Bill Text: CA SB167 | 2023-2024 | Regular Session | Chaptered

California Senate Bill 167

Bill Title: Taxation.

Spectrum: Committee Bill

Status: (Passed) 2024-06-27 - Chaptered by Secretary of State. Chapter 34, Statutes of 2024. [SB167 Detail]

Download: California-2023-SB167-Chaptered.html

Senate Bill No. 167

CHAPTER 34

An act to amend Section 11340.9 of the Government Code, to amend Section 25299.81 of the Health and Safety Code, to amend Sections 42885, 42886.1, and 42889 of, and to repeal Section 42882 of, the Public Resources Code, to amend Sections 6902.5, 7103, 17052.1, 17052.2, 17209, 17260, 17275.5, 17681, 18416.5, 18572, 19164, 19187, 23036, 24357, 24831, and 50108 of, to amend and repeal Sections 17052.8, 19378, and 23604 of, to amend, repeal, and add Sections 6055 and 6203.5 of, to add Sections 17039.4, 17275.6, 17276.24, 23036.4, 24416.24, and 25128.9 to, and to repeal Sections 17681.3, 17681.6, 24423, 24831.3, and 24831.6 of, the Revenue and Taxation Code, and to amend Section 8163 of the Welfare and Institutions Code, relating to taxation, and making an appropriation therefor, to take effect immediately, bill related to the budget.

[ Approved by Governor June 27, 2024. Filed with Secretary of State June 27, 2024. ]

LEGISLATIVE COUNSEL'S DIGEST

SB 167, Committee on Budget and Fiscal Review. Taxation.

(1) The Administrative Procedure Act governs the procedure for the adoption, amendment, or repeal of regulations by state agencies and for the review of those regulatory actions by the Office of Administrative Law. Existing law makes the act inapplicable in certain circumstances, including pursuant to a legal ruling of counsel issued by the Franchise Tax Board or the State Board of Equalization.

This bill would also make the act inapplicable pursuant to a legal ruling of counsel issued by the California Department of Tax and Fee Administration.

(2) The California Tire Recycling Act, until January 1, 2034, requires a person who purchases a new tire, as defined, to pay a California tire fee of $1.75 per tire, for deposit, except for 1¹/₂% retained by retailers and as provided below, in the California Tire Recycling Management Fund for expenditure by the Department of Resources Recycling and Recovery upon appropriation by the Legislature for prescribed purposes related to disposal and use of used tires. Commencing January 1, 2034, existing law reduces the California tire fee to $0.75 per tire and changes the retailers’ share to 3%. Existing law authorizes the department, in carrying out the act, to solicit and use any and all expertise available in, and to contract or cooperate with, other state agencies, as provided. Existing law authorizes the department to contract with the California Department of Tax and Fee Administration to collect the California tire fee. Existing law requires the department, or its authorized agent, to be reimbursed for its costs of collection, auditing, and making refunds associated with the California Tire Recycling Management Fund, in an amount not to exceed 3% of the total annual revenue deposited in the fund.

Existing law requires the payment of sales and use taxes, and specified taxes, fees, and surcharges that are administered by the California Department of Tax and Fee Administration under the provisions of the Sales and Use Tax Law and the Fee Collection Procedures Law, respectively. A violation of the Fee Collection Procedures Law is a crime.

This bill would repeal the authorization to solicit and use any and all expertise available in, and to contract or cooperate with, other state agencies for purposes of the California Tire Recycling Act. The bill would also repeal the requirement that the department be reimbursed for its costs of collection, auditing, and making refunds associated with the California Tire Recycling Management Fund, as described. The bill would also require the California Department of Tax and Fee Administration to collect the fee imposed by the act pursuant to the Fee Collection Procedures Law. By expanding the scope of crimes, the bill would impose a state-mandated local program.

(3) The Sales and Use Tax Law (SUT) imposes taxes on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state, measured by sales price. The SUT relieves a retailer of liability for sales and use tax, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off, either for income tax purposes or based on generally accepted accounting principles, as specified, and defines “retailer” for that purpose to include certain entities affiliated with the retailer, as specified. The SUT also, if an account is held by a lender, entitles a retailer or lender that makes a proper election, as specified, to a deduction or refund of the tax that the retailer has previously reported and paid if certain conditions are met, including that the account has been found worthless and written off by the lender pursuant to the provision described above.

This bill would sunset the definition of “retailer” described above on January 1, 2025, and would require an account to have been found worthless and written off by the lender before January 1, 2025, in order for the lender to be entitled to the deduction or refund described above. The bill would, on January 1, 2028, repeal the provision described above regarding accounts held by a lender.

