BILL ANALYSIS
AB 2136
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Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2136 (V. Manuel Perez) - As Amended: May 13, 2010
Policy Committee: Revenue and
Taxation Vote: 9-0
Local Government 8-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill adds the earthquake that affected Imperial County on
April 4, 2010 to the list of state-declared 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 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.
4)Codifies provisions included in agreements between California
and the United States for federal financial assistance.
FISCAL EFFECT
1)BOE estimates GF costs of $78,000 in 2010-11 and declining
amounts thereafter for reimbursing Imperial County for its
property tax losses and extending the homeowners exemption.
2)Income tax provisions will result in minor revenue losses,
AB 2136
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likely less than $5,000 per year for the next several years.
COMMENTS
1)Rationale . This bill extends to the victims in Imperial County
affected by the April 4 earthquake the financial relief that
has traditionally been provided to victims of natural
disasters in California. The earthquake, which was a magnitude
of 7.2, struck 16 miles south-southwest of Guadalupe Victoria,
Baja California, Mexico, approximately 40 miles south of the
United States border. The Earthquake damaged or destroyed
numerous homes, businesses, schools, water treatment and
storage facilities, and other public facilities in Imperial
County. On April 5, 2010, the governor proclaimed a state of
emergency in Imperial 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
Imperial 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 fires will lose the exemption under
existing law.) This bill allows the exemption for homes that
have been destroyed while they are being reconstructed.
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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
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), AB 1766 (Gaines),
and AB 2665 (Chesbro), also before this Committee, provide
similar disaster relief in connection with a variety of
state-declared disasters in 2009 and 2010.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081