Senate Standing Committee on Revenue and Taxation

The committee on revenue and taxation will come to order. Good morning.

We have 13 bills on the agenda today. File item seven haS Been pulled by the author. One bill is proposed for consent. And file items five that and that is file item five, SB 1151 by Senator Cervantes. I will take things a little bit out of usual order today.

Do we have a quorum? Yes. We don't have a quorum, and we will start as a subcommittee. And I will establish a quorum when, the committee is sufficient members are present. I'm gonna go a little out of order.

I have two bills of my own to present for expediency. I wanna go ahead and do those first. And I will hand the gavel over to my colleague, mister Grayson. Good

morning, Senator chair McNerney. And we have two items, item 12, SB 1329. If that's the one you wanna begin with, the floor is yours.

I thank the, the chair and distinguished members of the committee. Today, I'm presenting SB 1329. It's called Protecting the Future of Solar Power in California. The solar industry is ready to pay. The solar property tax exclusion ends in 2027.

Now that's a that's a tax exclusion that's been enforced and has been taken advantage of. And today, the solar industry is ready to start paying taxes, and the counties will start receiving revenue from solar property tax. However, the expiration comes at a time when solar is struggling, land is expensive, utility hookups are late, and the Federal Government is canceling solar tax credits. Once the exclusions end, solar will be assessed differently in all 58 counties, and that creates uncertainty for solar developers in California.

As a former renewable energy developee, I clearly understand the challenge when when it comes to getting financing.

I guess they're working next door. SB 1328 creates a statewide standard for solar property assessment so that the the developers will know what to expect, which makes, certainty nothing people in business like nothing better than certainty. SB 1329 states a preferred methodology for assessing solar property and excludes intangibles, like government subsidies and power purchase agreements from the property value. Solar remains crucial to helping California meet its 100% clean energy goals, and we must continue in this state.

S B 1329 protects our climate goals and helps solar energy providers supply renewable energy at low prices.

Today, with us, we have Stephanie Doyle from the Solar Energy Industry Association and John Rickenhanther from Adventaeus. And I will turn it over to Stephanie.

We're from the witnesses, two minutes each.

Good morning, chair and members. My name is Stephanie Doyle, and I'm the California director for the Solar Energy Industries Association, the National Trade Association for the solar and storage industry. I'm here today as a cosponsor of SB 1329, which will ensure consistent property tax assessment across all 58 counties, providing certainty to developers building the solar power that is essential to meeting our increasing energy demands and statewide grid decarbonization goals.

As you know, the current property tax exemption for solar expires at the end of the year. Our industry is ready and willing to pay our share of property taxes and support our communities where we build.

However, as we enter this new era, developers are reasonably concerned by the potential for over assessment, which could increase project costs and negatively impact rate payers. SB 1329 proposes a preferred methodology, specifically the cost method for calculating solar property taxes and clarifies what would be included in those calculations. It's just preferred, not mandatory, and discretion is still left to the assessors. The economics will benefit the state.

Our twenty two twenty twenty two estimates predicted billions of dollars in property tax revenues, and those would be much higher today.

By delineating a preferred methodology, SB 1329's approach better aligns with tax structures of our neighboring states, who we are also competing with for solar projects, such as Arizona, Nevada, and Texas, which require the use of the cost method and offer explicit and beneficial tax markets for solar projects by excluding the ITC and PTC value from taxable values. Nevada also provides a renewable energy tax abatement of 55%, and Oregon has an exemption if the project is net metered or consumed on-site.

As solar developers face an increasingly hostile environment at the federal level, a predictable, stable method of assessment is necessary to ensure that these projects continue developing at affordable rates in California. Some may argue against what they call unique treatment for solar, yet solar is unique. The state has mandated the purchase of solar energy, and rate payers do not have the same save as they do with other tax commodities.

For this reason, ensuring a fair market price, one that matches the realities the industry faces, is extremely important, and XP thirteen twenty nine does just that. I respectfully ask for your aye vote.

Great timing. Next witness. Good morning, chair and committee members. I'm John Redling Schaffer, senior tax counsel for Advantis, a San Diego based solar energy develop development business with approximately 10 gigawatts of utility scale solar under development in California. We encourage your support of SB 1329 because it provides a uniform, fair, and predictable method to assess property tax.

Typically, solar developers sell electricity to California utilities via twenty year agreements. The price of which is based on development cost, including in large part, property tax. In short, higher property taxes or uncertainty of property tax equals higher energy prices. SB 1329's replacement cost methodology is a transparent calculation based on objective and verifiable data that's both predictable and fair. If adopted, Avantis is estimated to pay over $1,000,000,000 in property tax during the life of projects to be installed during the next three years alone.

SB 1329's calculation is fair based on the value of a developer's investment and properly excludes tax credits, thus representing the net cost to build projects. We discourage the county assessor's proposal for evaluation based on income method, which allows discretionary and independent judgment. The income method results in a lack of uniformity among counties, and it's unpredictable with its various variables. The income method would result in increased energy costs, which disproportionately borne by Californians with the least ability to afford the cost.

Thank you for your time.

Thank you so very much. Any other members in the public want to add your support? Just name, affiliation, and position.

Lillian Mervis with the Large Scale Solar Association here in support. Thank you.

Thank

you. Delaney Hunter on behalf of EDF Power Solutions and EDP Renewables in support, and our friends at ACP California also asked me to give their support.

Chair members, Alicia Priego on behalf of Nexhamp in support.

And I see no one else racing the microphone for support. Do we have lead opposition that would like to come two minutes each? And you may begin when you're ready.

Good morning, chair and members. Kristen DePaul, Modoc County Assessor Recorder and president of the California Assessors Association. On behalf of the CAA, we respectfully oppose SB 1329. At a high level, SB 1329 would significantly reduce the assessed value of utility scale solar facilities by roughly 40% on an early review. And it moves the state away from the way these assets are valued in the marketplace today.

We understand the intent behind the bill and our concern isn't with the policy goals. Our concern is how the bill fits into California's property tax system, which relies on consistent market based valuation principles that counties apply statewide. Part of the CAA's role is to highlight where statutory changes could unintentionally create disparities or reduce uniformity in assessments across counties. Utility scale solar facilities are income producing assets, and they're typically valued based on actual market evidence. Simply put, what they earn and what buyers are willing to pay.

SB 1329 departs from that standard. It requires assessors to apply adjustments for incentives and subsidies that don't influence real world sale prices. It also mandates automatic reductions tied to things like tariffs while excluding income streams, contract terms, and development related step up costs that are commonly reflected in actual sales. When you put all that together, the bill disconnects assessed value from real market behaviors, and that opens the door to inconsistent results for similar properties, more disputes, and less uniformity statewide.

In closing, SB 1329 replaces a long standing market based appraisal form work framework with a formula that does not reflect standard valuation practice.

Once it's in statute, it could set a precedent for applying similar approaches to other types of property, and it would make the property tax for this rapidly growing sector less reliable and less consistent. For these reasons, we respectfully oppose SB 1329.

Excellent, miss.

Mister chair and members, Paul Yoder on behalf of the counties of Kern, Fresno, and Kings, in respectful opposition. It's a classic time of loving the author and not loving the bill. The current exclusion that is still in law in Sunset's 12/31/2026 has cost Kern County, for example, almost $200,000,000 over the last decade. That's a generation of people in Kern County who didn't get to see any one of those $200,000,000. The $200,000,000 could have funded bookmobiles, social services, health care to the indigent.

Kern County still maintains a county hospital, Etcetera, Etcetera, Etcetera. When the exclusion when the Hertzberg bill went through and there was an agreement to sunset the exclusion, the governor in a signing message said, the legislature should consider the impacts to local agencies before bringing forward another extension of this policy. Is this a straight extension? It's not. It's a new it's a new mousetrap.

It's a new thing that this greedy industry has come up with to try to get out of paying more taxes than they want to. He's not gonna move to Nevada. His company is not. They're gonna stay in California where the sunshine is and where the infrastructure exists, and where assessors and public work staff understand how to cite these facilities and work with developers. I have so much respect for the author, and we have had some really good conversations with him and his staff.

And I look forward to those continuing. In the meantime, I just want it understood that this bill is going to cost about eight or nine counties in California, hundreds of millions of dollars that would otherwise go to services as they're staring down the barrel of HR 1 impacts. Thank you.