(4) Under existing law, the taxes imposed by the Sales and Use Tax Law are due and payable to the California Department of Tax and Fee Administration on or before the last day of the month next succeeding each quarterly period. Existing law requires that a return for the preceding quarterly period be filed with the department on or before the last day of the month following each quarterly period, as provided. The Historic Venue Restoration and Resiliency Act requires a return filed with the department to report gross receipts for sales tax purposes to segregate the taxable sales on a line or a separate form, as prescribed by the department, if the place of sale in this state is on or within the real property of a confirmed historic venue, as defined, on the day of a qualified event and requires the department to report the amount of the total gross receipts segregated on the returns filed for the prior fiscal year to the Department of Finance on or before November 1 of each year, as prescribed. The act creates the Historic Venue Restoration and Resiliency Fund and continuously appropriates the moneys in the fund for transmission by the Controller to cities and counties with historic venues, as specified. The act requires an amount equal to 5% of the total amount of gross receipts, or adjusted gross receipts, for the prior fiscal year reported to the Department of Finance by the department to be included in the next annual Governor’s Budget for deposit into the fund and requires the Controller to, no later than 30 days after the enactment of the annual Budget Act, transfer the amount appropriated by the Legislature to the Controller, as described above, to the fund. Existing law repeals these provisions on July 1, 2030.

This bill would, among other changes related to the administration of the act, require that the return filed with the department, and the report to the Department of Finance, as described above, specify the taxable sales made at a qualified event for each confirmed historic venue. The bill would extend operation of the act’s provisions until November 1, 2030, but would limit the requirement to segregate taxable sales on the return to qualified events that occur on or before June 30, 2029. The bill would additionally require, no later than 15 days after enactment of the annual Budget Act, the Department of Finance to, for each confirmed historic venue located within the geographic boundaries of a city or county, report to the Controller the amounts to be allocated from the fund to each city and county, as prescribed.

The act requires a city or county with a confirmed historic venue to notify, within 90 days of any qualified event at the confirmed historic venue, any retailers subject to the return requirement described above making sales at the confirmed historic venue.

This bill would instead require a city or county, or its designee, to, at least 10 days before a qualified event scheduled to take place at a confirmed historic venue within the geographic boundaries of that city or county, notify any retailers subject to the return requirement described above that the city or county, or its designee, knows, or has reason to know, will be making sales during that qualified event of that return requirement.

The act requires, on or before January 1, 2027, and annually thereafter, a city or county, as defined, that receives money from the fund to deliver a report to the department regarding how that money is being used.

This bill would delete that provision.

The act requires the department to annually deliver a report to specified committees of the Legislature concerning, among other things, the amount of revenue transmitted to a city or county with respect to each confirmed historic venue.

This bill would specify that this annual report is due November 1 of each year. The bill would require the Controller to provide the department with the information related to the allocation of revenue to cities and counties, as described above, on or before September 1 of each year.

(5) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions in computing the income that is subject to the taxes imposed by those laws, including a deduction for a net operating loss, as specified. Existing law disallows the net operating loss deduction, as specified, for taxable years beginning on or after January 1, 2020, and before January 1, 2022.

This bill would disallow the net operating loss deduction for taxable years beginning on or after January 1, 2024, and before January 1, 2027.

(6) The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws. Existing law, for taxable years beginning on or after January 1, 2020, and before January 1, 2022, limits the total tax reduction by all business credits, as defined, to $5,000,000 per taxable year, and allows the amounts disallowed by that limit to be carried over, as specified.

This bill would similarly apply a $5,000,000 business credit limit and related carryover provisions to taxable years beginning on or after January 1, 2024, and before January 1, 2027, as provided, unless a specified exception applies. The bill would also state the intent of the Legislature to enact legislation allowing taxpayers to utilize their credits after the limitation period ends by electing to receive a refund of those tax credits, as specified.

(7) The Sales and Use Tax Law, in lieu of specified credits allowed under the Personal Income Tax Law and the Corporation Tax Law for qualified expenditures paid or incurred by a taxpayer for the production of a qualified motion picture, allows a qualified taxpayer or affiliate to make an irrevocable election to apply that income tax credit amount against qualified sales and use taxes imposed on the qualified taxpayer in the reporting periods in the following 5 years. Under existing law, amounts included in the election are excluded from the $5,000,000 business credit limitation described above.

Existing law, for irrevocable elections made on and after June 29, 2020, imposes, until January 1, 2022, a cap of $5,000,000 per taxable year on those tax credit amounts the taxpayer would otherwise be allowed to apply against those sales and use taxes for taxable years beginning on or after January 1, 2020, and before January 1, 2022, as specified.

This bill similarly, for irrevocable elections made on and after the operative date of this bill, would impose, until January 1, 2027, that $5,000,000 per taxable year cap for taxable years beginning on or after January 1, 2024, and before January 1, 2027, as specified.

(8) The Personal Income Tax Law, beginning on or after January 1, 2015, in modified conformity with federal income tax laws, allows an Earned Income Tax Credit against personal income tax and a payment from the Tax Relief and Refund Account for an allowable credit in excess of tax liability to an eligible individual that is equal to that portion of the Earned Income Tax Credit allowed by federal law, as determined by the earned income tax credit adjustment factor, as specified. That credit phases out based on specified tables as the qualified taxpayer’s income increases.

