CC - Item 4J - SB 310 (Calderon) - Adult Entertainment Tax - Support A---"E M �,
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TO: HONORABLE MAYOR
AND MEMBERS
ROSEMEAD CITY COUNCIL
FROM:\IFFITIC
G. TRIPEPI, CITY MANAGER il‘.'3
DATE: APRIL 3, 1997
RE: SB 1310 (CALDERON) -ADULT ENTERTAINMENT TAX- SUPPORT
This item was placed on the agenda at the request of Councilman Taylor. Senator Charles Calderon
announced recently that he is amending his bill, SB 1310, to include a 5% adult entertainment tax on
the sale or rental of pornographic materials. The tax, in turn, would be allocated to the Department
of Justice for disbursement to programs that provide counseling to victims of sexual crimes and other
violent crimes. In its current form, the bill seeks to amend current law with respect to sales and use
tax exemptions. It is anticipated, however, that Senator Calderon will strip the bill of its current
language and rewrite the measure to conform with the list of amendments attached.
A copy of SB 1310 is attached. However, the bill does not currently include the amendments
discussed above. The adult entertainment tax measure is scheduled to be considered by the Senate
Revenue and Tax Committee on April 16th.
RECOMMENDATION:
It is recommended that the City Council support the attached amendments and authorize staff to
prepare the appropriate correspondence after the bill has been formally amended by Senator Calderon
to include the 5% adult entertainment tax.
ccmemo.sb1310.fgt COUNCIL. AGENDA
APR 0. 8• 1997
ITEM No. �'J
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SE 1013 — Senator Charles Calderon
Coauthored by:
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Senator Hilda Solis
Senator Theresa Hughes
Assemblymember Sheila Kuehl
Assemblymember Antonio Villaraigosa
Assemblymember Mike Machado
Assemblymember Bernie Richter
Assemblymember Sally Havice
Assemblymember Brett Granlund
Assemblymember Louis Caldera
Assemblymember Joe Baca
Assemblymember Elaine Alquist
Assemblymember Jack Scott
The following section shall be added to the Revenue and Taxation Code:
(a) The Board of Equalization shall apply a five percent adult entertainment tax
to the sale and/or rental of pornographic materials or entertainment
including but not limited to the following:- X-rated video rentals, pay-per-
view services,phone sex services, pornographic magazines, strip clubs,
pornographic computer games, and pornographic computer transmissions.
(b) "Pornographic materials or entertainment" shall include any of the
following:
(1) Actual or simulated sodomy, oral copulation, sexual intercourse,
masturbation, bestiality, genital and/or rectal exposure or an image of an
exposed penis in an erect and turgid state.
(2) Verbal or written representations or descriptions of sodomy, oral
copulation, sexual intercourse, masturbation,bestiality, genital and/or
rectal exposure or an exposed penis in an erect and turgid state.
(3) Live performances characterized by the display of complete nudity which
may include the actual or simulated carrying out of specified sexual
activities.
(c) Subdivision (a) does not apply to medical, scientific, educational, artistic,
political or literary materials including but not limited to publications,
APR 02 '97 03: 10PM GONSALVES & SON
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performances, films,photographs, telephonic representations and
descriptions and videotapes.
(d) All revenue derived from the five percent tax will be allocated to the
Department of Justice for disbursement to programs which provide
counseling and support services for victims of sexual and other violent crimes
including but not limited to battered women's shelters and rape crisis centers.
SENATE BILL No. 1013
N
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Introduced by Senator Calderon
February 27, 1997
An act to add Sections 6025 and 18410 to the Revenue and
Taxation.Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
SB 1013,as introduced,Calderon. Sales,use,income,bank,
and corporation taxes: exemptions and credits: evaluation.
The Sales and Use Tax Law provides various exemptions
from the taxes imposed by that law.The Personal Income Tax
- Law and the Bank and Corporation Tax Law authorize
ovarious credits against the taxes imposed by both laws.
This bill would provide under all of those laws that the
04 Legislative Analyst in consultation and cooperation with the
J[ Department of Finance and the State Board of Equalization
or the Franchise Tax Board, as applicable, shall conduct an
6c, accountability evaluation, as specified, for each sales and use
otax exemption or income or franchise tax credit,as applicable.
Vote: majority. Appropriation: no. Fiscal committee: yes.
co
State-mandated local program: no.
t"-6 The people of the State of California do enact as follows:
-Cr) 1 SECTION 1. Section 6025 is added to the Revenue
2 and Taxation Code, to read:
3 6025. The Legislative Analyst shall, in consultation
Q4 and cooperation with the State Board of Equalization and
5 the Department of Finance, conduct a sales and use tax
'6_ accountability evaluation for each exemption from sales
•
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SB 1013 — 2—
-3 —
1 and use taxes allowed by this part that is first enacted on ' I 1 SB 1013
m 2 or after January 1, 1997. All of the following requirements `. . 1 . (5) Benefit primarily only a clearly identifiable single
3 shall apply to the evaluation: 2 economic entity or very small special interest group.
4 (a)' The Legislative Analyst shall establish a process by 3 (c) The Legislative Analyst shall estimate the rate of
5 which all tax expenditures for these sales and use tax 4 growth of the total amount of sales and use tax exemptions
5 over the previous year, and shall identify those sales and
6 exemptions are reviewed according to the following
7 guidelines: 6 use tax exemptions which are growing at rates which are
8 (1) A fiscal and economic analysis which takes into ( 7 in excess of the rate of growth in the General Fund
8 .budget. If the information requested in the criteria is not
9 account the original social and economic purpose of each
10 of these tax expenditures. If a specific amount of revenue 9 available, then the Legislative Analyst shall state why the
11 for a tax expenditure cannot be identified, the Legislative 10 information is missing and what is necessary to make it
12 Analyst shall provide a range of the revenues involved. 11 available.
13 (2) The extent to which the specific programs j 12 (d) Each evaluation shall be conducted in the year
14 supported by these tax expenditures have been effective I 13 preceding the date the sales and use tax exemption will
15 in influencing taxpayer behavior, including the extent to I 14 become inoperative, or earlier, if necessary, to ensure
16 which new jobs are created or new businesses are formed. 15 that the evaluation is submitted pursuant to subdivision
17 (3) Whether each of these tax expenditure programs i 16 (e) prior to the date the exemption will become
18 has been cost-efficient, whether the program's benefits j 17 inoperative.
19 exceeded its revenue cost, and whether there is a less I 18 (e) Each evaluation shall be submitted to the fiscal
20 costly way of providing the same benefits. 19 committees of each house of the Legislature no later than
21 (4) Which income groups benefit from the tax fes.. . 20 December 31 of every even-numbered year.
22 expenditure, the distribution of benefits among different 21 SEC. 2. Section 18410 is added to the Revenue and
z 23 income groups, and the effect of the tax expenditure on 22 Taxation Code, to read:
24 the overall distribution of the tax burden. 23 18410. The Legislative Analyst shall, in consultation
24 LC
25 (5) To what extent federal tax expenditures and these d and cooperation with the Franchise Tax Board and the
26 state tax expenditures overlap. r 25 Department of Finance, conduct a tax credit
c_1 27 (6) Recommendations on which programs, if any, 26 accountability evaluation for each income and franchise
z 28 should be reauthorized or revised_ 27 tax credit allowed by Part 10 (commencing with Section
0 29 (b), After an initial review of these tax expenditures for 28 17001) or Part 11 (commencing with. Section 23001) of
E 30 sales and use tax exemptions, the Legislative Analyst shall 29 Division 2, that is first enacted on or after January 1, 1997.
m31 identify those tax expenditures which can be shown to: 30 All of the following requirements shall apply to the
32 (1) Particularly provide windfall benefits to 31 evaluation:
C6 32 (a) The Legislative Analyst shall establish aprocess
33 individuals or groups whose behavior is unaffected by the by
34 tax incentive. ( 33 which all tax expenditures for these income and franchise
35 (2) Work: contrary. to the objectives of other state t' 34 tax credits are reviewed according to the following
m 36 programs or other tax,expenditures. 35 guidelines:
cE 37 (3) Are no longer consistent with the original goals and 36 (1) A fiscal and economic analysis which takes into
Q 38 . objectives for which they were intended. 37 account the original social and economic purpose of each
39 (4) Have : little or no clear economic or social 38 of these tax expenditures. If a specific amount of revenue
40justification. 39 for a tax expenditure cannot be identified, the Legislative
(: : . 40 Analyst shall provide a range of the revenues involved.
I
SB 1013 — 4— 1 —5— SB 1013
N- 1 (2) The extent to which the specific programs C F I 1 become inoperative, or earlier, if necessary, to ensure
2 supported by these tax expenditures have been effective 2 that the evaluation is submitted pursuant to subdivision
3 in influencing taxpayer behavior, including the extent to 3 (e) prior to the date the credit will become inoperative_
4 which new jobs are created or new businesses are formed. 4 (e) Each evaluation shall be submitted to the fiscal
5 (3) Whether each of these tax expenditure programs 5 committees of each house of the Legislature no later than
6 has been cost-efficient, whether the program's benefits 6 December 31 of every even-numbered year.
7 exceeded.its revenue cost, and whether there is a less
8 costly way of providing the same benefits. ti.'•
9 (4) Which income groups benefit from the tax
10 expenditure, the distribution of benefits among different
11 income groups, and the effect of the tax expenditure on
12 the overall distribution of the tax burden.
13 (5) To what extent federal tax expenditures and these
14 state tax expenditures overlap. _
15 (6) Recommendations on which programs, if any,
16 should be reauthorized or revised.
17 (b) After an initial review of tax credit expenditures,
18 the Legislative Analyst shall identify those tax
19 expenditureswhich can be shown.to:
20 (1) Particularly: provide windfall benefits to C. .
21 individuals or groups whose behavior is unaffected by the
z 22 tax credit.
0 23 (2) . Work, contrary to the objectives 'of other state
06 24 programs or other tax expenditures.
w 25. (3) Are no longer consistent with the original goals and ; _.'
J 26 objectives for which they were intended.
27 (4) Have little or no clear economic or social
6 28 justification.
29 (5) Benefit primarily only a clearly identifiable single
a- 30 economic entity or very small special interest group.
m 31 (c) The Legislative Analyst shall estimate the rate of :
m 32 growth of the total amount of income and franchise tax
33. credits over the previous year,and shall identify those tax
M 34 credits which are growing at rates which are in excess of -
N 35 the rate of growth in the General Fund budget. If the
m 36 information requested in the criteria is not available,then
Q 37 the Legislative Analyst shall state why the information is
38. missing and what is necessary to make it available.
'39 (d.) Each.,evaluation shall be conducted in the year
40 preceding the date the income or franchise tax credit will C 0