Excellent timing. Any other members of the public that would like to add on in opposition? Simply step to the microphone. Seeing no one stepping to the microphone, we'll bring it back to the committee for questions or comments. Seeing we have a question or comment.

Vice chair Alvarado-Gil.

Thank you so much. My question is for the opposition. So I represent many rural counties, particularly those who are struggling to be heard on issues around solar and alternative energy. You mentioned eight counties. Are you able to say a little bit more which counties those are?

I am afraid that, you know, when we're you know, when we're putting forward legislation that we're often, thinking about California as a whole, but not taking rural communities and Central Valley communities into, account. So I just wanted to know, what what other counties have been impacted by this?

Thank you. Thank you for the question. Through the chair, I don't believe it's any of the counties in your district, Senator, but the counties that our firm represents, in addition to the three I mentioned, be San Luis Obispo, Tulare, Merced.

Basically, almost all eight counties in the Central Valley except probably the senator's own county, San Joaquin, San Bernardino, Riverside, Los Angeles, you know, where the sun shines a lot and where there's ample land that's adjacent or close to infrastructures where you find these facilities, these mega solar facilities. Appreciate the question.

Of course. Of course. So to the author, I know there was a lot of respect in this room for you. Can you address that since both you and I represent Central Valley Counties? And I know that you're a strong advocate for rural communities as well.

Thank you.

And address just address the concerns in the opposition that this unfairly impacts some of our our rural community counties?

Well, I appreciate the question and and understand what the opposition has concerned about. A loss of revenue would be a problem, and so we're open to working. It's a long process ahead of us to get through the assembly, and we are open to working with the opposition. And I appreciate the the terminology of a new mousetrap, and we'll try not to get caught in that one. We'll try not to get our toes caught in that.

Thank you, Senator McNearney. I won't be able to support your bill today, but I'm gonna keep on watching it and encourage you to to connect with some of these Central Valley communities that have very significant losses and are looking for some looking for some solutions moving forward. And I know that you'd be open to to having those conversations. Thank you. Appreciate

it. Seeing no further questions or comments, Senator, would you like to close?

Yes. This is a this is a fundamental change. These these companies have been excluded from the from the tax, and now they're gonna be starting to pay it. So we wanna make sure it's as as uniform as possible. And I understand the opposition has its concerns, but these are new revenues.

Let's make sure that they, they are, they're uniform, that there's no disparities. And with that, I will ask for an aye vote.

Thank you, Senator. We are still operating as a subcommittee. So at the appropriate time, we'll take a motion to vote on your bill. Moving to item 13, SB 146. When you are ready, the floor is yours.

Chair and members of the committee, we're gonna discuss today SB 146, which is so called closing the Montana tax loophole. I don't have any witnesses with this, so it'll be I'm on my own against the committee here. This basically costs this loophole, the Montana tax loophole costs California taxpayers about $20,000,000 a year in lost revenue. Basically, it strengthened state law by making it easier to go after tax avoidance scams involved in luxury vehicles and so on.

These scams in these scams, California residents can create out of state shell companies, to buy expensive cars or RVs in Montana to avoid paying California taxes and vehicle license fees.

The Montana tax loophole was the subject of a recent criminal investigation, which 14Californians allegedly bought $20,000,000 worth of luxury vehicles to avoid paying over $1,800,000 in California taxes. Since 1923, the Montana loophole has been exploited at at least 20, 2,500 vehicles, involving California residents. According to the California Department of Tax and Fee Administration, SB 146 will close the loophole by making it easier for collectors to go after the people who create these shell companies.

They're limited liability companies, and it will allow the California to collect unpaid taxes and vehicle registration fees. SB 146 allows the CDTFA to uphold personal liability against any officer, manager, partner, beneficial owner, or member of a shell company remember a shell company for any unpaid taxes on the purchase of a vehicle in Montana or other state.

SB 146 will close the Montana loophole for good and restore much needed state revenues to pay for essential road repairs and other services. With that, I will respectfully ask for an aye vote.

Thank you, Senator. We have no lead witnesses. So are there any members of the public that would like to step forward and express your support? Simply your name, affiliation, and position.

Michelle Warshaw on behalf of the California Teachers Association in support.

Thank you so very much. Any other members of the public seeing no one moving, we will move to it's my understanding no opposition for this bill is registered. Any members of the public who would like to wish or wish to step forward in opposition? Seeing no one moving, bring it to committee. Any questions or comments from committee members?

Seeing no questions or comments, Senator, would you like to make a closing statement?

I will ask for an aye vote.

Thank you so very much. We are in a subcommittee environment. So when you establish a quorum, we will take a motion and vote on your bill.

Thank you. And now we will resume questioning and Senator Joe Bogue is present. If you would like to come forward and present your bill. We have a quorum. Oh, excuse me.

Before you present, we have a quorum. And I would like the secretary to call roll.

Senators McNerney.

Here.

McNerney present. Alvarado-Gil.

Here.

Alvarado-Gil present. Ashby Becker Grayson. Here. Grayson present.

We now have a quorum, and I will proceed again by asking Senator Ochoa Bogue to present her bill, which is item file item number one, SB 984. Proceed when ready.

Good morning, mister chair and members. I'd like to begin by accepting the committee's amendments and thanking the committee staff for working with my team on this bill. TIPS aren't regular income despite the fact that existing tax laws treats them as such. Tips are not guaranteed, they're not consistent, and they're not enough to make ends meet. Members of my own family, including my mom as a single mom, and myself as a high school and college student, have worked in the service industry.

SB 984 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. SB 984 will conform state law to federal deduction for tipped income. Now that the Federal Government has adopted this policy, we have the opportunity to do the same.

Conformity will provide even more relief to the millions of people who support our state's world class service and hospitality industries.

I hope you'll join me in supporting this important effort to help Californians keep more money in their pockets. With me today is Matt Sutton with the California Restaurant Association and Scott Kaufman with the Howard Jarvis Tax Association.

The witness may proceed.

Thank you, mister chair and senators. Matt Sutton with the California Restaurant Association. We're here in strong support of SB 984. And most of who we represent are the restaurants that you see in your neighborhood, the independent restaurant base. SB 984, as you've heard, allows employees the ability to deduct earned tipped income, for three up to three years, aligning it with current federal law.

Leading up to January, last January, we started to get a lot of our members reaching out in surprise and disappointment that we don't automatically conform to federal law, which I know we don't and we haven't. So this picks up that piece and, our members were disappointed on behalf of their their staff and team members. And so this is a really important one to a lot of our members, and to our workforce for the regularly tipped employees.

The other thing I'd say is there's a lot of segments in the restaurant community that are indeed tipped, but there are 68 other professions that also receive tips that would benefit under this. 36 other states automatically conform to federal law.

We of course need to act and that's what this bill is asking. And so by California adopting these changes, we'd be offering the tax relief that other similarly situated employees in other states are receiving as well. So with that, we'd ask for your aye vote. Thank you.

Good morning. I'm Scott Kaufman, the legislative director for the Howard Jarvis Taxpayers Association. Thank you all for allowing me to speak with you today. The Howard Jarvis Taxpayers Association is proud to support SB 984. As the always excellent Senate rev and staff tax report notes, state law does not automatically conform to changes in federal tax law, except for specific retirement provisions.

Federal law now allows an up to 25,000 deduction for tips received between 2025 and '28. It's available to taxpayers who file a standard deduction or itemized, but is reduced for taxpayers whose gross income exceeds 150,000 for single taxpayers or 300,000 for married joint. SB 984 would bring the state into conformity with those federal provisions on tipped income. As also noted in the staff report, tipped income already has one of the lowest compliance rates.

I believe you stated that illegal income is the only one that's lower, and enforcement has been ineffective.

These issues will likely only be exacerbated if the state does not conform to the federal standard. The differenceS Between state and federal tax systems cause confusion for taxpayers and practitioners and make it harder for the franchise tax board to ensure the taxpayers pay the correct amount of the tax. That's why SB 984 is so important. It provides clarity and a uniform standard for taxpayers to follow. Thank you, and I ask for your aye vote.

I think, the witnesses are the members of the public that wish to speak in favor of the bill. Please state your name, your affiliation, and your, support.

Good morning, chair and members. Jennifer Tannehill with Aaron Reed and Associates on behalf of the California Society of Enrolled Agents in support. We love conformity where it can happen. Thank you.

I think, are there any, major witnesses in opposition? Seeing none, are there any members of the public that wish to voice their opposition? Seeing none, I will turn to the committee. Any members of the committee wish to make statements or questions? Seeing none, I will ask well, I basically wanna say that the committee strives to have conformance with the federal tax program.