The Personal Income Tax Law also allows a refundable young child tax credit against the taxes imposed under that law for each taxable year beginning on or after January 1, 2019, and a refundable foster youth tax credit for taxable years beginning on or after January 1, 2022, to a qualified taxpayer in a specified amount multiplied by the earned income tax credit adjustment factor, as provided. Those credits are reduced by a specified amount for each $100 the qualified taxpayer earns beyond a threshold amount.

This bill would require the Franchise Tax Board to calculate a graduated reduction amount for the young child tax credit and the foster youth tax credit so that the amount of those credits is equal to zero for a qualified taxpayer that earns more than the maximum amount of earned income that results in a California Earned Income Tax Credit greater than $0. The bill would apply that new graduated reduction amount for taxable years beginning on or after January 1, 2024. By increasing the payments from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.

(9) The Corporation Tax Law, for taxable years beginning on or after January 1, 2016, and before January 1, 2031, allows, with regard to the manufacture of a new advanced strategic aircraft for the United States Air Force, a credit against the taxes imposed under that law for 17¹/₂% of qualified wages, as defined, paid or incurred by the qualified taxpayer to qualified full-time employees, subject to specified limitations. The Corporation Tax Law provides for an alternative minimum tax and provides that, except for specified credits, no credit shall reduce the regular tax, as defined, below the tentative minimum tax. Existing law, for taxable years beginning on or after January 1, 2020, and before January 1, 2026, authorizes the strategic aircraft credit to reduce the regular tax below the tentative minimum tax.

This bill would extend that authorization through taxable years beginning before January 1, 2031.

(10) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow a credit calculated based on a taxpayers qualified enhanced oil recovery costs, as defined.

This bill would provide the above-referenced credit applies for taxable years beginning before January 1, 2024, and would repeal the credit effective December 1, 2024.

(11) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow a deduction for intangible drilling and development costs in the case of oil and gas wells and geothermal wells, and a deduction for depletion of natural resource deposits. That law calculates the deduction for depletion of natural resource deposits as a percentage of gross income from the property in the case of specified natural resources, including oil, gas, and shale.

This bill would disallow the deduction for intangible drilling and development costs in the case of oil and gas wells paid or incurred on or after January 1, 2024. The bill would also disallow, for taxable years beginning on or after January 1, 2024, the calculation of depletion as a percentage of gross income from the property for specified natural resources, including coal, oil, oil shale, and gas.

(12) Existing federal law provides that refiners of crude oil with average daily refinery runs for a taxable year that are greater than 75,000 barrels cannot calculate a depletion deduction as a percentage of gross income, as described above. Existing state law does not conform to this exception for large producers.

This bill would repeal the provision that provides state law does not conform to the above-described exception.

(13) The Personal Income Tax Law conforms as of a specified date to federal income tax laws with respect to itemized deductions, including business deductions and items not deductible, except as specifically provided. The Corporation Tax Law does not conform to those federal income tax provisions, but specifically provides for deductions for purposes of that law.

Existing federal income tax laws disallow a deduction or credit for business expenses of a trade or business whose activities consist of trafficking specified controlled substances, including marijuana. For taxable years beginning on or after January 1, 2020, and before January 1, 2025, the Personal Income Tax Law does not conform to those federal income tax law provisions with respect to deductions.

This bill would extend the provisions of the Personal Income Tax Law that specifically do not conform to federal income tax law with respect to the above-referenced deductions through taxable years beginning before January 1, 2030.

(14) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax law, allow a deduction for qualified conservation contributions, as defined. Existing federal law, the Consolidated Appropriations Act, 2023, among other things, imposed limitations and reporting requirements upon the deduction for qualified conservation contributions. That act also made conforming changes relating to statute of limitations and penalties, as specified.

This bill, for contributions made on or after January 1, 2024, would conform state law to the above-referenced changes in federal law, except as provided, and would make additional conforming changes.

(15) Existing law authorizes the Franchise Tax Board to implement an alternative communication method that would allow the Franchise Tax Board to provide notification to the taxpayer in a preferred electronic communication method designated by the taxpayer that a specified notice, statement, bill, or other communication is available for viewing in the taxpayer’s folder on the Franchise Tax Board’s internet website, and would allow the taxpayer to file a protest, notification, and other communication to the Franchise Tax Board in a secure manner. This provision ceases to be operative and is repealed on January 1, 2025.

This bill would extend that provision indefinitely.

(16) The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, provide for the postponement of certain tax-related deadlines in the case of a declared state of emergency. Under existing law, the Franchise Tax Board determines whether a taxpayer is affected by a state of emergency declared by the Governor.

