Gut-and-amend bill links repeal of fire fee with corporate tax hike

California’s controversial $150 annual fire prevention fee to rural homeowners would be repealed in exchange for raising taxes on numerous out-of-state corporations under legislation proposed today.

The development comes just one week before the Legislature is scheduled to adjourn for the year.

The new proposal, Senate Bill 1040, would link a GOP push to repeal the fire prevention fee repeal with a key priority of Assembly Speaker John Pérez and most Democrats, Assembly Bill 1500, to impose a corporate tax formula known as the “single sales factor.”

The proposed compromise also could pressure Senate Republicans to provide the necessary votes, at least two, to ensure that Pérez’s tax formula bill clears the upper house by the needed supermajority.

“This should deliver Republican votes, based on what they’ve said in the past,” said Robin Swanson, spokeswoman for Pérez, who is pushing AB 1500.

Altering the corporate tax formula should generate an estimated $1 billion for the state each year. About $90 million would be used to backfill revenue lost by repealing the fire fee. The remainder would fund college scholarships for families earning less than $150,000 per year.

“This is a nice, I think, compromise where we can still take care of middle-class families and address some of the concerns of Republicans, while closing the single sales factor loophole,” Swanson said.

Sen. Bob Huff, leader of the Senate Republican Caucus, could not be reached immediately for comment.

Senate Bill 1040 was gutted and amended Friday to contain the compromise.

Assemblyman Brian Nestande, who cast one of two votes in favor of  Pérez’s AB 1500 when it passed the Assembly, is the principal author of the plan to link the fire fee’s repeal with imposition of the single sales factor. The former would not occur without passage of the latter.

Nestande, R-Palm Desert, said there was no specific deal struck with Pérez when he voted yes on AB 1500. But the fire fee compromise was one of several matters under discussion with the speaker at the time, he said.

Nestande said that he felt Democrats improperly passed the fire tax last year on a simple majority vote, rather than a two-thirds supermajority.

The annual fee of $150 per structure also is a hardship to homeowners in areas protected by state fire crews, particularly those living in communities already paying an assessment for fire protection, Nestande said.

“It’s unfair,” Nestande said of the fee.

While Pérez and Democrats have characterized AB 1500 as closing a corporate tax loophole, most Republicans have painted it as a billion dollar corporate tax increase.

Current law allows companies to choose the more beneficial of two tax formulas – one based solely on sales in California in proportion to sales elsewhere, the other accounting for sales, payroll and property in California.

AB 1500 would eliminate the option and bases taxes on sales in California, thus, imposing the single sales factor.

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