Last year, we passed a bill with with, I think, a thousand some entries. So it's always our, goal to have, conformance. There's some exceptions, of course. But when we worked on this bill last year, Congress had not acted yet. I wanna thank the author for bringing this forward.

It shows that your determination to fight for the people you you care much about, and I appreciate that greatly. And this will bring us back in conformance with federal law. And again, I support your measure. I supported it last year. I think it was a good deal, and I believe that state tax and pharmacy conformance is a good idea.

Senator, would you like to close?

Thank you, Senator chair, for your encouraging comments. SB 984 has the potential to bring tangible benefits to millions of workers in California, particularly those in the restaurant, hospitality, and service sectors who are so essential to California's economy. I respectfully ask for an aye vote.

Thank you. With the secretary, do we have a motion?

I do.

I hear a motion. Will the secretary call a roll?

Senators McNerney. Aye. McNerney, aye. I apologize. Do pass to the committee on appropriations.

Ashby, Becker, Grayson?

Aye.

Grayson, aye. Three zero.

Let's start with file item 10 SB 1084. Senator, proceed when ready.

Good afternoon. Mister chair and members of our committee, Senator Maria Alvarado-Gil representing Senate District 4. In California, wildfire is no longer an abstract issue. It's really part of everyday life, whether you live in rural areas or in urban centers. From Placer County through El Dorado and into the Sierra, families that I represent live in constant awareness of this risk.

I've asked myself, many times, like, will this be the year that, I have to leave everything behind? Senate Bill 1084 is about giving Californians a real way to prepare. This bill creates the Fire Safe Home Tax Credit, providing up to $50,000,000 annually to support home hardening and defensible space improvements. These are practical and proven steps that are are widely promoted, not only by CAL FIRE, but also by our fire state councils. This is clearing vegetation, upgrading vents, using ignition resistant materials, and so on.

And we also know that these measures work. According to Cal Fire, ember intrusion is the leading cause of home loss during wildfires. Simple upgrades like ember resistant vents and defensible space can significantly improve a home's chance of survival. The Insurance Institute for Business and Home Safety has also found that homes built or retrofitted to wildfire resistant standards, they're far more likely to withstand the fire exposure. Yet for so many homeowners, that cost is out of reach, that initial investment.

At the same time, insurance costs are rising sharply across wildfire prone regions. According to our own California Department of Insurance, thousands of homeowners in the high risk areas have faced nonrenewals in recent years, pushing many into the California Fair Plan, where premiums are often significantly higher and coverage is more limited. This is especially true in Senate District 4, where entire communities fall within high fire severity zones. We also have a looming threat of a 38% increase of fair plan premiums in 2026.

These have not happened yet, but this is creating a significant fear amongst those of us who live in these high fire severity zones.

Not only around affordability, but what can we do to help bring those costs of the premiums down. Home hardening, defensible space, vegetation clearing, some of that responsible homeowner management. I've also spoken to residents who are doing everything they can within their financial reach. They're clearing brush. They're preparing go bags.

They're following all the guidance that we've issued to them. But when it comes to retrofitting the homes, they hesitate because they don't it's not that they don't care. It's because they can't afford it. So many times we see these these homes also go on the market and stay on the market for a long time because the retrofitting costs are above and beyond what a new homeowner in California can can take on in moving into a home. So this Senate bill really helps to close that gap.

It doesn't mandate any behavior. It really incentivizes it. This bill gives people the ability to reduce their own risk while also stabilizing the broader insurance market. Because we know that when homes are safer, losses are lower. And when losses are lower, pressure on premiums and state backed insurance programs is reduced.

This is the year that we can make a difference in terms of the cost of insurance premiums in California by incentivizing positive behaviors and helping to show that we are part of the solution. The financial case is just as strong. According to the legislative analyst office, wildfire response and recovery costs in California have reached billions billions of dollars annually in severe fire years. Investing in prevention reduces long term costs to the state from emergency response to infrastructure repair to disaster assistance.

And this bill also includes accountability, which I know is important to this committee.

It requires data collection and evaluation so that we can measure how effective these credits are in reducing wildfire damage over time. So this is more, this is about more than protecting structures. It's about creating tangible solutions, to a a issue in California, affordability and wildfire risk crisis. It's about stability for families who wanna stay in California. It's about preserving foothill mountain communities, and it's about making sure that preparation is not limited to those who can afford it.

Sadly, we've seen what happens when preparation falls short, over and over, here in California. There's too many stories to note. Entire communities can change overnight with this bill. Senate bill 1084 is a chance to act earlier to reduce risk before disaster strikes so that residents in wildfire prone areas are not asked, are are not asking for special treatment in this bill.

They're actually asking for practical support so that what they can do or what they already do, is is asked of them, can also benefit, financially when they're trying to afford the larger scheme of insurance affordability.

So I respectfully ask for your aye vote.

I think the the author are there any members of the public who wish to come forward and offer their support? Please state your name and your affiliation.

Good morning. Kendra Begley on behalf of the town of Truckee in support.

Good morning. Amy Garrett with California Association of Realtors, also in support.

I think those, members of the public are there any, members in, lead opposition? Any members of the public wish to voice opposition? Seeing none, I will ask the members of the committee if, if there are comments. Senator Grayson, you're recognized?

Thank you, mister chair. And I want to applaud the author for bringing this bill forward. There's much need to be done as far to be addressed with wildfires. So there's one thing that I believe is worthy of protection, and that is prop 98, making sure our schools are continue to be funded and made whole. However, in this particular case, it's not a but.

That means don't ignore what I just said. Some pay attention what I'm about to say. But however, however, there is also a thing called cost benefit. And the cost benefit of this bill is far greater than the cost of loss due to a wildfire event. And prop 98 would suffer in a much greater way under a wildfire event than it would on the cost of this incentive to help folks just I mean, we're penny pinching every day.

So this bill would definitely incentivize and help. And whatever relief we can provide to our fair plan by getting folks back into the regular market for insurance, getting our houses, fire communities become Firewise communities. Thank you for this bill, and I definitely want to move it, at the appropriate time.

Thank you.

I thank the Senator for his comments. And I guess I get the last word here, almost. This is a good this is a good idea. I thank you for bringing this forward. I voted for a similar bill when it was brought forward last year by Senator Choi.

Basically, announced the provision is worth a pound of cure here. If we can incentivize people to take the steps to make their home safer, I think we're all gonna be better off for that. And I appreciate your work with the committee on amendments, which will result in more taxpayers being eligible to to receive this credit. I'm happy to support your bill. Senator, would you like to close?

Thank you. Thank you for that. As someone who's practiced brush clearing for many years, it was really in the thousands of dollars. I'd have to kind of pick and choose what home retrofitting, I would invest in year and year, year after year. I have gotten quite smarter now.

I now raise dairy goats and they do a lot of brush clearing. Plus, they're fun to have around. So a plug for dairy goats and, you know, thank you for the comments and I urge this committee for an aye vote.

Thank you, Senator. Do we have a motion? We did have a motion earlier. And with that, would the secretary please call the roll?

Motion is do passed to the committee on appropriations. Senators McNerney. Aye. McNerney, aye. Alvarado-Gil.

Aye. Alvarado-Gil, aye. Ashby, Becker, Grayson? Aye. Grayson, aye.

Three zero.

Those 3-0. The bill is on call. We have, now SB file Amendment 11. SB 1118, Alvarado-Gil.

Please proceed when ready.

Thank you. So, Senate Bill 1118 is a little bit more prickly, I will admit.

But this is part of a package of Wildfire Risk Reduction and Insurance Affordability bills that I put forward. The intent of the package of bills was really to listen to constituents as I traveled throughout my district and held town halls and really understand how we can make life more affordable for those who live in high-risk areas.

Whether it's based on income or based on where they live, we were looking at a variety of incentives that will allow people to continue positive behaviors to protect property and to plan for inevitable disasters in the time of a wildfire. The reason it's prickly is because it really does force us to look at fossil fuels versus clean energy incentives.

So, as I present today, I know that there are some questions from the chair on this bill, but hopefully I can answer some of those questions and urge support from this committee.

So, in many parts of California, losing power is an inconvenience. In the district that I represent, losing power means loss of water, loss of heat, loss of food security, loss of access to much needed medical care, all of which can be very dangerous. The California Public Utilities Commission estimates that approximately 50 to 60% of people in my district sit in tier three. Tier three high fire threat areas.