This bill would instead require the Director of Finance to determine whether a taxpayer is affected by a state of emergency. The bill would require the above-described federal income tax laws, relating to the postponement of certain tax-related deadlines, to apply to an impacted taxpayer during an additional relief period that requests relief, as specified. The bill would define various terms for these purposes, including an impacted taxpayer to mean a taxpayer who, among other things, requests relief, as specified, and who is required, upon request, to submit supporting documentation related to the declared disaster, as provided. The bill would define supporting documentation to mean, among other things, a statement, signed under penalty of perjury, from a tax professional indicating the impacted taxpayer’s books and records, as described, were destroyed in the disaster area or jurisdiction for which the Governor has proclaimed a state of emergency. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would authorize the Franchise Tax Board to adopt regulations that are necessary or appropriate to implement these provisions, as specified. The bill would state that its provisions apply to any federally declared disaster or Governor-proclaimed state of emergency on or after the effective date of the bill.

(17) The Personal Income Tax Law and the Corporation Tax Law authorize the Franchise Tax Board to enter an agreement for purposes of collecting delinquent accounts with respect to amounts assessed or imposed under those laws. Existing law requires the Franchise Tax Board to notify the Controller of its contracting costs under the above-described agreements, and requires the Controller to transfer that amount to the continuously appropriated Delinquent Tax Collection Fund for the purpose of reimbursing the Franchise Tax Board for its contracting costs.

This bill would repeal the provisions relating to reimbursement of the Franchise Tax Board for the above-described costs, and would terminate the Delinquent Tax Collection Fund, as of June 30, 2024.

(18) The Corporation Tax Law imposes taxes measured by net income on every corporation doing business within the limits of this state, subject to certain exceptions. In the case of a business with business income derived from or attributable to sources both within and without this state, existing law, the Uniform Division of Income for Tax Purposes Act, apportions the business income between this state and other states and foreign countries by multiplying the business income by the sales factor, except as provided. Existing law provides that certain amounts are not included in income for various reasons, including, but not limited to, exclusion, deduction, exemption, or nonrecognition. Under existing law, the Franchise Tax Board does not include in the apportionment formula amounts that do not give rise to apportionable income.

This bill would exclude from the apportionment formula any amount that does not give rise to apportionable income, consistent with existing law and practice of the Franchise Tax Board, as described above. This bill would make findings and declarations relating to the intent of the Legislature that the provisions of the bill are not a change in, but are declaratory of, existing law. The bill would apply these provisions to taxable years beginning before, on, or after the effective date of this bill.

(19) Existing law authorizes a one-time Better for Families Tax Refund payment to each qualified recipient, as defined, in an applicable amount, as specified. That law requires that each payment include an expiration date, and that any unexpended or unclaimed balance of the payments issued be returned to the state no later than May 31, 2026.

This bill would instead require any unexpended or unclaimed balance to be returned to the Franchise Tax Board, which will deposit the moneys in the General Fund.

(20) Existing law, the Barry Keene Underground Storage Tank Cleanup Trust Fund Act of 1989, requires an owner of an underground storage tank, as defined, for which a permit is required by law to pay storage fees for each gallon of petroleum placed into the tank. The act establishes the Underground Storage Tank Cleanup Fund and requires the storage fees, among other moneys, to be deposited into the fund. The act authorizes the State Water Resources Control Board to expend the moneys in the fund, upon appropriation by the Legislature, to pay for corrective actions in response to unauthorized releases from underground storage tanks and for the cleanup and oversight of unauthorized releases at abandoned tank sites, among other specified purposes.

The act provides for the repeal of certain provisions on January 1, 2036, but also provides that certain associated rights, obligations, and authorities that apply before the January 1, 2036, repeal date do not terminate upon repeal of the other provisions of the act, such as the collection of unpaid fees by the California Department of Tax and Fee Administration for deposit into the fund, as specified.

This bill would additionally provide that the making of any refunds and effecting any credits, the disposition of the moneys collected, and the commencement of any action or proceeding regarding certain fees do not terminate upon repeal of the act. The bill would also provide that the payment of administrative costs of the department and certain refunds do not terminate upon repeal of the act, as specified.

(21) The bill would state that its provisions are severable.

(22) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

(23) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(24) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: YES

The people of the State of California do enact as follows:

SECTION 1.

Section 11340.9 of the Government Code is amended to read:

11340.9.

This chapter does not apply to any of the following:

(a) An agency in the judicial or legislative branch of the state government.

(b) A legal ruling of counsel issued by the Franchise Tax Board, State Board of Equalization, or the California Department of Tax and Fee Administration.

(c) A form prescribed by a state agency or any instructions relating to the use of the form, but this provision is not a limitation on any requirement that a regulation be adopted pursuant to this chapter when one is needed to implement the law under which the form is issued.

(d) A regulation that relates only to the internal management of the state agency.

