BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1662
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           CORRECTED  - 06/02/2010 Technical change (Member name)

          ASSEMBLY THIRD READING
          AB 1662 (Portantino and Jeffries)
          As Amended  April 7, 2010
          2/3 vote.  Urgency 

           REVENUE & TAXATION  9-0         APPROPRIATIONS   17-0           
                                                            
           ----------------------------------------------------------------- 
          |Ayes:|Portantino, Conway,       |Ayes:|Fuentes, Conway, Ammiano, |
          |     |Beall,                    |     |                          |
          |     |Charles Calderon, Coto,   |     |Bradford, Charles         |
          |     |Fuentes, Harkey,          |     |Calderon, Coto,           |
          |     |Nestande, Saldana         |     |Davis, Monning, Ruskin,   |
          |     |                          |     |Harkey,                   |
          |     |                          |     |Miller, Nielsen, Norby,   |
          |     |                          |     |Skinner,                  |
          |     |                          |     |Solorio, Torlakson,       |
          |     |                          |     |Torrico                   |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Adds the wildfires that occurred in the Counties of Los  
          Angeles and Monterey in 2009 (2009 Wildfires) and the severe  
          winter storms that occurred in the Counties of Calaveras,  
          Imperial, Los Angeles, Orange, Riverside, San Bernardino, San  
          Francisco, and Siskiyou in 2010 (2010 Storms) to the list of  
          disasters eligible for full state reimbursement of local property  
          tax losses, beneficial homeowners' property tax exemption  
          treatment, and special "carry forward" treatment of excess  
          disaster losses.  Specifically,  this bill  :

          1)Provides that, notwithstanding existing law, the state share  
            shall be up to 100% of total state eligible costs connected with  
            the severe winter storms, flooding, and debris and mud flows  
            that occurred in Northern, Central, and Southern California from  
            January 17, 2010, to February 6, 2010, as specified in  
            agreements between this state and the United States for federal  
            financial assistance.  

          2)Provides a mechanism for reimbursing eligible counties for  
            property tax losses resulting from the reassessment of  
            properties damaged by the 2009 Wildfires and the 2010 Storms.

          3)Provides that any dwelling that qualified for a homeowners'  







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            property tax exemption before the commencement dates of the 2009  
            Wildfires, that was damaged or destroyed by the 2009 Wildfires,  
            and that has not changed ownership since the commencement dates  
            of the 2009 Wildfires, shall not be denied a homeowners'  
            exemption solely because that dwelling was temporarily damaged  
            or destroyed, or was being reconstructed by the owner, or was  
            temporarily uninhabited as a result of restricted access.

          4)Provides identical homeowners' property tax exemption treatment  
            for victims of the 2010 Storms.  

          5)Provides that any taxpayer's excess disaster loss resulting from  
            the 2009 Wildfires and/or 2010 Storms shall be carried forward  
            to each of the five taxable years following the taxable year for  
            which the loss is claimed.  However, if there is any excess  
            disaster loss remaining after this five-year period, then the  
            applicable percentage of that excess disaster loss shall be  
            carried forward to each of the next 10 taxable years. 

          6)Specifies that, if the Commission on State Mandates determines  
            that this bill contains costs mandated by the state, local  
            agencies and school districts will be reimbursed for those  
            costs.

          7)Takes immediate effect as an urgency measure.


           EXISTING LAW  :

          1)Property tax reassessment:  Allows each county, by ordinance, to  
            provide for the reassessment of properties damaged by a  
            calamity, disaster, or misfortune.  Taxpayers owning damaged  
            property must apply for a reassessment within the time period  
            specified in the applicable county's ordinance or within 12  
            months of the misfortune or calamity, whichever is later.  The  
            application for reassessment must show the condition and value  
            of the property after the damage and the dollar value of the  
            damage.  Once the property is reassessed, the taxpayer is  
            entitled to a refund of any excess property tax paid on the  
            property.  If the affected property is subsequently repaired,  
            its value is subject to an upward reassessment by the county.