These are the very communities where utilities are focused, are forced to shut down electricity during high wind events to prevent catastrophic wildfire.

And we have a name for it now. It's called the Public Safety Power Shutoff. But for families, for seniors, for small businesses, it feels less like safety and more like uncertainty. Those of us who live in these, areas have a word for it as well, but it is full of expletives, so I will not I will not indulge the committee with that. Reason being is, you know, we do get notices that power will be shut off.

Mostly, it's time. These time these power shut offs happen very early, where families are trying to get ready, get their kids ready for school, you know, times where they have to cook a meal. Sometimes they are shut off for days at a time without much notice. And that's when you go on survival mode. Right?

So I, for one have many cords of wood stacked up next to my home, getting ready for these shutoffs. I have trained my daughter, what to do in times of these shutoffs, and how to prepare to have extra water and extra food because we never know how long it's gonna be off.

But this by far has been one of the issues that seniors and people on fixed incomes that live in these areas have time and time again have said this is the number one risk to their life. Senate bill 1118 addresses the reality directly. What it does is it provides a tax credit equal to 50% of the cost of backup generators or solar battery systems.

So we're balancing the fossil fuel with the clean energy. We're capping it at 5,000 for generate generators and 7,500 for battery storage. These are for homes and small businesses in high fire threat zones between 2027 and 2032. Why do we include small businesses? Because it's these small businesses that carry healthy food in some of the high-risk areas where we don't have, large grocers, that we rely on for everyday staples, food, bread, eggs, meat, vegetables.

It's not just tax policy. It's about resiliency, helping build resiliency in these communities because out outages are not rare. They're imminent. They happen quite often, if not monthly, sometimes weekly. According to the California Public Utilities Commission, millions of Californians have experienced public safety power shutoffs in recent years.

Sometimes they last multiple days. These out abjects become a regular part of wildfire prevention strategy. I will say in, we're now in a new month, but in last month alone, I tracked the number of hours that I was in a planned power shutoff, and the total was twenty one hours. Okay? Twenty one hours of not having access to water, healthy food, and having to plan for other survival mechanisms.

We also know that the economic impact is significant. The US Department of Energy has estimated that power outages cost The US economy between 28,000,000,000 and 169,000,000,000 annually, with small businesses being among the hardest hit due to loss of inventory. So again, if you don't have refrigeration, you've got spoiled food, Interrupted operations, when you have a shutdown, you're already paying for employees, you're already paying for services, but you're not able to provide services, so that becomes a loss of revenue.

In rural areas like District 4, those impacts are magnified. When the power goes out, there is often no backup system, no nearby alternative, and limited infrastructure redundancy.

I for one, have a large tank of propane on my property, and I use it as a last resource for cooking and for heating, but I have also introduced alternate ways to cook and to heat my home. Again, balancing fossil fuel with clean energy incentives. I've heard from small business owners who lose thousands of dollars in single adage. Restaurants who are forced to throw away food. Medical patients worried about refrigeration of their medication.

With affordability of diabetes medication. You know, if it is not refrigerated properly, it does not work properly. Families who cannot pump water because their wells rely on electricity. I'm one of those families. It's not hypothetical.

It's happening right now every day. Senate bill 1118 gives people that ability to prepare. So again, making that investment in a backup generator or a solar battery provides continuity. And it's not for everyone. It is expensive.

It's an expensive upfront investment. Oftentimes, if you have the solar system that you've already invested in, having that solar battery allows you to capture that alternative clean energy to be able to use it in times of emergency. They keep the lights on. They preserve food. They power medical devices, and they allow businesses to stay open.

Now there is a broader benefit I wanna talk about when distributing energy resources like battery storage are deployed. They reduce the strain on the grid during peak demand and emergencies. According to the California Energy Commission, expanding energy storage is a key part of California's long term, reliability strategy. This bill adds to that, especially at extreme weather events where they become more frequent. Many of our utility companies, have begun doing ads on social media throughout my district, for free energy storage, solar energy storage batteries.

But when you give them your ZIP code, you get a do not qualify response. So, we know that there are solutions out there, and we know that solar battery storage is part of those solutions. But getting having that access to some of those high fire severity zones is just as important.

So if utility companies have the incentives and the carrots to provide these free of cost, the least that we can do as legislators is to fill the gap for those that don't qualify because of their ZIP code. So this bill does two things at once.

It protects individual households and businesses, and it strengthens the overall grid resilience. It's also targeted. Okay? The credit is limited to designated wildfire zones and to small businesses with average gross receipts of 15,000,000 or less. Okay?

So very targeted. It ensures the benefit reaches the communities that need it most. So in District 4, resilience means being able to function when the systems that we rely on fail. So it means families can stay in their homes during an outage. It means businesses can keep their doors open and keep employees employed, and it means that we're not having to leave rural Californians behind as our risks increase.

So, we ask that these communities we ask these communities to bear the burden of wildfire risk, and we ask them to accept power shut offs in the name of safety. So, what Senate Bill 1118 says is that we will also allow them to give them the tools to adapt as we ask them to accept these challenges. It's practical, it's targeted, and it responds directly to growing challenges in our state.

So I respectfully ask for for your aye vote, and I know that there may be questions.

Thank you, Senator, for your presentation. Do you have any major witnesses?

I do have a representative from our propane and gas. I'll invite them forward.

Mister chairman and members, Paul Yoder on behalf of the Western Propane and Gas Association in strong support. Thank you.

Any other members of the public wish to speak in support of this bill?

Good morning once again. Kendra Begley on behalf of the Town of Truckee in support.

Thank you. Seeing no others, is there any major witnesses in opposition? Any members of the public wish to voice opposition? Seeing none, I will ask members of the committee, for questions or comments. Any members wish to have a comment?

Senator Becker?

So we you know, we've had these issues across the state. Right? So and with a major outage in in my district for a bunch of days, a year or two ago. So, PG&E always says that they will reimburse for things that are lost and food. So I know it's not probably an ideal process, but that is the way it's supposed to function.

What is what's been the experience? Why is that not sufficient?

I think with any bureaucracy, you know, there is goodwill and wanting to reimburse for loss. But when it is constant and you and you understand the loss of quality of life, quality of life, how do you put a dollar amount to that? So, I think this is one of those situations where sometimes the shutoffs happen with very little notice.

So with those who are losing medication, you know going days without access to that medication, how do you put a dollar amount to that? Not having access to water, I think that's it's very hard to quantify that.

So I think, you know the tangible loss for businesses would be having to close down and the revenue. But again, it's the intangible that is very hard to measure when you're filling out those paperwork. I have tried to fill out that paperwork myself for the loss of a full freezer of meat that was supposed to last me all year long.

And you know, the amount of paperwork, you know, it was not worth my time to do all that paperwork, so I took it as a loss. But many of us who live in rural communities, you know, we stock up with meats around the fair time, and fill freezers.

Those of us who hunt do the same thing. So it's very expensive and it's difficult to survive when you don't have that backup generator backup power.

Yeah. And I certainly understand the, you know the loss and the frustration and the I mean, just the especially as your examples of the hunter rights. You know, the expect to last a year or put a lot of effort into. But it's so but in your ability, how would that still be quantified?

I mean, in the PG&E situation, right, it's the bureaucracy, it's the paperwork you have to but here is it just sort of self-attested that, you know, this was the loss and therefore you get half of that loss?

Like, how how is that calculated?

Yeah. So this bill is not around loss. It's about again, providing incentive. So if you purchase, a generator, you would be eligible for this tax incentive. If you, purchase and install a soul solar battery backup, you would be eligible for this for this tax incentive.

Again, through the numerous town halls that I had in my district on wildfire risk reduction and insurance affordability, I did straw polls. How many people already have a generator? Many have old generators, which again, when we're looking at moving towards clean energy. We do know that there's newer generators on the market, that balance the use of propane and other energy sources. And so, it gives those who have who are already relied on generators that opportunity to maybe even trade up.

I think the solar battery backup system is essential because when I did straw poll, many of my constituents, did not have that, so they had invested already in solar. But when it came to being able to store that, is where the money fell short. That investment fell short. So, I think this bill you know, balances both aspects because the reality is propane is still in existence, for cooking and heating, and we have generators that require that that propane as well.