(e) A regulation that establishes criteria or guidelines to be used by the staff of an agency in performing an audit, investigation, examination, or inspection, settling a commercial dispute, negotiating a commercial arrangement, or in the defense, prosecution, or settlement of a case, if disclosure of the criteria or guidelines would do any of the following:

(1) Enable a law violator to avoid detection.

(2) Facilitate disregard of requirements imposed by law.

(3) Give clearly improper advantage to a person who is in an adverse position to the state.

(f) A regulation that embodies the only legally tenable interpretation of a provision of law.

(g) A regulation that establishes or fixes rates, prices, or tariffs.

(h) A regulation that relates to the use of public works, including streets and highways, when the effect of the regulation is indicated to the public by means of signs or signals or when the regulation determines uniform standards and specifications for official traffic control devices pursuant to Section 21400 of the Vehicle Code.

(i) A regulation that is directed to a specifically named person or to a group of persons and does not apply generally throughout the state.

SEC. 2.

Section 25299.81 of the Health and Safety Code is amended to read:

25299.81.

(a) Except as provided in subdivisions (b) and (c), this chapter shall remain in effect only until January 1, 2036, and as of that date is repealed.

(b) Notwithstanding subdivision (a), this section, Article 1 (commencing with Section 25299.10), Article 2 (commencing with Section 25299.11), and Article 4 (commencing with Section 25299.36) shall not be repealed and shall remain in effect on January 1, 2036.

(c) The repeal of certain portions of this chapter does not terminate any of the following rights, obligations, or authorities, or any provision necessary to carry out these rights and obligations:

(1) The filing and payment of claims against the fund, including the costs specified in subdivisions (c), (e), and (h) of Section 25299.51, claims filed under Section 25299.50.3, and claims for commingled plumes, as specified in Article 11 (commencing with Section 25299.90), until the moneys in the fund are exhausted. Upon exhaustion of the fund, any remaining claims shall be invalid.

(2) The repayment of loans, outstanding as of January 1, 2036, due and payable to the board.

(3) The recovery of moneys reimbursed to a claimant to which the claimant is not entitled, or the resolution of any cost recovery action.

(4) The collection of unpaid fees by the California Department of Tax and Fee Administration pursuant to the Underground Storage Tank Maintenance Fee Law (Part 26 (commencing with Section 50101) of Division 2 of the Revenue and Taxation Code) that are imposed pursuant to Article 5 (commencing with Section 25299.40), as that article read on December 31, 2035, or have become due before January 1, 2036, including any interest or penalties that accrue before, on, or after January 1, 2036, associated with those unpaid fees, the making of any refunds and effecting of any credits, the disposition of the moneys collected, and the commencement of any action or proceeding regarding fees imposed pursuant to Article 5 (commencing with Section 25299.40).

(5) The payment for the administrative costs of the California Department of Tax and Fee Administration pursuant to subdivision (b) of Section 25299.51 and refunds pursuant to subdivision (g) of Section 25299.51.

(6) (A) The filing of an application for funds from, and the making of payments from, the Underground Storage Tank Petroleum Contamination Orphan Site Cleanup Fund pursuant to Section 25299.50.2, any action for the recovery of moneys paid pursuant to Section 25299.50.2 to which the recipient is not entitled, and the resolution of that cost recovery action.

(B) Upon liquidation of funds in the Underground Storage Tank Petroleum Contamination Orphan Site Cleanup Fund, the obligation to make a payment from the Underground Storage Tank Petroleum Contamination Orphan Site Cleanup Fund is terminated.

(7) (A) The payment of loans and grants, consistent with the terms of agreements that were effective before January 1, 2036, from the fund pursuant to this chapter or the Petroleum Underground Storage Tank Financing Account pursuant to Chapter 6.76 (commencing with Section 25299.100). Upon exhaustion of the fund, any remaining claims for payment of grants or loans shall be invalid.

(B) The amount of money disbursed for grants and loans pursuant to Chapter 6.76 (commencing with Section 25299.100) shall not exceed the sum of the following:

(i) The amount that reverts to the fund pursuant to Section 25299.111.

(ii) Amounts recovered through the repayment of loans granted pursuant to Chapter 6.76 (commencing with Section 25299.100).

(iii) The resolution of any cost recovery action filed before January 1, 2036, or the initiation of an action or other collection process to recover defaulted loan moneys due to the board or to recover money paid to a grant or loan recipient pursuant to Chapter 6.76 (commencing with Section 25299.100) to which the recipient is not entitled.

(8) (A) The imposition and collection of civil liability pursuant to Article 7 (commencing with Section 25299.70), as that article read on December 31, 2035.

(B) Subparagraph (A) shall not be construed as extending or modifying any applicable statute of limitations.

(d) The board shall continuously post and update on its internet website, but at a minimum, annually on or before September 30, information that describes the status of the fund and shall make recommendations, when appropriate, to improve the efficiency of the program.

SEC. 3.

Section 42882 of the Public Resources Code is repealed.

SEC. 4.

