BILL ANALYSIS AB 2136 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2136 (V. Manuel Perez and Salas) As Amended August 20, 2010 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |69-0 |(May 24, 2010) |SENATE: |34-0 |(August 24, | | | | | | |2010) | ----------------------------------------------------------------- Original Committee Reference: L. GOV. SUMMARY : Adds the earthquake that struck Imperial County on April 4, 2010 (Earthquake) 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. The Senate amendments : 1)Delete the provisions that added the Earthquake to the list of disasters eligible for full state reimbursement of local agency costs. 2)Specify that loans provided under the "CalHome Program Disaster Assistance" for Imperial County that have been made to rehabilitate, reconstruct, or replace lower income owner-occupied manufactured homes shall be due and payable in 10 years, with 20% of the original principal to be forgiven annually for each additional year beyond the fifth year that the manufactured home is owned and continuously occupied by the borrower. 3)Prevent chaptering-out issues given the large number of disaster-related bills pending in the current legislative session. 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 AB 2136 Page 2 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 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. 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. 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. AS PASSED BY THE ASSEMBLY , this bill: AB 2136 Page 3 1)Provided a mechanism for reimbursing Imperial County for property tax losses resulting from the reassessment of properties damaged by the Earthquake. 2)Provided that any dwelling that qualified for a homeowners' property tax exemption before April 4, 2010, that was damaged or destroyed by the Earthquake, and that has not changed ownership since April 4, 2010, 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. 3)Provided that any taxpayer's excess disaster loss resulting from the Earthquake 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. 4)Added the Earthquake to the list of disasters eligible for the higher state share of costs. 5)Specified 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. 6)Takes immediate effect as an urgency measure. FISCAL EFFECT : 1)The State Board of Equalization estimates General Fund costs of $78,000 in fiscal year 2010-11 and declining amounts thereafter for reimbursing Imperial County for its property tax losses and extending the homeowners' exemption. 2)This bill's income tax provisions will result in minor revenue losses of likely less than $7,000 per year for the next several years. 3)According to the Senate Appropriations Committee, providing CalHome loan forgiveness would accelerate up to $10 million in revenue losses by ten years, beginning in 2015. AB 2136 Page 4 COMMENTS : According to the author's office, the purpose of this bill is to provide immediate tax relief to individuals and businesses affected by the Earthquake. Specifically, the author states, "AB 2136 supplements a number of existing provisions in state tax law that can be helpful both to local jurisdictions and to individuals after a natural disaster." Committee Staff Comments: The Earthquake: At approximately 3:40 p.m. on April 4, 2010, a magnitude 7.2 earthquake struck 16 miles south-southwest of Guadalupe Victoria, Baja California, Mexico, approximately 40 miles south of the United States border. The Earthquake was widely felt in southern California, particularly in Imperial County, south of the Salton Sea. The Earthquake damaged or destroyed numerous homes, businesses, schools, water treatment and storage facilities, and other public facilities in Imperial County. While two deaths have been reported in Mexico, no deaths have been reported in California. On April 5, 2010, Governor Arnold Schwarzenegger proclaimed a state of emergency in Imperial County. Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0006619