So okay. Now I understand a little bit about how it works now. The there are many who so when it's credits, right? there are many households lower in income households because we have a very progressive tax system that, you know, don't pay taxes or pay a low amount. Right? Very that wouldn't be able to use this or use it fully.

How would you respond? Like, it feels like there's a concern that those who really most need it

Right. Right. But we know that

would not benefit.

Well, we know that once a home is equipped with solar panels and equipped with a generator and equipped with solar battery, it stays with the home. So it also helps to lift up our real estate market that allows to have these incentives to sell homes and to buy homes within real high fire areas.

So the intent with this is really to provide more incentives and more solutions so that not only are we uplifting the real estate market, we're also balancing our approach to fossil fuels and clean energy. At the same time, we're saying that when you have the upfront investment in your home to have access to basic facilities while you were, living there in time of a crisis, that now you're passing those benefits on to the next homeowner or to the next renter.

So that's an incentive there as well.

You know, we've we and the legislator have made, you know incentives priority, incentives a priority to move into clean energy options. And so, like I mentioned, the utility companies have been doing quite a lot of work in providing free generators and free solar batteries to certain communities. I did not qualify for one of those because of my zip code, not even my income, but just my zip code.

And this is what we're continuing to see in the wildfire urban interface areas, those high fire risk areas. So if we're saying, yes, we have we know that solar batteries work.

We know that generators work. We know that they're good for the communities, but we're not giving them to the communities that are in the highest fire risk areas, then it's kind of a false carrot. So that's what we're trying to balance with this bill, is ensure that those who are willing to have the upfront investment to equip their homes with generators and with solar batteries we'll see a incentive tax break incentive.

Yeah. And there's no from the utilities here that that we know. No.

I don't have anyone from the utilities.

Yeah. I mean, is it I'm willing to consider that I I'd love to hear from the utilities about the programs that they already have and how this because this is a substantial you know, it says it would result in 90,000,000 in '26, '27, 200,000,000 in '27, '28, '22, 50,000,000. So, I just I would like to consider all terms. So I'm gonna continue to listen here today, but I actually appreciate what you're trying to do.

I just I feel like there's some other things out there that that we're not quite thinking of as alternatives here.

I'm gonna turn it over to my colleague.

So this bill does establish a framework for relief. So by passing this as policy now, it gives us the ability to signal that this is a priority. The Governor will be watching what we do here in the legislature and how we attack bringing the cost of insurance affordability down. Right? This is also it's triggered by an appropriation allotment.

So you know, coming out of policy committee, if we can agree that it is good policy, but yet, you know, we still have some questions. It gives this bill an opportunity to continue to move forward. I myself would love to have that those conversations with the utility companies as well, because I think there's an incentive for them as well to expand into other ZIP codes.

So if if we don't have to legislate this, and we can continue to partner with the utilities throughout California, who want to who want to provide this technology in rural communities, I think it's a win-win all around. Right?

That is why there is a sunset of 2032. We want to look at the total value of credits allowed. If they're significantly higher than anticipated, then, you know, we come back to the drawing board. But this framework is important to really signal that that fossil fuel clean energy balance is important to us. So I hope this bill helps to create that for you and urges you to vote in support.

I last comment. I again, I appreciate it. I know initially when the power shut up program was initially it was very broad. It was not targeted well at all and had a lot of repercussions. I know it is getting more targeted.

My colleague was saying so how many hours a year was it is?

Well, I had I recorded 21 hours in May and this was for brush clearing, for tree clearing. It was not for imminent danger.

Yeah. Because I know they have been more targeted. So there's a little concern, I mean, especially the diesel backup, which there was a lot of during that time and it does not, you know, fit with our goals. Although, you know, we wanted in emergency situations, but it's just sort of I'm trying to understand how much because they have gotten a lot more targeted. I don't have all the data here.

I just know that it I agree, like, it was and across the state, you know, way too wide, but I know they have gotten more targeted, which would be helpful. Anyway, we'll continue to

Thank you, Mister chair, and thank you to the author for bringing this bill forward with your intent. So, I as in the last bill that you just presented before us, there was a tremendous cost benefit to it. I'm not convinced that I'm seeing the cost benefit like I did in the last bill, especially with the expenditure of it. But that's an appropriations conversation, which I sit on appropriations. So, I'd be more than willing to have that conversation.

However, to me this bill is more than just about an appropriation or the cost. To me, this is about a bill in the last bill, if the house didn't survive a wildfire event, there was a tremendous loss for to Prop 90. In this particular case, we're not talking about whether a house stands or not. We're talking about the convenience. You mentioned twenty-one hours in May.

Was that twenty one hours straight, or was that broken up in a different time?

It's broken up into four different days.

In four different dates. So an average of about five hours.

Well, one was one was a full eight hours. So at that point, you're throwing out everything in the fridge for eight hours.

Well, you need to get a new refrigerator then because in most cases, refrigerators are designed to go without power and still keep the food whole Yeah. For longer than eight hours. So I get it. Yeah.

New technology. I totally get it. So with that, I am I'm not opt to do it like what I did on the last bill provider. But I'll be watching to see if this bill moves forward.

Thank you. And I appreciate, you know, the dialogue because, you know, I I'm confident that we are all looking at how to bring the cost of insurance down and how to protect Prop 98 and how to give all Californians hope that we're moving in the direction of protecting property and life.

And again, like, this is part of a bill package that we put forward, trying to come at it from different angles based on feedback that we've gotten from a district and in response to our constituent.

I appreciate that. However, where do we where do we pick who gets a tax credit, who doesn't for all kinds of different issues that come not just with a generator, but with other issues that might happen during a power loss event.

Thank you for your comment.

Well, I thank Senator Grayson and also Senator Becker for their comments. And, Senator, I appreciate your work on this, and we have worked together on this. I have some responsibilities to ensure that the impact on the budget is well justified. And I feel a couple of concerns here. First of all, we're using taxpayer money to benefit individuals, and those are investments I think they're good, but I'm not sure it's something that the state should be picking up, which would increase the value of the property.

Also, I don't like the use of diesel generators. They're loud. They put up a lot of smoke. And for those reasons, I'm gonna I'm not gonna be able to support your bill.

Thank you. You hear me out

Yes. Senator, would you like to close?

I just want to thank the committee for allowing us to present. I think this is a worthwhile issue that we'll continue to work on and bring back to our constituents for more feedback. And you know, I just I pray for all those families that have you know, lost their homes and lives, family members, in wildfires in California. And I just wanna continue to express that.

The Senate, including my colleagues across the aisle, continue to work very hard to come up with solutions that are tangible.

So thank you so much, and I urge an aye vote.

Alright. Senator Valladres?

She's allowed me to go forward because she actually two fellas tonight.

Okay. Alright. I'll thank you, Senator Richardson. I invite you to the table. And this is I file item six, SB 1151.

I'm sorry. It's File item 6 SB 1249. Senator Richardson, you may begin when ready.

Thank you, Mister chair and members of the committee. In California, there are approximately 151,000 adults between the ages of 86 and 90. As MediCare costs have risen by 10% and inflation has reached 3.3%, social security benefits for our seniors have only increased 2.8%. Recent federal legislation recognizes such financial hardships that our seniors are facing and have implemented a temporary $6,000 senior tax deduction to reduce economic burdens. California should take a similar action to support our senior population today.

In 2022 alone, 39.3% of Californians at the age of 85 and above live 200% below the federal poverty line. Many elderly individuals relying on a fixed or semi fixed incomes spend a disproportionate share of their income in health care, housing, and food expenses, which are prone to rapid inflation.

SB 1249 would help alleviate such economic challenges by easing the tax burden on those least able to absorb the cost this bill would provide senior taxpayers only between the ages of 86 and 90 with a $6,000 tax deduction until the taxable year of 2032 starting with 90-year-olds. By providing targeted relief, SB 1249 aims to improve the financial stability and independence of older adults amid rising cost of living pressures. With me here to testify is Amber King with Leading Age California.

She is only going to give a brief statement because I promised Senator Valladares that I would be quick, and she'll be able to answer any supporting questions.

Thank you. Senator Amber, you are recognized.

Thank you, mister chair and members. Amber King with LeadingAge California representing nonprofit providers of care services and housing for older adults here in strong support of SB 1249 that would help provide ease financial pressures to improve stability and support independence for some of our most vulnerable older adults in the state. I'm happy to answer any questions and urge your aye vote. Thank you.

I thank the witnesses. Are there any members of the public that wish to voice their support? Please state your name and your affiliation.

