BILL ANALYSIS
AB 79
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Date of Hearing: May 28, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 79 (Duvall) - As Amended: May 21, 2009
Policy Committee: Revenue and
Taxation Vote: 9-0
Local Government 7-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill adds the wildfires that occurred in Orange, Riverside,
and San Bernardino counties in 2008 to the list of disasters
eligible for special tax treatment. Specifically, this bill:
1)Provides that the state will reimburse the local governments
for property tax losses resulting from downward assessments of
property damaged by the fires.
2)Allows owners of homes destroyed by the fires to receive the
homeowners' property tax exemption while the homes are being
reconstructed.
3)Permits victims of the wildfires to carry back casualty losses
and use them as income tax deductions in the year preceding
the disaster (in this case 2007) and then carry forward any
remaining losses for up to 15 years. These provisions apply to
uninsured losses in excess of 10 percent of the taxpayers'
income.
FISCAL EFFECT
1)GF expenditures for reimbursing the counties' property tax
losses would be $635,000 in 2009-10 and smaller amounts in
subsequent years as homes are reconstructed.
2)Extension of homeowners' exemption to homes that are being
reconstructed will result in revenue loss of about $8,000 in
2009-10 and smaller amounts in subsequent years.
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3)Income tax provisions will result in modest revenue losses,
likely less than $5,000 per year for the next several years.
COMMENTS
1)Rationale . This measure extends to victims of the November
2008 wildfires in Orange, Riverside, and San Bernardino
counties the tax relief that has traditionally been provided
to victims of natural disasters in California.
2)Background - property tax assessments . State law authorizes
local governments to reduce property taxes following a
disaster. Under these provisions, assessors may reduce the
assessed value property in proportion to the loss in market
value. The property retains its lower assessed value until it
is reconstructed or otherwise restored. Historically,
legislation has been passed in which the state has reimbursed
counties for the revenue reductions associated with the
downward assessments. This bill provides the relief to Orange,
Riverside, and San Bernardino counties with respect to the
reassessments following the 2008 wildfires.
3)Background - homeowners' exemption . The California
Constitution exempts from property taxes the first $7,000 of
the value of a dwelling when occupied by an owner as his or
her principal residence. The state reimburses local
governments for the property taxes they cannot collect because
of this homeowners' exemption. Under the Revenue and Taxation
Code, property which becomes vacant, is destroyed, or is no
longer owner-occupied on the lien date (January 1) is
generally not eligible for the exemption in the upcoming year.
(The Board of Equalization staff has opined that a temporary
absence from a dwelling damaged in a natural disaster will not
result in the loss of the exemption. Thus, only owners of
homes destroyed by the fires will lose the exemption under
existing law.) This bill allows the exemption for homes that
have been destroyed while they are being reconstructed.
4)Background - casualty losses . Under federal and state income
tax law, individuals filing income taxes can deduct casualty
losses in excess of 10 percent of their adjusted gross income
plus $100 in the year in which the loss occurs. Any losses not
deducted in the year in which they occur can then be carried
forward and deducted against income for up to five years into
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the future. For federally declared disasters, the taxpayer may
either take the deduction on the current year return or may
file an amended return for the prior year. Any unused losses
may then be carried forward for up to 15 years. The prior-year
and up-to 15 year carry forward provisions are not available
for a governor-only declared disaster on either federal or
state returns. However, the special tax treatment is available
on California's state income tax return if enabling state
legislation is enacted.
5)Related legislation. AB 15 (Fuentes) and AB 50 (Nava), also
before this committee, provide similar disaster relief to
victims of wildfires in Los Angeles, Ventura, and Santa
Barbara counties.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081