Section 42885 of the Public Resources Code, as amended by Section 20 of Chapter 355 of the Statutes of 2022, is amended to read:

42885.

(a) For purposes of this section, “California tire fee” means the fee imposed pursuant to this section.

(b) (1) A person who purchases a new tire, as defined in subdivision (g), shall pay a California tire fee of one dollar and seventy-five cents ($1.75) per tire.

(2) The retail seller shall charge the retail purchaser the amount of the California tire fee as a charge that is separate from, and not included in, any other fee, charge, or other amount paid by the retail purchaser.

(3) The retail seller shall collect the California tire fee from the retail purchaser at the time of sale and may retain 1¹/₂ percent of the fee as reimbursement for any costs associated with the collection of the fee. The retail seller shall remit the remainder to the state on a quarterly schedule for deposit in the California Tire Recycling Management Fund, which is hereby created in the State Treasury.

(c) The California Department of Tax and Fee Administration shall collect the fee imposed by this article pursuant to the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)) of Division 2 of the Revenue and Taxation Code. For purposes of this section, the reference in the Fee Collection Procedures Law to “feepayer” shall include a person required to pay the fee imposed by this section, which includes the retail seller.

(d) The California tire fee imposed pursuant to subdivision (b) shall be separately stated by the retail seller on the invoice given to the customer at the time of sale. Any other disposal or transaction fee charged by the retail seller related to the tire purchase shall be identified separately from the California tire fee.

(e) A person or business who knowingly, or with reckless disregard, makes a false statement or representation in a document used to comply with this section is liable for a civil penalty for each violation or, for continuing violations, for each day that the violation continues. Liability under this section may be imposed in a civil action and shall not exceed twenty-five thousand dollars ($25,000) for each violation.

(f) In addition to the civil penalty that may be imposed pursuant to subdivision (e), the department may impose an administrative penalty in an amount not to exceed five thousand dollars ($5,000) for each violation of a separate provision or, for continuing violations, for each day that the violation continues, on a person who intentionally or negligently violates a permit, rule, regulation, standard, or requirement issued or adopted pursuant to this chapter. The department shall adopt regulations that specify the amount of the administrative penalty and the procedure for imposing an administrative penalty pursuant to this subdivision.

(g) For purposes of this section, “new tire” means a pneumatic or solid tire intended for use with onroad or off-road motor vehicles, motorized equipment, construction equipment, or farm equipment that is sold separately from the motorized equipment, or a new tire sold with a new or used motor vehicle, as defined in Section 42803.5, including the spare tire, construction equipment, or farm equipment. “New tire” does not include retreaded, reused, or recycled tires.

(h) The California tire fee shall not be imposed on a tire sold with, or sold separately for use on, any of the following:

(1) A self-propelled wheelchair.

(2) A motorized tricycle or motorized quadricycle, as defined in Section 407 of the Vehicle Code.

(3) A vehicle that is similar to a motorized tricycle or motorized quadricycle and is designed to be operated by a person who, by reason of the person’s physical disability, is otherwise unable to move about as a pedestrian.

(i) This section shall remain in effect only until January 1, 2034, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2034, deletes or extends that date.

SEC. 5.

Section 42885 of the Public Resources Code, as amended by Section 21 of Chapter 355 of the Statutes of 2022, is amended to read:

42885.

(a) For purposes of this section, “California tire fee” means the fee imposed pursuant to this section.

(b) (1) Every person who purchases a new tire, as defined in subdivision (g), shall pay a California tire fee of seventy-five cents ($0.75) per tire.

(3) The retail seller shall collect the California tire fee from the retail purchaser at the time of sale and may retain 3 percent of the fee as reimbursement for any costs associated with the collection of the fee. The retail seller shall remit the remainder to the state on a quarterly schedule for deposit in the California Tire Recycling Management Fund, which is hereby created in the State Treasury.

(e) Any person or business who knowingly, or with reckless disregard, makes any false statement or representation in any document used to comply with this section is liable for a civil penalty for each violation or, for continuing violations, for each day that the violation continues. Liability under this section may be imposed in a civil action and shall not exceed twenty-five thousand dollars ($25,000) for each violation.

(f) In addition to the civil penalty that may be imposed pursuant to subdivision (e), the department may impose an administrative penalty in an amount not to exceed five thousand dollars ($5,000) for each violation of a separate provision or, for continuing violations, for each day that the violation continues, on any person who intentionally or negligently violates any permit, rule, regulation, standard, or requirement issued or adopted pursuant to this chapter. The department shall adopt regulations that specify the amount of the administrative penalty and the procedure for imposing an administrative penalty pursuant to this subdivision.

(h) The California tire fee may not be imposed on any tire sold with, or sold separately for use on, any of the following:

(1) Any self-propelled wheelchair.

(2) Any motorized tricycle or motorized quadricycle, as defined in Section 407 of the Vehicle Code.

