BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2332| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ CONSENT Bill No: AB 2332 Author: Monning (D) Amended: 4/12/12 in Assembly Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 6/28/12 AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, Kehoe, La Malfa, Liu, Yee SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 70-0, 5/25/12 (Consent) - See last page for vote SUBJECT : Income taxes: deductions: disaster losses: County of Santa Cruz SOURCE : Author DIGEST : This bill provides that any losses sustained in the County of Santa Cruz as a result of the severe storms that occurred in March 2011 (2011 Storms) may, at the taxpayers election, be taken into account for the taxable year immediately preceding the taxable year in which the disaster occurred. ANALYSIS : Existing law: CONTINUED AB 2332 Page 2 1. Allows individual and corporate taxpayers to utilize net operating losses (NOLs) to offset their tax liabilities. For NOLs incurred in taxable years beginning on or after January 1, 2008, existing law provides a carryover period of 20 years. 2. Allows NOLs attributable to taxable years beginning on or after January 1, 2013, to be carrybacks to each of the preceding two taxable years, as provided. 3. Disallows the deduction for NOLs and NOL carryovers in the 2008 to 2011 taxable years for specified taxpayers. This bill: 1. Provides that Internal Revenue Code (IRC) Section 165(i) shall apply to any losses sustained in the County of Santa Cruz as a result of the 2011 Storms. 2. Provides that the election under IRC Section 165(i) may be made on a return or amended return filed on or before the due date of the return, determined with regard to extension, for the taxable year in which the disaster occurred. 3. Provides that, unless otherwise specified, any law that suspends, defers, reduces, or otherwise diminishes the deduction of an NOL shall not apply to a NOL attributable to losses described above. 4. Takes immediate effect as a tax levy. Comments According to the author, "Between March 15 and 27, 2011, California was struck by a storm that brought snow, heavy rain, high winds, flooding and flow of debris and mud, destroying and damaging public facilities and private property throughout the state. Statewide there was more than $50 million in damages and Santa Cruz County sustained $15 million in damage, 30 percent of the statewide total. In April 2011, Governor Brown issued an Emergency CONTINUED AB 2332 Page 3 Proclamation regarding this and requested the federal government to declare the event a major disaster. A Presidential Declaration of a Major Disaster by Federal Emergency Management Agency (FEMA) would pay for 75% of the recovery costs, offsetting the recovery costs incurred by the effected communities and local governments that are struggling to address the damage with extremely limited fiscal resources. Unfortunately, California's request to FEMA that the March 2011 storm be declared a major disaster was denied, along with the state's subsequent appeal of this decision. In addition, because the Governor did not invoke the California Disaster Assistance Act (CDAA), state financial assistance was not made available to counties for disaster recovery and economy recovery efforts. The residents of Santa Cruz County have been struggling to make repairs and recover from the severe March 2011 storm and this measure is intended to provide a small amount of financial relief." FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/6/12) County of Santa Cruz ASSEMBLY FLOOR : 70-0, 5/25/12 AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fong, Furutani, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Hagman, Halderman, Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Lara, Logue, Bonnie Lowenthal, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, V. Manuel Pérez, Portantino, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Atkins, Bill Berryhill, Fletcher, Fuentes, Grove, Hall, Knight, Ma, Perea, Silva CONTINUED AB 2332 Page 4 AGB:m 8/7/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED