BILL ANALYSIS
AB 1690
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Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1690 (Chesbro) - As Introduced: January 27, 2010
Policy Committee: Local
GovernmentVote:8-0
Revenue and Taxation 9-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill adds the earthquake that occurred in Humboldt County
on January 9, 2010 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 earthquake.
2)Allows owners of homes destroyed by the earthquake to receive
the homeowners' property tax exemption while the homes are
being reconstructed.
3)Permits victims of the earthquake to carry back casualty
losses and use them as income tax deductions in the year
preceding the disaster (in this case 2009) and then carry
forward any remaining losses for up to 15 years. These
provisions apply to uninsured losses in excess of 10 % of the
taxpayers' income.
FISCAL EFFECT
1)The Board of Equalization estimates that GF expenditures for
reimbursing Humboldt County for its property tax losses and
extending the homeowners exemption would be about $125,000 in
2010-11, with declining amounts in subsequent years.
2)Income tax provisions will result in minor revenue losses,
likely less than $5,000 per year for the next several years.
AB 1690
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COMMENTS
1)Rationale . This bill extends to the victims of the Humboldt
County earthquake the financial relief that has traditionally
been provided to victims of natural disasters in California.
The 6.5 magnitude earthquake struck the northern coast of
California on January 9, 2010, disrupting utilities and
damaging at least 175 structures. On January 12 the governor
proclaimed a state of emergency in Humboldt County.
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 property value 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 reimburses
counties for the revenue reductions associated with the
downward assessments. This bill provides the reimbursements to
Humboldt County for the reduction in assessments resulting
from the earthquake.
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 earthquake 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 % of their adjusted gross income plus
$100 in the year in which the loss occurs. Any losses not
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deducted in the year in which they occur can then be carried
forward and deducted against income for up to five years into
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 1662 (Portantino), currently before
this committee, provides similar disaster relief in connection
with certain wildfires that occurred in Los. AB 1766 (Gaines,
also before this committee, provides similar disaster relief
in connection with the 49 Fire that began in Placer County in
August 2009. AB 2136 (V. Perez) provides relief to victims of
the April 4 earthquake that affected Imperial County.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081