(3) Any vehicle that is similar to a motorized tricycle or motorized quadricycle and is designed to be operated by a person who, by reason of the person’s physical disability, is otherwise unable to move about as a pedestrian.

(i) This section shall become operative on January 1, 2034.

SEC. 6.

Section 42886.1 of the Public Resources Code is amended to read:

42886.1.

(a) The California Department of Tax and Fee Administration, if it deems it necessary in order to ensure payment to or facilitate the collection by the state of the amount of fees, may require returns and payment of the amount of fees for a yearly period.

(b) On or before the 15th day of the month following each designated yearly period, a return for the preceding designated yearly period shall be filed with the California Department of Tax and Fee Administration in the form as the California Department of Tax and Fee Administration may prescribe.

SEC. 7.

Section 42889 of the Public Resources Code, as amended by Section 22 of Chapter 355 of the Statutes of 2022, is amended to read:

42889.

(a) All revenues, interest, and penalties derived from the California Tire Fee, less refunds and reimbursement to the California Department of Tax and Fee Administration for expenses incurred in the administration and collection of the fee imposed by this article, shall be deposited as follows:

(1) An amount equal to seventy-five cents ($0.75) per tire on which the fee is imposed shall be in the Air Pollution Control Fund. The state board shall expend those moneys, or allocate those moneys to the districts for expenditure, to fund programs and projects that mitigate or remediate air pollution caused by tires in the state, to the extent that the state board or the applicable district determines that the program or project remediates air pollution harms created by tires upon which the fee described in Section 42885 is imposed.

(2) The remaining moneys collected pursuant to Section 42885 shall be deposited in the California Tire Recycling Management Fund to fund the waste tire program, and shall be appropriated to the department in the annual Budget Act in a manner consistent with the five-year plan adopted and updated by the department. These moneys shall be expended for the payment of refunds under this chapter and for the following purposes:

(A) To pay the administrative overhead cost of this chapter, not to exceed 6 percent of the total revenue deposited in the fund annually, or an amount otherwise specified in the annual Budget Act.

(B) To pay the costs associated with operating the tire recycling program specified in Article 3 (commencing with Section 42870).

(C) To pay the costs associated with the development and enforcement of regulations relating to the storage of waste tires and used tires. The department shall consider designating a city, county, or city and county as the enforcement authority of regulations relating to the storage of waste tires and used tires, as provided in subdivision (c) of Section 42850, and regulations relating to the hauling of waste and used tires, as provided in subdivision (b) of Section 42963. If the department designates a local entity for that purpose, the department shall provide sufficient, stable, and noncompetitive funding to that entity for that purpose, based on available resources, as provided in the five-year plan adopted and updated as provided in subdivision (a) of Section 42885.5. The department may consider and create, as appropriate, financial incentives for citizens who report the illegal hauling or disposal of waste tires as a means of enhancing local and statewide waste tire and used tire enforcement programs.

(D) To pay the costs of cleanup, abatement, removal, or other remedial action related to waste tire stockpiles throughout the state, including all approved costs incurred by other public agencies involved in these activities by contract with the department. Not less than six million five hundred thousand dollars ($6,500,000) shall be expended by the department during each of the following fiscal years for this purpose: 2001–02 to 2006–07, inclusive.

(E) To make studies and conduct research directed at promoting and developing alternatives to the landfill disposal of waste tires.

(F) To assist in developing markets and new technologies for used tires and waste tires. The department’s expenditure of funds for purposes of this subdivision shall reflect the priorities for waste management practices specified in subdivision (a) of Section 40051.

(G) To pay the costs associated with implementing and operating a waste tire and used tire hauler program and manifest system pursuant to Chapter 19 (commencing with Section 42950).

(H) To pay the costs to create and maintain an emergency reserve, which shall not exceed one million dollars ($1,000,000).

(I) To pay the costs of cleanup, abatement, or other remedial action related to the disposal of waste tires in implementing and operating the Farm and Ranch Solid Waste Cleanup and Abatement Grant Program established pursuant to Chapter 2.5 (commencing with Section 48100) of Part 7.

(J) To fund border region activities specified in paragraph (8) of subdivision (b) of Section 42885.5.

(K) For expenditure pursuant to paragraph (3) of subdivision (a) of, and paragraph (3) of subdivision (b) of, Section 17001.

(b) This section shall remain in effect only until January 1, 2034, and as of that date is repealed, unless a later enacted statute that is enacted before January 1, 2034, deletes or extends that date.

SEC. 8.

Section 42889 of the Public Resources Code, as amended by Section 23 of Chapter 355 of the Statutes of 2022, is amended to read:

42889.

(a) All revenues, interest, and penalties derived from the California tire fee, less refunds and reimbursement to the California Department of Tax and Fee Administration for expenses incurred in the administration and collection of the fee imposed by this article, shall be deposited in the California Tire Recycling Management Fund in the State Treasury. Funding for the waste tire program shall be appropriated to the department in the annual Budget Act. The moneys in the fund shall be expended for the following purposes:

(1) To pay the administrative overhead cost of this chapter, not to exceed 5 percent of the total revenue deposited in the fund annually, or an amount otherwise specified in the annual Budget Act.

