PA 08-2, June 11, 2008 Special Session—SB 1000

Emergency Certification

AN ACT CONCERNING ADJUSTMENTS TO CERTAIN PETROLEUM PRODUCTS TAXES, PETROLEUM FRANCHISE AGREEMENTS, GASOLINE DISCOUNTS FOR CONSUMERS, HOME HEATING OIL AND PROPANE GAS CONTRACT DEPOSITS AND THE FUEL OIL CONSERVATION ACCOUNT

SUMMARY: This act eliminates a scheduled July 1, 2008 increase in the petroleum products gross earnings tax rate from 7% to 7. 5%, thus maintaining the 7% rate until the next scheduled increase to 8. 1% on July 1, 2013.

The act declares that competitive pricing is essential to the functioning of a fair and efficient free market economy in the petroleum industry and bans gasoline franchise contracts from prohibiting gasoline dealers and distributors from offering discounts for using any method of payment.

The act modifies (1) the receivership and post-judgment remedy laws by increasing the amount that must be paid for certain consumer deposits and (2) the receivership laws by increasing the amount that a receiver must pay for wages owed. It specifies that “consumer deposits” include deposits made to a home heating oil or propane gas dealer under a prepaid or capped price per gallon contract.

By law, part of the growth in revenues from the petroleum products gross receipts tax above 2006 levels goes into a special account to be used to fund fuel oil conservation programs. The act modifies when funds are transferred into this account for FY 08 and makes minor changes to the board that administers it.

EFFECTIVE DATE: Upon passage

1 & 2 — PETROLEUM PRODUCTS GROSS EARNINGS TAX

The act eliminates an increase in the petroleum products gross earnings tax rate from 7% to 7. 5% previously scheduled to take effect on July 1, 2008. It freezes the tax at 7% until July 1, 2013, when under prior law and this act, the rate is scheduled to increase to 8. 1%.

The petroleum products gross earnings tax applies to the gross earnings from the first sale of petroleum products in Connecticut by petroleum products distributors. Taxed products include gasoline, aviation fuel, kerosene, benzol, distillate fuels, residual fuels, and crude oil. The tax also applies to products made from petroleum or petroleum derivatives, such as paint, detergents, antiseptics, fertilizers, nylon, asphalt, and plastics. Many petroleum products and uses are exempt, including most diesel fuel, home heating oil, and propane gas used for heating.

3 & 4 — CASH DISCOUNTS

The act declares that competitive pricing is essential to the functioning of a fair and efficient free market economy in the petroleum industry. It finds and declares that (1) certain petroleum product franchise agreements prohibit gasoline retailers and distributors from offering discounts based on a buyer's payment method and (2) these provisions constitute unreasonable restraints on competitive pricing and inhibit the fair and efficient functioning of a free market economy within the petroleum industry. The act declares such provisions in franchise agreements void and without effect because they are contrary to public policy. It specifically prohibits future agreements from including such provisions and voids them in existing ones.

The law states that it does not prohibit sellers of anything, not just gasoline, from offering a discount to induce a buyer to pay by cash, check, or similar means. The act specifies this also includes debit cards. The law also prohibits sellers from imposing a surcharge on a buyer who chooses to use any payment method, including cash, check, credit card, or electronic means.

5 & 6 — RECEIVERSHIP PROCEEDINGS AND POST-JUDGMENT REMEDIES

Whenever a court appoints a receiver for a business or organization, or when there are proceedings involving (1) the termination of an entity, (2) the insolvency of a person or entity, or (3) the inability of a person or entity to pay all creditors in full, the law requires payment of certain debts up to a statutory limit. The requirement applies to any debt due an individual for a deposit made in connection with the purchase, lease, or rental of goods or services purchased for personal, family, or household purposes that were not received. The act raises the cap on such payments from $900 to the amount that federal bankruptcy law sets for paying the unsecured claims of individuals arising from deposits made for the same reasons, currently $2,425. It also specifies that the covered deposits include payments made by a consumer to a home heating oil or propane gas dealer under a prepaid or capped price per gallon contract.

Prior law capped at $600 required payments by a receiver for debts due for wages for work performed within the three months before an application was made to appoint a receiver. The act raises this cap to the cap in federal bankruptcy law, which is currently $10,950. The law requires wages to be paid in full in court proceedings involving (1) the termination of an entity, (2) the insolvency of a person or entity, or (3) the inability of a person or entity to pay all creditors in full.

Federal law requires the caps in the bankruptcy law to be adjusted every three years in accordance with changes in the Consumer Price Index for All Urban Consumers; they were last adjusted in 2007.

7—FUEL OIL CONSERVATION BOARD AND PROGRAMS

The law establishes a 13-member board to administer fuel oil conservation programs, which are funded from growth in revenue from the petroleum products gross earnings tax above its 2006 revenue. The law requires that a portion of this revenue be deposited into a special account. The act: (1) requires one of the governor's appointees to the board to be a representative of an in-state biodiesel distributor rather than in-state generators, (2) places the board within the state comptroller's office for administrative purposes only, and (3) requires the fuel oil conservation account to be within the Restricted Grant Fund rather than the General Fund.

By law, the amount of money to be transferred to the account is capped at $10 million in FY 08 and $5 million for each fiscal year thereafter. The act eliminates a provision that requires the comptroller to deposit the money in the account before the accounts for the General Fund are closed each fiscal year. Instead, it allows the comptroller to deposit up to $2. 5 million into the account upon the act's passage June 17, 2008 and requires any remaining amount due the account for FY 08 to be deposited as determined by the comptroller at the close of the fiscal year, but no later than October 1, 2008.

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