My name is, CT Weber, Vice president of CARA, California Alliance for Retired Americans, speaking on behalf of the board in support of SB 1249. Thank you.

Thank you.

Thank you.

Are there any major witnesses in opposition? Seeing none, are there any members of the public that wish to voice their opposition to this measure? Seeing none, I will ask members of the committee if, anyone has a comment or question.

Seeing none, Senator, thank you for bringing this bill forward. We've worked together on this with the committee to make sure that we minimize impact on the on the budget.

And basically, you're helping seniors who are the least able to absorb the pressures of increased cost of living. It's deeply appreciated, and the bill is narrow narrowly tailored for older senior seniors age 86 and up. So I'm happy to support the measure. Would you like to close?

I respectfully ask for your aye vote on SB 1249.

Nice closing. Do we have a motion? So moved. We have a motion. Secretary, we call the roll.

Senators McNerney?

Aye.

Apologies. Do pass the committee on appropriations. I'll go. Ashby? Becker?

Aye.

Becker, aye. Grayson?

Aye.

Grayson, aye. 3-0.

The vote is 3-0. The bill is on call. Thank you, Senator.

I didn't hear you calling.

Sorry. I apologize. Alvaro Gil?

Aye.

Alvaro Gil, aye.

4-0.

Alvaro Gill, voice is an aye. The voice is now, voice is not vote is now 4-0. The bill is still on call.

Any word on when miss, Valladares will be available?

No?

Where are the authors when you need them? They were all here earlier.

The committee will now go into recess.

Now come back into session. We have one of the authors here, Senator Archuleta. This is Senate this is file item number nine, Senate Bill 1424. Senator Archuleta, would you present your bill?

Good morning, Mister chair and members. Thank you so much for having me this morning, and I know it's been a busy day for you. I'm here to present my bill, which is very, very important to our environment and the future of hydrogen and our zero emissions, what we're trying to do. And again, thank me for allowing to be here and present Senate Bill 1424 dealing with partial tax exemption for zero emission vehicle refueling equipment.

I would like to start by thanking the chair and his staff for working with me on this important measure.

Senate Bill 1424 will allow zero emission vehicle refueling equipment, including charging and hydrogen stations, to qualify for the state's existing partial sales and use tax program intended to support advanced manufacturing and power generation. This program is administered by the California Department of Tax and Fee Administration and is scheduled to sunset on 07/01/2030. So, assuming this bill is passed and signed, this bill would be a term limited to a three-year partial tax exemption. Three years.

California transportation sector accounts for roughly 50% of the state's green gas emissions and about 90% of the diesel particulate matter pollution, making this making the transition to zero or near zero emission technologies essential to achieving the state's climate and air quality goals.

To this end, California has established ambiguous zero emission vehicle deployment targets through both legislation and executive action. Achieving these goals depends heavily on the availability of a robust refueling network which Senate Bill 1424 is designed to support. By expanding the existing partial sales tax exemption to include a broader range of zero emission vehicles refueling equipment, California can help mitigate the significant impacts stemming from the reduced federal support for plane transportation.

These challenges have been further complicated by the federal actions under the Trump administration that have undermined key programs California has relied on such as natural, a National Electric Vehicle Infrastructure program, also known as NEVI program, and arches California's hydro hub, thereby setting back the state's transportation decarbonization efforts.

So Senate Bill 1424 seeks to support those that actively investing in decarbonization of California's transportation sector by providing a term limited exemption from the state's portion of the sales and use tax for zero emission vehicles refueling equipment.

This targeted initiative will reduce upfront capital costs for infrastructure developers, helps projects pencil out, and accelerate the deployment of both charging and hydrogen refueling networks at the scale required to meet California's climate and clean air markets and mandates. Without this support, California risks slower infrastructure expansion, higher costs for operators and consumers, and delays in achieving the emissions of reductions and targets the broader transportation decarbonization goals. This bill has received no votes, has no known opposition, and is supported by both the charging and hydrogen community.

For these reasons, I respectfully ask your aye vote on Senate Bill 1424. With me today, I have Teresa Cooke with the California Hydrogen Coalition and Julie Michlovsky Ball representing the California Electric Transportation Coalition to testify in support to help answer any questions.

What an opportunity to have hydrogen and the electrical world coming together for the betterment of California's climate and future. Thank you, Mister chairman and I appreciate the opportunity.

Thank you, Senator, for your presentation. Your witnesses are now, acknowledged.

Thank you, Senator. Good morning. Theresa Cooke on behalf of the California Hydrogen Coalition. I wanna reiterate the thanks that the Senator gave to the chair and in particular staff for their work, refining and improving the bill. We in California have ambitious zero emission vehicle goals, as you are all, intimately aware, but those goals are only as strong as the availability of fueling infrastructure to support them.

So to that end, 1424 provides another support mechanism to get us much closer to the fueling infrastructure targets that the state has laid out for us, both in charging and hydrogen. Really want to reiterate the Senator's comments about the damage done by the Current Federal Administration in undoing a lot of the wonderful policies put in place during the Biden administration.

And so again, for these reasons, we appreciate your consideration of this bill and your willingness to, support another bill that would go a long way to help us build out the infrastructure that we need to go where we need to go. Thank you.

Yeah. Good good morning. Julie Malinowski Ball on behalf of the California Electric Transportation Coalition in support of SB 1424. I think first, Cal ETC appreciates, once again, sitting next to the hydrogen industry, supporting a technology neutral zero emission infrastructure incentive proposal. You know, and while California can't make up for all the problems that the Federal Government has created, we do believe that this bill is a meaningful incentive to build out our charging infrastructure that supports our growing EV market.

Money may not solve all the barriers to EV charging, but we think that this measure helps chip away at our very ample to do list. And if it's not working, the bill has language in there that says that CARB and CEC can do review to see if any meaningful progress has been made. Because of this analysis, we think that's good government, and we ask for your support.

Thank the witnesses. Are there any members of the public that wish to voice support? Are there any major witnesses in opposition? Seeing none, any members of the public wish to voice opposition? Seeing none, I will now ask if there are any members of the committee that wish to ask questions or have comments.

Senator Becker, you recognized?

I just wanna say I very much appreciate the author's long advocacy and and work in this area and just appreciate you. And, again, all the work that you've done here, I've gotten to see an Energy Committee and now here working with us. Thank you.

Thank you, Senator.

Vice Chair Alvarado-Gil, do you have a comments?

Yes. Thank you so much. I wanna thank the author for bringing this forward, and I think that your work and your commitment to representing your constituents and to the future of California is unabridged, and undo duplicative. I think your bill stands alone without the bashing of our president and the federal comments. So, I just wanna tell you that I support your bill but could have done without the commentary. So thank you.

Senator, as you probably know, I'm a strong proponent for renewable energy, and the state's infrastructure needs to be upgraded so that we can meet our our goals. So this zero emission vehicle initiative is a priority. However, as I mentioned earlier, I do have responsibilities, and I I see that the industry does receive a lot of support from other various programs.

And so, I I'm not opposed to this, but I'd like to see, you work with opposition so that we can get this, tuned up a little bit better. And with that, I'm gonna give you an aye vote so that we can move it forward.

And do we have a motion?

So moved, would you please call the roll?

Motion is do passed to the committee on appropriations. Senators McNerney?

Aye.

McNerney, aye. Alvarado-Gil?

Aye.

Alvarado-Gil, aye. Ashby? Becker?

Aye.

Becker, aye. Grayson?

Aye.

Grayson, aye.

4-0.

The vote is 4-0. The bill is now on call. Thank you, Senator Archuleta. Any witnesses?

Alright. The bill is one zero and is now on call. Finally, Senator Valvadares, you're welcome to come up and thank you for, allowing Senator Richardson in in in ahead of you enroll. And, you are now, with s with file item three, SB 1113. Please proceed when ready.

Thank you, mister chair and members, for the opportunity to present Senate bill 1113. Under current law, California taxes the profits of US flag international shipping companies that are exempt under the federal tonnage tax system, even when those vessels never call at a California port. This lack of conformity effectively penalizes companies operating compliance with federal law.

As a result, the current policy increases operating costs, undermines the global competitiveness of American carriers, discourages investment in The US flag vessels and shipbuilding, and runs counter to bipartisan federal efforts to rebuild the maritime fleet. It also has national security implications, reducing the availability of US commercial vessels during times of emergency.

Senate bill 1113 simply aligns California's tax law with the federal tonnage rate regimen under internal revenue code subchapter r, ensuring consistent treatment for qualifying US flag international shipping companies. This narrow technical update modernizes California's tax policy and ensures the state supports rather than undermines our national maritime strategy. Joining me today to testify is Kelsey Morgan with Saltchuk and Matt Robinson on behalf of the Pacific Merchant Shipping Association.

You're recognized Kelsey.

Chair and members of the committee, I thank you for the opportunity to testify today. My name is Kelsey Morgan, director of government affairs with Saltchuk. Saltchuk is a privately owned group of maritime transportation and energy distribution companies. Many of which support California's ports and supply chains. We have also built many large ocean going vessels at the NASCO shipyard in San Diego, including the world's first LNG powered container ships.

We are here today in strong support of Senate bill 1113 because it addresses a tax policy misalignment that directly impacts American ship owners doing business in California. The federal US tonnage tax system was enacted by Congress in 2004 in response to the massive decline in US flagged international vessels from the previous two decades.

Tonnage tax systems provide an alternative to regular corporate income tax and are the primary tool used by governments around the globe to encourage private investment in larger international commercial fleets owned and flagged in their nations. In America, maintaining and growing the number of US flag vessels is vital for national security. Our US military depends heavily on these US flag vessels crude by US Mariners to deliver military cargo and essential supplies that support our troops all over the world.

The US tonnage tax system provides a key input that makes owning and operating these US flagged vessels economically viable. Foreign owned, foreign flagged vessels calling on US ports do not pay corporate income tax at the federal or California state level regardless of this bill. California is crucial to The US flag fleet and US ship building and contribute significantly to the strength and resilience of our nation's maritime workforce.

Many of the next generation of US merchant mariners that will support our military efforts abroad, aboard US flagships, will train just an hour from where we are today at Cal Poly Maritime Academy. Senate bill 1113 is a targeted fix.

It aligns California corporate tax policy with an existing federal framework, reducing unnecessary complexity and supporting the American companies like Saltchuk that will continue to make significant long term investments in our nation's ocean going commercial vessels and the shore side communities that support them. For these reasons, Solcek respects respectfully urges your aye vote on SB 1113. Thank you.

Thank you, mister chair. As the Senator noted, I'm Matt Robinson on behalf of the Pacific Merchant Shipping Association. Our members include the ocean going carriers and the marine terminal operators at our California public seaports. Appreciate the opportunity, and testifying today in strong support of SB 1113.

S B 1113 will align the tax structure with the federal tax framework that is intended to ease the tax burden on The US flag vessels in international trade, so they can better compete against other foreign flagged operators.

The maritime sector operates in a uniquely international environment, and PMSA represents both US flagged and foreign flagged vessels. These companies all compete in international trade, and the federal tonnage tax has proven to be a successful and widely accepted system for taxing vessel operations fairly. Aligning California with the system is essential to ensure that our state remains competitive with other jurisdictions. However, we are currently out of step. And the way that we tax the income of US flag vessels puts those companies at a disadvantage.

SB 1113 would correct the nonconformity and remove this California only penalty on US flag vessels that no other state currently imposes. In short, SB 1113 is about maintaining California's leadership in global trade, protecting jobs and ensuring a level excuse me, a level playing field and true competition in an increasingly complex international trade marketplace. For these reasons, I respectfully ask for I vote.

I thank the author and the major witnesses. Do we have any members of the public that wish to voice support? Please state your name and your affiliation.

Hi, chair and members. Jennifer Tannehill with Aaron Reed and Associates on behalf of the California Society of Enrolled Agents in support of the conformity provisions in the bill, and then also on behalf of Matson Shipping, as a member of PMSA. Thank you.

Thank you. Seeing no more witnesses, are there any major witnesses in opposition? Please approach the speaker.

Chair and members, first of all, thank you to Senator and the sponsors of the bill. I think we have the same goal, which is to keep our ports thriving. We respectfully oppose this bill as it results in in ten years, potentially $500,000,000 impact to the general fund. We believe that these resources should not be benefiting companies that are their main interest is not the workforce that continues to move cargo. The it it incentivizes shipping companies that prioritize automation at times and reducing well paying jobs.

Port workers continue to move, goods at every port in California. Shipping companies continue to make record profits. We don't see, any of these larger large companies going out of business, profits in the billions. This would be an impact to the general fund, which means, cuts to other general services. We, respectfully oppose the bill.

To conclude your presentation, would you please give your name and your affiliation?

Yes. Marvin Pineda on behalf of the International Longshore and Warehouse Union. Thank you, Senator. Sorry about that.

Are there any members of the public, that wish to, voice opposition to the bill? Seeing none, I will turn to members of the committee to ask for comments or questions. Seeing none, sir Nevaledez, thank you for your presentation. You're patient, and I appreciate that.

This bill creates parity and advances fairness in in the state tax law for the industry, and the industry is vital to our national security and our economy. I will be supporting the bill today, but I do wanna note that we received a letter in opposition from the ILWU. It was after closing. So I hope that you I will ask you to work with that organization to to address our concerns as this bill moves forward. Senator, would you like to close?

Yes. Thank you, mister chair. And we are happy to work with opposition. You know, any amendments they have, we'd greatly appreciate. I know my team has reached out several times to try and get something, scheduled.

We'll continue to work on that and work with, all stakeholders. I do wanna clarify, that, the letter was received late, and we, again, are happy to work with them. It is this is a really simple bill. It's about keeping, American vessels competitive, and it's about conformity. That is as that's as simple as it gets, and I respectfully ask for an aye vote.

I think, Senator, do I have a motion? Yes. Moved. Please call the roll.

[Roll Call]

The vote is 4-0. The bill is on call. And now we move to item file item number four, SB 1137, again by Senator Valladares.

That's me.

Proceed when you're ready.

Okay.

So again, thank you, Mister chair and members. I'm here today to present SB 1137 the Medical Expense Deduction Act, a straightforward bill with a very simple purpose, to make California's tax code reflect the reality that getting sick is not a luxury expense. Under current law, families can only deduct medical costs that exceed 7.5% on their adjusted gross income and only if they itemize.

The vast majority of Californians do not itemize, which means they receive no relief even when facing significant out of pocket costs. SB 1137 takes a targeted approach.

It allows qualifying taxpayers to deduct medical expenses above 4% of their income, focuses the relief on those earning up to 300% of the federal poverty level, and caps the deduction at $5,000. This is a targeted responsible relief that puts real money back into the pockets of families who cannot afford to delay care, to skip prescriptions or to ignore chronic conditions. We talk a lot about affordability in this building, but health care costs are not optional.

Families cannot shop around their way out of a diagnosis or postpone necessary care. SB 1137 does not solve the broader challenges of health care affordability but is a meaningful step to ensure tax code does not add to that burden.

I respectfully ask for an aye vote. Here to ask answer any technical questions is Carlos Valdez. I will mention that this bill is a priority bill for our Legislative Hispanic Caucus.

Thank you, Senator. And are you do you have a prepared statement?

Yes.

Okay. Please proceed.

Hi. Good morning, Chair and members of the committee. My name is Carlos Valdez, here on behalf of the California Hispanic Legislative Caucus in support of SB 1137. The caucus exists to advance economic opportunity for the hard-working families in California, and one of the biggest obstacles of that is medical cost. Not just a catastrophic illness but the steady grinding cost of staying healthy on a plan that asks you to pay thousands before it kicks in.

For Latino families for working in Middle-class families, that cost doesn't hurt. Just doesn't hurt. It compounds. It sets families back every year quietly, and nobody talks about it. I'll be honest with you.

This is kind of personal for me. For years, my family was in a high premium, high deductible plan, and with coverage then, it started to expand several thousand dollars. My wife is a public school teacher, and at times, we were surviving just on her income. We were struggling the way people imagine when you think about those who need help. But every month, that premium came out of our tight budget.

Every year was hard to hit that deductible, and we made too much money to get any assistance, but not enough to absorb that expense, without having to make health care choices at the end of each month. That's a gap that this bill is about, and it's a big one. How many families in California are paying thousands of out of pocket medical costs and getting zero relief at tax time? A lot. Because the current deduction was never designed for them.

It was designed for the 50% of tax filers who itemized people with accounting, people with enough deductions to make it worthwhile. SB 1137 opens that door for a lot of other people. If you spend a significant portion of your income on health care, that tax code should account for that. These families have done everything right and still come up short every time. What this bill, and this is what this bill and this vote is about.