(2) To pay the costs associated with operating the tire recycling program specified in Article 3 (commencing with Section 42870).

(3) To pay the costs associated with the development and enforcement of regulations relating to the storage of waste tires and used tires. The department shall consider designating a city, county, or city and county as the enforcement authority of regulations relating to the storage of waste tires and used tires, as provided in subdivision (c) of Section 42850, and regulations relating to the hauling of waste and used tires, as provided in subdivision (b) of Section 42963. If the department designates a local entity for that purpose, the department shall provide sufficient, stable, and noncompetitive funding to that entity for that purpose, based on available resources, as provided in the five-year plan adopted and updated as provided in subdivision (a) of Section 42885.5. The department may consider and create, as appropriate, financial incentives for citizens who report the illegal hauling or disposal of waste tires as a means of enhancing local and statewide waste tire and used tire enforcement programs.

(4) To pay the costs of cleanup, abatement, removal, or other remedial action related to waste tire stockpiles throughout the state, including all approved costs incurred by other public agencies involved in these activities by contract with the department. Not less than six million five hundred thousand dollars ($6,500,000) shall be expended by the department during each of the following fiscal years for this purpose: 2001–02 to 2006–07, inclusive.

(5) To fund border region activities specified in paragraph (8) of subdivision (b) of Section 42885.5.

(6) For expenditure pursuant to paragraph (3) of subdivision (a) of, and paragraph (3) of subdivision (b) of, Section 17001.

(b) This section shall become operative on January 1, 2034.

SEC. 9.

Section 6055 of the Revenue and Taxation Code is amended to read:

6055.

(a) (1) A retailer is relieved from liability for sales tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the tax may, under rules and regulations prescribed by the department, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the tax shall be paid with the return.

(2) (A) Before January 1, 2025, for purposes of this subdivision, the term “retailer” shall include any entity affiliated with the retailer under Section 1504 of Title 26 of the United States Code.

(B) An entity that is a retailer under this paragraph shall not be entitled to a deduction under paragraph (1) on or after January 1, 2025.

(b) (1) In the case of accounts held by a lender, a retailer or lender that makes a proper election under paragraph (4) shall be entitled to a deduction or refund of the tax that the retailer has previously reported and paid if all of the following conditions are met:

(A) A deduction was not previously claimed or allowed on any portion of the accounts.

(B) The accounts have been found worthless and written off by the lender in accordance with the requirements of subdivision (a) before January 1, 2025.

(C) The contract between the retailer and the lender contains an irrevocable relinquishment of all rights to the account from the retailer to the lender.

(D) The retailer remitted the tax on or after January 1, 2000.

(E) The party electing to claim the deduction or refund under paragraph (4) files a claim in a manner prescribed by the department.

(2) If the retailer or the lender thereafter collects in whole or in part any accounts, one of the following shall apply:

(A) If the retailer is entitled to the deduction or refund under the election specified in paragraph (4), the retailer shall include the amount collected in its first return filed after the collection and pay tax on that amount with the return.

(B) If the lender is entitled to the deduction or refund under the election specified in paragraph (4), the lender shall pay the tax to the department in accordance with Section 6451.

(3) For purposes of this subdivision, the term “lender” means any of the following:

(A) Any person that holds a retail account which that person purchased directly from a retailer who reported the tax.

(B) Any person that holds a retail account pursuant to that person’s contract directly with the retailer that reported the tax.

(C) Any person that is either an affiliated entity, under Section 1504 of Title 26 of the United States Code, of a person described in subparagraph (A) or (B), or an assignee of a person described in subparagraph (A) or (B).

(4) For purposes of this section, a “proper election” shall be established when the retailer that reported the tax and the lender prepare and retain an election form, signed by both parties, designating which party is entitled to claim the deduction or refund. This election may not be amended or revoked unless a new election, signed by both parties, is prepared and retained by the retailer and the lender.

SEC. 10.

Section 6055 is added to the Revenue and Taxation Code, to read:

6055.

(a) A retailer is relieved from liability for sales tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the tax may, under rules and regulations prescribed by the department, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the tax shall be paid with the return.

(b) This section shall become operative on January 1, 2028.

SEC. 11.

Section 6203.5 of the Revenue and Taxation Code is amended to read:

6203.5.

(a) (1) A retailer is relieved from liability to collect use tax that became due and payable, insofar as the measure of the tax is represented by accounts that have been found to be worthless and charged off for income tax purposes by the retailer or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. A retailer that has previously paid the amount of the tax may, under rules and regulations prescribed by the department, take as a deduction the amount found worthless and charged off by the retailer. If these accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the first return filed after the collection and the amount of the tax shall be paid with the return.