UC Efforts Rescue Bill Giving Donor a Free Tax Ride
A last-ditch lobbying effort by UC Berkeley breathed new life Tuesday into a bill that would give the owner of the Seattle Seahawks a special $1.4-million tax break for making a donation to the school.
The bill by state Sen. William Campbell (R-Hacienda Heights) would exempt Kenneth Behring, a multimillionaire developer and classic car buff, from paying the 7% sales tax to the state on 160 of the automotive showpieces that he intends to donate to the university through a museum he controls in rural Contra Costa County.
The bill had been moving quietly through the Legislature until recent published reports led some legislators to question it as a special interest ploy designed to help a rich man avoid taxes. It was left for dead in the Assembly Revenue and Taxation Committee last week when the panel’s chairman, Assemblyman Johan Klehs (D-Castro Valley), pulled it from the agenda.
The bill was revived, however, after UC officials--jarred by the controversy--pitched in to help Campbell to persuade Assembly committee members to give the bill a second chance Tuesday at a special hearing, where it passed 6 to 2.
Campbell and school officials argued that without the tax break, Behring said he may go back on his intentions to turn over his cars to the university, thus depriving the school of an asset that it could sell off in the future.
“The university is going to end up with the most awesome and magnificent auto museum in the world, and that’s good government,” Campbell said before Tuesday’s hearing. He termed criticisms of his bill as a special interest vehicle as “outrageous.”
Yet Klehs, who agreed to the special hearing, repeated the criticism as the reason for his vote against the bill Tuesday. “It’s a bill that clearly benefits one person to get (him) out of a tax liability,” he said.
Assemblyman Tom Hayden (D-Santa Monica), who cast the other no vote, repeatedly questioned UC officials about why the school would want to acquire a classic car collection that included the solid silver 1923 British-made Daimler once owned by the Maharishi Rewa of India.
“That would be for Far Eastern studies?” Hayden quipped.
When it was explained that UC Berkeley would be free to sell the cars beginning in the year 2002, a skeptical Hayden asked: “What’s the difference between you and a used car lot?”
A majority of the committee members, however, said they welcomed the gift by the owner of Seattle’s professional football franchise and didn’t think it was fair that he should have to pay taxes on such a generous donation.
Behring’s problem stems from the fact that he purchased the cars with a wholesale license, which waives the payment of any sales taxes until the car is sold at retail.
Instead of doing that, Behring has meticulously restored the autos for display at his museum, which charges $20 a person for tours conducted by appointment only. Behring keeps five of his most cherished autos in the ballroom of his Contra Costa County home.
When the millionaire agreed in 1987 to give the cars to UC Berkeley over time, he apparently forgot about the sales tax provision. That came back to haunt him, said museum president William Morse, when Behring made the first installment of his donation to the school--40 cars, as well as the museum’s 150,000-square-foot building and its 42 acres of land in Danville, Calif.
Following the $21-million gift, the state sent Behring a little surprise: a bill for the sales tax on the 40 cars. Ruling that the donation was akin to a retail “transaction,” the state wanted 7% of what the millionaire originally paid for the autos before he fixed them up.
The tax bill so irked Behring that he complained to Campbell earlier this year at a dinner for legislators who had toured the automotive institute.
Campbell said he instantly agreed to introduce a bill to eliminate the tax before Behring made the rest of his donation. Although the balance of the autos are thought to be worth $80 million, they actually cost Behring about $20 million to acquire and would fetch about $1.4 million in taxes, testimony showed Tuesday.
On Tuesday, committee members voted to approve conceptual amendments in the state’s revenue and taxation code that would eliminate taxes for items donated to a museum.
The actual amendments will be made when the bill moves to another Assembly committee for consideration today. To become law, the measure must pass both houses of the Legislature and be forwarded to Gov. George Deukmejian for signature before the legislative session ends Sept. 15.
