systems, and larger commercial systems enrolled in net energy metering.

However, this exclusion does not apply to commercial systems over 5 megawatts, preventing large utility scale operators from claiming these benefits. SB 710 balances the need to continue encouraging solar adoption with the need for local governments to have property tax revenue.

Now, more than ever, we must maintain this incentive that makes the solar transition more affordable for individuals, businesses, schools, and others and to help the state meet its clean energy goals. With me today, I have Laura Deehan, on behalf of the Environment California, the sponsor of the Bill, to speak more.

Thank you, Senator.

Two minutes.

Okay, thank you so much, Assemblymember. My name's Laura Deehan. Good morning—afternoon—Chair and Committee Members. I'm the State Director for Environment California and we're really proud to sponsor SB 710 with Senator Blakespear. And obviously, California has been a leader nationally on installing solar and other clean energy.

We now have more solar than any other state, by far. And one way that we've helped to lead the way on that is with tax policies that are in line with our goals, our clean energy goals.

And so, SB 710 just continues this really common sense, 25 yearlong practice of excluding new solar and storage installations in homes and businesses from triggering an increase in property tax evaluation. Without this, Californians would really be punished—penalized—for investing in clean air and greater grid resilience.

With this Bill, we're recognizing that our tax code should not discourage these investments. And it's really about both saving customers that money, but also helping to build a cleaner, safer, more resilient California for everyone. And so, we urge you to support SB 710 today and help make sure California catches even more sunshine in the future.

Thank you very much. Anyone in the room wishing to speak in support of SB 710, would you please line up? I just need your name, your organization, and this is support.

Hi, my name is Ellen Brittingham. I'm here on behalf of San Diego Community Power, in support.

Thank you.

Ryan Spencer, on behalf of the Environmental Working Group, in support.

Thank you.

Sabrina Gleitz with Axiom Advisors, on behalf of Pearlx, in support.

Thank you.

Hannah Hunter, Summit Advocacy, on behalf of the Center for Sustainable Energy, in support.

Thank you.

Kim Stone, Stone Advocacy, on behalf of the California Solar and Storage Association, in support. And have also been asked to relay the support of the Solar Rights Alliance, The Climate Center, Recolete, Climate Action California, Clean Earth for Kids, 350 Humboldt, Glendale Environmental Coalition, and Indivisible Marin.

Thank you.

Good afternoon, Mr. Chairman. Just a couple more. The Clean Coalition, the Stan Coalition, California Interfaith Power and Light, Citizen Climate Lobby in Santa Cruz, Climate Alliance Indivisible Santa Cruz. Thank you.

Thank you.

So, kind of a tweener. John Kennedy, Rural County Representatives of California. Happily neutral on the Bill with the amends. We think it strikes the right balance. Thank you.

Thank you.

Ben Triffo, with the League of California Cities, aligning our comments with RCRC.

Ruth Macdonald, one more time for Climate Action California, in support. Thank you.

Thank you very much. Anyone—any primary witnesses in opposition? Would you please come and take a seat at the table? Primary opposition. Two minutes.

Bit of a tweener, but Chair, Members of the Committee, Dylan Finley, on behalf of the California Large Energy Consumers Association, CLECA. So, we're the industries of cement, steel, cold storage, industrial gases, as well pipeline. So, large energy consumers, one thing they all share is they're all a part of the base interruptible program.

So, at any moment, the state calls on us and we have to reduce the amount of electricity we're using. And then, a lot of our members are also energy intensive and trade exposed. So, a lot of emissions leakage occurs within our industries of CLECA members. Appreciate the author.

We used to be in support actually of the Bill, but with the recent amendments which put the cap at 5 megawatts, we are now support if amended. I want to clarify, we did...

I'm sorry, did you say you in support? I'm sorry.

So, we registered opposition. We were opposed if amended. The reason I'm coming up here to say is to state that we're support if amended and then also to ask if I can go into what our amendments would be given.

No, no. Okay. You're, you're in opposition of the Bill?

We registered opposition, but I'd like to change it here and state that we're support if amended.

Okay, thank you. Thank you very much.

Thank you.

So, anyone in the room wishing—anyone in the room wishing to register their opposition, please come forward. Just opposition. Hearing none. Want to bring it back to the Committee. Ms. Quirk-Silva.

Can you just kind of give me a scenario of, because the summary says that any newly constructed active solar, solar, so you're talking about units that have not been built or have solar or you're talking about going backwards on this?

Yeah, it's for a new solar installation. So, if somebody put solar panels and a battery on their home, they wouldn't have a reassessment that would cause their property taxes to go up. And that's been in effect for 25 years and this keeps that in effect.

And so, that would be like say from starting now or just if it is signed going backwards or?

No, just going forward.

Going forward. So, for the people that have already put in solar, in essence, you're trying to protect the—if you want to say promise—that was made, as far as this benefit, tax benefit.

Right. People wouldn't have to do anything if they already have solar and battery. They would continue to not have a reassessment.

Right. Okay, I definitely support this. I know that there's a lot of confusion out there as we have seen with other bills. But I do think clarifying it because there's so many different scenarios of the way it's written is newly constructed. It feels like a new homes that are being built. So, it's just the language, but I support it.

Thank you. Thank you, Chair. Thank you.