          2)Homeowners' exemption:

             a)   Exempts the first $7,000 of the full value of a dwelling  







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               from property tax, when the dwelling is occupied by an owner  
               as his/her principal residence.  However, if a property is no  
               longer owner-occupied or is vacant on the lien date (January  
               1), the property is not eligible for the exemption for the  
               succeeding tax year; and,  

             b)   Provides certain disaster-related exceptions to the  
               general rule that a property must be owner-occupied on the  
               lien date to receive the homeowners' exemption.  Under these  
               exceptions, properties that were eligible for the homeowners'  
               exemption immediately before the disaster, do not change  
               ownership after the disaster, and are vacant solely because  
               of damage incurred during the disaster, continue to be  
               eligible for the homeowners' exemption.

          3)Income tax losses:    

             a)   Allows non-business taxpayers with casualty losses that  
               are not reimbursed by insurance and that exceed $100 plus 10%  
               of the taxpayer's adjusted gross income (AGI) to claim these  
               losses as itemized deductions on their tax return.  Taxpayers  
               may carry forward 100% of any remaining losses for up to 10  
               years.  Corporate taxpayers with casualty losses that are not  
               reimbursed by insurance are not subject to the $100 plus 10%  
               of AGI threshold, but are subject to the same carry forward  
               rules that apply to individual taxpayers; and, 

             b)   Allows both individual and corporate taxpayers who  
               experience losses as a result of certain named disasters to  
               claim these losses either in the year in which the loss  
               occurred or in the preceding year.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)Property tax reassessment and homeowners' exemption:  The Board  
            of Equalization (BOE) estimates that the cost of reimbursing the  
            counties' property tax losses and of extending the homeowners'  
            exemption would be less than $500,000.
           
           2)Income tax losses:  The Franchise Tax Board has not yet provided  
            a revenue estimate for the carry forward provisions of this  
            bill.  

           COMMENTS  :  The author has provided the following statement in  







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          support of this bill:

               On August 26, 2009, the Station Fire in Los Angeles County  
               was reported burning in the Angeles Forest.  This mostly  
               rural area contains forested and chaparral vegetation and  
               abuts many foothill communities in Los Angeles County.  Aided  
               by winds and hot temperatures the fire quickly spread out of  
               control.  A report issued by the U.S. Department of  
               Agriculture subsequently attributed extremely dry vegetation,  
               extremely steep terrain and inaccessible fire locations to  
               the spread of the fire and the inability of fire personnel to  
               contain it.

               Ultimately the fire consumed over 160,000 acres, destroyed  
               209 structures of which 89 were homes and caused the deaths  
               of two fire fighters.  Because the Station Fire denuded the  
               hillsides and steep terrain of the Angeles Forest, heavy  
               rains in February of 2010 . . . caused mudslides and flash  
               flooding that has destroyed or damaged at least 86 homes. 

               AB 1662 would allow victims who lost homes and other property  
               to claim disaster loss treatment, for losses sustained as a  
               result of the August, 2009 Station Fire in Los Angeles  
               County.  The purpose of this bill is to provide immediate tax  
               relief to individuals and businesses affected by that  
               wildfire.  As an urgency measure, this bill would be  
               effective and operative immediately upon enactment.  

               AB 1662 would provide disaster-related tax relief for losses  
               sustained as a result of the wildfire that occurred in Los  
               Angeles County in August 2009.  The legislation would include  
               state reimbursement to backfill property tax revenue losses  
               resulting from assessment reductions because of these  
               wildfires.  These tax benefits are necessary tools for these  
               areas to recover from these disasters as quickly as possible.  
                

          Committee Staff Comments:

          1)Related legislation:

             a)   AB 1690 (Chesbro) of 2010 would provide similar disaster  
               assistance for losses sustained as a result of the earthquake  
               that struck Humboldt County on January 9, 2010.  AB 1690 is  
               currently in the Senate Rules Committee;







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             b)   AB 1766 (Gaines) of 2010 would provide similar disaster  
               relief in connection with the 49 Fire that began in Placer  
               County in August 2009.  AB 1766 is currently in the Senate  
               Rules Committee; and,

             c)   AB 2136 (V. Manuel Perez) of 2010 would provide similar  
               disaster relief in connection with the earthquake that struck  
               Imperial County.  AB 2136 is currently in the Senate Rules  
               Committee.

          Should these bills all continue to progress through the  
          legislative process, appropriate amendments should be taken to  
          prevent chaptering out issues.  
           

          Analysis Prepared by  :  M. David Ruff / REV. & TAX. / (916)  
          319-2098                                               


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