On behalf of the California Hispanic Legislative Caucus, I raise your aye vote.

I thank the witness. Are there any members of the public that wish to voice their support for this bill? Seeing none, is there a witness, in opposition major witness in opposition? Seeing none, are there any members of the public that wish to voice opposition? Seeing none, I will ask members of the committee.

Seeing none, Senator, thank you for bringing this forward. Insufficient insurance, and medical costs are a big burden, for many families in America and in California. Currently, those who itemize can claim deductions, from unreimbursed medical expenses, but usually these itemizers are folks with higher income and ability to take those, deductions. Your bill allows the above the line deduction for families with incomes of less than 300% of the federal poverty level.

This does bring important parity for those most affected, by the poor decisions made in Washington, which have made health care, harder to obtain for working Californians.

I will be supporting your bill today. Senator, would you like to close?

I respectfully ask for an aye vote.

Nice closing. Thank you. So do we have a motion? So moved.

Then secretary, would you please call the roll?

Motion is do passed to the committee on appropriations. Senators McNerney.

McNerney, aye. Alvarado-Gil?

Aye.

Aye.

Alvarado-Gil, aye. Ashby?

Aye.

Ashby, aye. Becker? Grayson?

Aye.

Grayson, aye. 4-0.

The vote is 4-0. The bill is on call. Next, we have finally, Senator Arreguin, you get to do your bill. This is file item 8, SB1415. Please proceed when ready.

They say we save the best for last. Well, good morning, Mister chair and members of the committee. I'm pleased to present SB 1415, a bill intended to catalyze much needed missing middle housing for modern income Californians such as teachers, firefighters, police officers, nurses, and construction workers. Currently, California's housing policy tools are largely designed to support either very low income or low-income households.

While middle income families, often defined as those earning roughly 80 to 120% of the area median income, are left with few options.

Tax credits, bond revenues, and other state housing programs target lower income households with very few programs available for people with moderate incomes. These households earn too much to qualify for traditional affordable housing programs, but not enough to afford market rate housing in many parts of the state. In turn, we continue to see a growing gap in housing production for working families and see working families lead the state of California.

Existing property tax law provides a welfare exemption that's help subsidized housing for low-income households, but it does not extend the same benefits to moderate income housing. As a result, developers are less likely to build mixed income projects that include middle income units, even though that is where significant portion of unmet housing need exists.

Senate bill 1415 addresses this gap by extending a partial welfare property tax exemption to rental housing that includes units for both low and moderate income households. Specifically, the bill allows a proportional property tax exemption based on the share of units dedicated to those income levels, similar to how the exemption currently works for low income housing.

Ultimately, SB 1415 is about filling a critical gap in our housing policy, ensuring that California is not only building housing for the lowest income households, but also for the workforce that keeps our communities running. Since this bill was introduced, I've been in conversation with a variety of stakeholders, including the California Assessors Association. We are committed to working with the assessors to hear their input and make sure that if this law is passed, it is implementable at the County level.

In addition, we are in the process of reviewing proposed amendments with sponsors to reduce costs and take into consideration stakeholder input. I respectfully ask for an aye vote on this important policy to unlock workforce housing in California. And with me to testify in support of SB 1415 is Michael Lane, the State Policy Director at the San Francisco Area Planning and Urban Research Association or SPUR, and Daniel Adams, Director of the San Francisco Mayor's Office of Housing Committee Development on behalf of Mayor Daniel Lurie.

Good morning, chair and committee members. I'm Daniel Adams. I'm the Director of the Mayor's Office of Housing and Community Development in San Francisco. And I am here to respectfully urge you to support SB 1415, which would update our welfare property tax exemption to support, as the Senator referenced, moderate income housing, providing a reliable, non-competitive financing tool to incentivize missing middle-income housing.

This is critical for our workforce that keeps our communities running, who often, again, who often earn too much to qualify for affordable housing, but can't afford market rate housing where they live.

In San Francisco, for example, we recently opened up an educator housing facility. We received way too many applications to consider all of them. There's incredible demand for this kind of housing in San Francisco. And again, these are folks who generally don't meet the 80% AMI or below threshold for traditional affordable housing, but to afford a market rent is beyond their means. Importantly, the proposed expansion of the welfare tax exemption would be focused exclusively on the production of net new units.

These would be new units coming online, and the tax exemption is time limited to just 20 years, while the affordability restriction would be much longer at 55 years. So in summary, this bill would incentivize investment in moderate income housing, a sector that is underserved by current incentives. It will stimulate new production of much needed rental housing across the state where we have an extraordinary gap between housing need and housing provision.

And importantly, it will create assets which over the long term will contribute to the positively to the tax rules given that the tax abatement is only 20 years and the life of the project will extend far beyond that. With the for those reasons, I respectfully ask your vote for an aye on this measure. Thank you.

Mister Chairman, my name is Michael Lane, the State Policy Director at the San Francisco Bay Area. Deed restricted affordable housing for moderate income households is very difficult to finance because these tenants earn too much for the vast majority of public subsidy programs, but not enough to afford market rents. As we review annual progress reports submitted to HCD by jurisdictions across the state, it is exceedingly rare to find deed restricted moderate-income housing proposed or approved.

SB 1415 will improve feasibility for mixed income housing projects that include moderate income units while ensuring the benefit of the property tax welfare exemption flows to tenants in the form of below market rents. This exemption is limited to a non profit organizations for a period of twenty years, which aligns with typical financing terms and requires market studies to demonstrate that rents charged are at least 10% below market rate.

SB 1450 will facilitate the financing of exactly the type of mixed income housing developments often requested by Planning Commissioners, City Council members, and County Supervisors, and that will allow them to make progress toward the arena targets while serving a broader range of households and workforce. We respect the request an aye vote.

I thank the witnesses. Do we have any members of the public who wish to, voice their support? Please state your name and your affiliation.

Good morning. Eileen Mariano on behalf of the bill sponsor, Mayor Daniel Lurie, in support.

Good morning, Mister chairman and members. Paul Bauer with Actum on behalf of LW Partners in support of the bill. Thank you.

Thank you. Thank you. Are there any primary witnesses in opposition? Please approach the microphone.

Good Morning, Chair and members. Kristen DePaul, Modoc County Assessor and Recorder, and President of the California Assessors Association. On behalf of the California Assessors Association, we do oppose unless amended. The author has been in contact with us, and we have been working with him on amendments, and we are working on some mockups, and look forward to working with the author. Thank you.

Any other witnesses in support? Oh, I'm sorry. In opposition? Please approach the microphone.

Good afternoon, chair and members. Tiyesha Watts with the California Housing Partnership. The Housing Partnership does not have a formal position, but we were one of the stakeholders who expects concerns to the Senator's office, and I wanted to say for the record that they have been willing to work with us and accept our amendments, specifically ensuring that we have guardrails to ensure that the bill actually produces affordability and not producing a loophole for a developer to take advantage of the welfare tax exemption.

That's something that the partnership has been working to preserve the integrity of it. And then also making sure that the independent market studies are reviewed by a housing agency.

So we wanna make sure that we are on a record to state that the Senator has agreed to work with us and accept our amendments and looking forward to seeing those in print.

Thank you. Please state your name and your affiliation only.

Purva Bhattacharjee with Housing California. We also don't have an official position on the bill but wanna thank the author for committing to resolve our concerns. Thank you.

Thank you. With that, I will see if members of the committee wish to make comments or questions, have questions? Seeing none. Senator, I think this is pretty straightforward. The bill is a potential way to increase rental housing supply and moderate housing in housing supply, so that's important for our economy and for the state of our well-being here.

I am happy to support your bill. Would you like to close?

Respectfully ask for your aye vote.

Very good closing. Thank you, Senator. Do we have a motion?

So, moved.

Senator Ashby, moves. So, secretary, would you please call the roll?

Motion is do passed to the committee on appropriation. Senators McNerney?

Aye.

McNerney, aye. Alvarado-Gil?

No.

Alvarado-Gil, no. Ashby?

Aye.

Ashby, aye. Becker? Grayson?

Aye.

Grayson, aye. 3-1.

3-1. The bill is on call. And now we will move to. Thank you, Senator, for your presentation. I will move to opening up the bills that were on call. Secretary, would you call the rules on those?

[Roll Call]

[Roll Call]

The vote is four zero. The bill is out. The committee now concludes.