Sales and use taxes: exemption: water treatment.
The legislation will not only affect state tax laws but also impose changes on local government financing. Historically, when sales tax exemptions reduce local tax revenues, the state is required to reimburse those losses. However, AB405 specifically stipulates that the state will not provide such reimbursements for the duration of this tax exemption. This decision has raised concerns among local agencies about funding for essential services, given that critical revenues may be lost during the effective period of the bill.
AB405, introduced by Assembly Member Blanca Rubio, amends Section 6353 of the Revenue and Taxation Code to exempt certain chemicals used in water treatment from sales and use taxes. This exemption applies to chemicals utilized by cities, counties, public utilities, and sanitation districts for treating water, recycled water, or wastewater, and it will be effective from January 1, 2020, to January 1, 2025. The bill aims to lower the costs associated with water reuse and promote environmentally friendly practices, supporting water recycling efforts across California.
Overall, the sentiment surrounding AB405 appears favorable among proponents of water recycling and environmental sustainability initiatives. Supporters argue that the bill addresses pressing water management issues, especially in regions facing drought conditions. On the other hand, local governments and fiscal analysts express worries regarding the financial implications of not reimbursing lost revenues, potentially destabilizing local funding for various services.
A notable point of contention regarding AB405 is the fiscal responsibility it places on local agencies without provisions for state reimbursement. Critics argue that while promoting water recycling is essential, it should not come at the expense of local governance and financial stability. This debate highlights the balancing act between environmental policy objectives and the economic realities of local governments needing reliable funding.