BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
79 (Duvall)
Hearing Date: 07/23/2009 Amended: 05/21/2009
Consultant: Mark McKenzie Policy Vote: Rev&Tax 8-0
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BILL SUMMARY: AB 79, an urgency measure, would provide
disaster-related fiscal assistance and tax relief to affected
persons and jurisdictions for losses sustained as a result of
wildfires that occurred in Orange, Riverside, and San Bernardino
Counties in 2008.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Property tax reimbursement $636 Special*
Homeowner's exemption $7 annually until homes are
rebuiltGeneral
Disaster loss carryover$3 (FY 2008-09) for Orange Co. General
(see staff comments)
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*Special Fund For Economic Uncertainties (NOTE: this fund is
continuously appropriated, so requiring an allocation for this
purpose constitutes an appropriation)
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
On November 15, 2008, Governor Arnold Schwarzenegger proclaimed
a state of emergency declaring the wildfires that occurred in
Orange, Riverside, and San Bernardino Counties to be state
disasters. On November 18, 2008, President George W. Bush
declared a federal disaster for the wildfires that occurred in
Los Angeles, Orange, Riverside, and Santa Barbara Counties. The
President did not declare a federal disaster for the wildfires
that occurred in San Bernardino County.
Property Tax Reimbursement
Current law provides for a downward reassessment of properties
affected by a disaster. Taxpayers are entitled to a refund of
any "excess" property tax paid on the property. Taxpayers whose
property is damaged are also allowed to defer payment of the
next installment of property taxes pending receipt of a
corrected tax bill for the reassessed property. For previous
disasters, the Legislature has acted to provide one-year state
reimbursement of property tax losses to local governments
resulting from reductions in assessed values of damaged or
destroyed properties.
AB 79 would provide for state reimbursement to backfill any
local government property tax revenue losses from assessment
reductions in Orange, Riverside, and San Bernardino Counties as
a result of wildfires that commenced in November of 2008. The
state would hold local governments harmless for wildfire-related
2008-09 property tax losses, based initially on an estimate of
loss, followed by a corrective adjustment based
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AB 79 (Duvall)
on the actual property tax loss. Staff notes that based on
total projected reductions in assessed value reported by county
officials, this bill would result in state allocations of
approximately $618,640 to Orange County, and approximately
$17,312 to Riverside County. San Bernardino County reported no
losses from the fires.
Homeowners' Exemption
Current law exempts from the property tax the first $7,000 of
the assessed value of an owner-occupied principal place of
residence. However, properties that become vacant or are under
construction on the January 1 lien date are not eligible for
this homeowners' exemption for the upcoming tax year. Local
jurisdictions are reimbursed by the state for property tax
losses due to the homeowners' exemption.
AB 79 would provide that any dwelling that qualified for the
exemption prior to the Governor's disaster proclamations that
was damaged or destroyed as a result of the 2008 wildfires in
Orange, Riverside, and San Bernardino Counties may not be denied
the exemption solely on the basis that the dwelling was
temporarily damaged or destroyed or was being reconstructed by
the owner. The Board of Equalization estimates that this
provision would likely result in a minor revenue loss of
approximately $7,351 ongoing, but this amount would decline over
time as homes are rebuilt and occupied.
Carry Forward of Casualty Loss Deduction
Current law allows nonbusiness taxpayers to deduct uninsured
losses, less $100, to the extent the loss exceeds 10% of
adjusted gross income. Business taxpayers may deduct losses
against income; a portion of losses may be carried forward to
offset future years' tax liabilities for up to 10 years.
Taxpayers may either claim the losses as an itemized deduction
in the year the loss occurs, or in the preceding year by filing
an amended return for the prior year. For previous disasters,
legislation has allowed both business and non business taxpayers
to carry forward 100% of their excess losses for 5 years, and a
portion of losses for another 10 years.
This bill would apply the special disaster loss carryover
treatment for losses sustained as a result of the 2008 wildfires
in Orange, Riverside, and San Bernardino Counties. The
Franchise Tax Board (FTB) estimates a total revenue loss of
approximately $3,000 in 2008-09 due to losses sustained in
Orange County. To the extent that these deductions would have
been claimed in later years had they not been taken on an
amended tax returns for the previous tax year, there is a minor
revenue gain in those later years. Taxpayers that choose to
file an amended return to report the casualty loss immediately
will have a higher tax liability in subsequent tax years. FTB
estimates revenue losses in Riverside and San Bernardino
Counties to be negligible.