Thank you. Anyone else having questions of the author? Great. You already, in your opening, agreed to accepting the amendments which is a five year sunset to compliance to the Committee rules. Thank you very much and you may close if you wish.

I respectfully ask for your aye vote.

Thank you very—thank you very much. So, this course, this Bill will be referred to our suspense file. And thank you very much, your witness, for appearing. Thank you very much. Next, we will have—oh, so we're going to call the absentee Members for our consent calendar. Madam Secretary.

[Roll Call]

So, the consent calendar is—I know, what's, what's the vote now?

7-0.

Thank you very much, Dr. Bains. So file item number seven, our last item for today, SB663. Senator Allen, thank you very much. And your primary witness. You may commence when ready.

Yeah thank you so much, Mr. Chair. So this is an urgency measure that seeks to provide immediate property tax relief and ease the recovery and rebuild for victims of the January wildfires. As we know, nearly 20,000 structures were damaged or destroyed and thousands of Palisades and Altadena families were displaced.

Can you bring your microphone up a little?

Yeah, of course. So as homeowners have been navigating the trauma and the challenges associated with the fires, filing of misfortune and calamity claims within the existing 12 month deadline may be difficult.

We know that rebuilding after a disaster is a really complicated task and residents have to grapple with insurers and completion of the paperwork, competition for contractors permitting, et cetera.

Just to give you an example of the impacts of all this, according to data from the City of Malibu, I think only about a third of the homes that were destroyed during the 2018 Woolsey Fire have been rebuilt to date. The law also lacks flexibility for properties that are primarily used by charitable, hospital or religious organizations.

So just to give you the law says that the institutions get this special tax exemption, but it only applies when the property is being used for those purposes. So of course the property burns down and no longer, they're no longer able to get their, their special tax status because it's no longer being used for the purpose.

So here's what the Bill seeks to do. It extends the deadlines for victims to file misfortune and Calamity claims from 12 to 24 months. It extends special exemptions for up to eight years.

And it also extends the time that homeowners have to rebuild from five to eight years for the base tax year to transfer to the new construction. Recent amendments also expand the Bill to include the Mountain and Franklin fires in Ventura County in Malibu that destroyed over 300 structures in the fall of last year.

The amendments also extend tax exemptions provided to disabled veterans who use their who unfortunately lose their homes in a disaster. The bill's sponsored by our LA County Assessor, Jeff Prang. It's supported by the California Assessors Association and the Board of Equalization.

And here in support of the Bill is San Francisco Assessor Recorder Joaquin Torres, who's the chair of the California Assessor Association Legislative Committee.

Great. Thank you very much. You have two minutes.

Great. Thank you so much. And once again, many thanks to Senator Allen for introducing this Bill. Joaquin Torres, Assessor Recorder, Chair of Legislative Committee for the California Assessors Association, here to express our strong support for Senate Bill 663.

We're a proud advocate of this legislation simply because of all the reasons that were stated by the Senator right before me.

It meets taxpayers, property owners, those who've been impacted by the fires where they are and the realities that they're facing, so that they have the timelines necessary to benefit from exclusions that they should be entitled to, especially during this time.

And of course, at the same time, as was also mentioned, just a tax exempt status that's continued for disabled veterans and also those properties that are used for religious, charitable or welfare purposes without requiring future filings until that property is rebuilt.

Again, just common sense tailorings to ensure that these who have been impacted have the best support of us in California through this legislation. So I just want to also thank Assessor Prang from Los Angeles, who's always been a strong advocate and helped to facilitate this process and bring us here today.

Thank you again to Senator Allen for that. And I close.

Thank you very much. Anyone in the room wishing to speak and support, register your support, name, organization, Seeing none. Anyone wishing to register their opposition to this measure. Hearing and seeing none. Any primary opposition. Hearing and seeing none. Bring it back to the Committee. Any Committee Members wishing to. Harrison, you have something to say over there?

Wesley, you like. You have a lot to say. Okay, now.

Okay.

Committee Members Ms. McKinnor.

I just like to thank the author for this Bill. Thank you for looking out for our folks at home in LA County. It's really needed. We know we're all struggling right now, even at the state with our budget, but we know that we have to make these people whole and not have them paying taxes. So I thank you for that.

No. Okay. Again, I want to align my comments with Ms. McKinnor. Just I think there's still some drafting errors, some technical amendments that needs to be discussed.

Want to make sure that you're willing to work with our team to, to help on, on some of those issues with the Bill that was raised in the analysis that we still need to work through. This Bill will be referred to our suspense file. So there's some time that still needs to be worked on.

And again, I want to thank you and as well as your leadership and also our assessor. Certainly there's work that needs to be done as people that needs still help in this area, in the affected area of Los Angeles County. And again, just thank you for your leadership and you may close if you wish.

No, appreciate that, Mr. Chair. I'm certainly looking forward to working with your Committee on getting, you know, anything cleaned up that we need to in the Bill and respectfully ask for an aye vote.

Thank you very much. Again, as stated, this is a suspense candidate. And thank you and your witnesses for coming before us. Thank you very much.

Thank you. That's it.

Anything else? Revenue Taxation Committee stands at adjourn. Thank you very much. Thank you.

Thank you. So how does this work? This is so nothing gets voted on.