BILL ANALYSIS Ó
AB 50
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Date of Hearing: February 24, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 50 (Hill) - As Amended: February 18, 2011
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill provides that the natural gas transmission line
explosion of September 9, 2010 in the City of San Bruno, will be
treated, for the purposes of the personal income tax, as if it
were a qualified disaster as defined under the Internal Revenue
Code Section 139. Specifically, this bill:
1)Excludes from gross income any gain from the compulsory or
involuntary conversion of property as a result of its partial
or total destruction by the explosion.
2)Corrects an obsolete statutory reference in the laws currently
allowing the carryover of certain losses sustained in the
County of San Mateo as a result of the explosion.
3)Takes effect immediately as a tax levy.
FISCAL EFFECT
The Franchise Tax Board (FTB) estimated a revenue loss of
$600,000 in fiscal year (FY) 2010-11, $36,000 in FY 2011-12, and
$30,000 in FY 2012-13 on an earlier version of the bill. The
bill has been significantly amended and the revenue losses are
expected to be smaller, less than $50,000 in 10-11 and
negligible in subsequent years.
COMMENTS
1)Rationale. This bill intends to provide tax relief to the
victims of the September 9, 2010 San Bruno explosion.
According to the author, the residents of Glenview have been
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through enough and should not have to face taxes that arise
from this tragedy.
2)The explosion. On September 9, 2010, a 30-inch natural gas
pipeline owned by PG&E exploded in flames in San Bruno,
California, killing eight individuals. In addition, FTB notes
the explosion damaged 175 homes, of which 53 were completely
destroyed. On September 10, 2010, acting Governor Abel
Maldonado proclaimed a state of emergency declaring the
explosion site to be a state disaster. However, this incident
was never declared a federal disaster, which would have
triggered the automatic exclusion of qualified disaster relief
payments under both state and federal law.
3)Previous legislation . On October 19, 2010, Governor Arnold
Schwarzenegger signed AB X6 11 (Hill) into law, which added
this incident to the list of disasters eligible for full state
reimbursement of local property tax losses, beneficial
homeowners' property tax exemption treatment and special
carrying forward into future tax years the treatment of excess
disaster losses.
4)The PG&E Fund : On September 13, 2010, PG&E announced it would
set aside up to $100 million to assist individuals impacted by
the explosion. Among other things, this fund would reimburse
insurance deductibles and help those with needs that were
greater than the temporary housing and other basic necessities
already provided. PG&E also announced that individuals would
not be asked to waive potential claims in order to receive
these funds.
5)Payments that are excluded from taxes : Qualified payments
must cover reasonable and necessary expenses arising from the
disaster, including:
i) Reasonable and necessary personal, family, living or
funeral expenses incurred as a result of a qualified
disaster.
ii) Reasonable and necessary expenses incurred to
rehabilitate a personal residence or to repair or replace
its contents.
These payments are excludable if they are not reimbursing for
expenses compensated by insurance. In contrast, if a private
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entity were simply to provide lump sum payments to victims of
a disaster, irrespective of actual damages incurred, then the
amount above and beyond that reasonably needed for
disaster-related expenses would fall outside IRC Section 139's
exclusions from taxation.
6)Federal treatment : Even if this bill is enacted, qualified
disaster relief payments will not receive the benefit of IRC
Section 139 for federal income tax purposes. This is because
the explosion was never declared to be a federal disaster,
although efforts continue to obtain the federal exclusion
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081