BILL ANALYSIS Ó
AB 232
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Date of Hearing: May 13, 2013
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 232 (Ting) - As Amended: May 6, 2013
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Income taxes: credit: gun buybacks
SUMMARY : Provides a tax credit, under the Personal Income Tax
(PIT) Law, for a handgun, shotgun, rifle, or assault weapon in
working condition that is either surrendered or sold to local
law enforcement in a gun buyback program. Specifically, this
bill :
1)Provides a PIT credit, for taxable years beginning on or after
January 1, 2014, and before January 1, 2017, of $250 for a
handgun, shotgun, or rifle, and $500 for an assault weapon.
2)Limits the credit to $1,000 for each taxpayer per taxable
year.
3)Requires the taxpayer to keep a record of the type of handgun,
shotgun, rifle, or assault weapon surrendered or sold to local
law enforcement in a buyback program. A taxpayer is also
required to keep track of the number of weapons surrendered,
and the name, address, and date of the buyback program, or any
other information prescribed by the Franchise Tax Board (FTB).
The records shall be furnished to the FTB upon request.
4)Provides that a tax credit may be carried forward for two
succeeding years.
5)Authorizes the FTB to promulgate rules and regulations as
necessary or appropriate to implement the provisions in this
bill.
6)Sunsets on December 1, 2017.
7)Takes effect immediately as a tax levy.
EXISTING LAW allows:
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1)Various credits under both the PIT Law and the Corporation Tax
Law. These credits are generally designed to encourage
socially-beneficial behavior or to provide relief to taxpayers
who incur specified expenses.
2)A taxpayer to claim a deduction for charitable contributions
made to a qualifying organization, in modified conformity with
federal law.
FISCAL EFFECT : The FTB estimates that this bill will result in
a revenue loss of $4.6 million in fiscal year (FY) 2013-14, $9.2
million in FY 2014-15, and $11 million in FY 2015-16.
COMMENTS :
3)The author has provided the following information in support
of this bill:
Gun buyback programs have removed a wide variety of guns
from circulation, including handguns, assault weapons and
even rocket launchers. Whatever the type of weapon,
studies indicate that it is safer to not have a gun in the
home than to have a gun. Consider the following facts: a
gun in the home increases the risk of unintentional
firearm-related death among children; people who keep a gun
in the home are almost twice as likely to be murdered with
a gun and almost 17 times more likely to take their own
lives using a firearm; and, it is more likely that a gun
used in the home will be used against a family member than
to protect a family member.
Taxpayers can bear the brunt of these tragic incidents.
Medical treatment, criminal justice proceedings, new
security precautions, and reductions in quality of life are
estimated to cost U.S. citizens $100 billion annually.
According to research, 80% of the medical costs for firearm
injuries are borne by taxpayers. Nationally, lifetime
medical costs for gunshot injuries total an estimated $2.3
billion, or $6 million per day. U.S. taxpayers pay for
almost half of those lifetime costs ($1.1 billion).
California accounts for more than 12% of gun violence in
this country and state taxpayers are paying a substantial
share of associated costs. One study found that up to 93%
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of gunshot victims in Alameda County were uninsured. This
is likely reflected in many other urban and suburban
California counties.
As a state, we can act to remove more guns from circulation
by incentivizing more gun buyback programs and more gun
buyback participants. By taking this action, we are
lowering the chances of a misplaced, unwanted weapon
causing damage, injury or tragically, death.
4)Committee Staff Comments:
a) Heightened Danger from Guns : According to David
Hemenway, Ph.D., Director of the Harvard Injury Control
Research Center, "the presence of a gun makes quarrels,
disputes, assaults, and robberies more deadly. Many
murders are committed in a moment of rage." As an example,
"a large percentage of homicides - and especially homicides
in the home - occur during altercations over matters such
as love, money, and domestic problems, involving
acquaintances, neighbors, lovers, and family members; often
the assailant or victim has been drinking. Only a small
minority of homicides appear to be the carefully planned
acts of individuals with a single-minded intention to kill.
Most gun killings are indistinguishable from nonfatal gun
shootings; it is just a question of the caliber of the gun,
whether a vital organ is hit, and how much time passes
before medical treatment arrives. " (Susan Perry, The
Health Risk of Having a Gun in the Home, Minnesota Post,
December 17, 2012).
Substantial evidence has been provided as to the dangers of
having a gun in the home. According to the author, the
presence of a gun in the home makes the likelihood of
homicide three times higher, suicide three to five times
higher, and accidental death four times higher.
Furthermore, it is more likely that a gun used in the home
will be used against a family member than to protect a
family member.
b) What is a "tax expenditure"? : Existing law provides
various credits, deductions, exclusions, and exemptions for
particular taxpayer groups. In the late 1960s, United
States Treasury officials began arguing that these features
of the tax law should be referred to as "expenditures,"
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since they are generally enacted to accomplish some
governmental purpose and there is a determinable cost
associated with each (in the form of foregone revenues).
This bill would enact a new tax expenditure program, in the
form of a tax credit for taxpayers surrendering their
weapons to a law enforcement gun buyback program.
c) How is a tax expenditure different from a direct
expenditure? : As the Department of Finance notes in its
annual Tax Expenditure Report, there are several key
differences between tax expenditures and direct
expenditures. First, tax expenditures are reviewed less
frequently than direct expenditures once they are put in
place. This can offer taxpayers greater certainty, but it
can also result in tax expenditures remaining a part of the
tax code without demonstrating any public benefit. Second,
there is generally no control over the amount of revenue
losses associated with any given tax expenditure. Finally,
it should also be noted that, once enacted, it takes a
two-thirds vote to rescind an existing tax expenditure
absent a sunset date. This bill includes a sunset date.
d) Windfall for Savvy Taxpayers : This bill provides a $250
tax credit for a handgun, shotgun, and rifle, or a $500 tax
credit for an assault weapon. Under the provisions of this
bill, a taxpayer may be able to purchase a shotgun for
$100, surrender the weapon at a gun buyback program, and
reap a $250 dollar tax credit, resulting in a net benefit
of $150. The provisions of this bill provide no discretion
for law enforcement, and establish a blanket credit amount
for all handguns, shotguns, and rifles.
e) Double-Dipping : AB 232 provides a tax credit for a
weapon in working condition that is either surrendered
without consideration or sold to local law enforcement in a
gun buyback program. Under the provisions of this bill, it
may be possible for a taxpayer to sell a shotgun at a gun
buyback program, receive consideration for the weapon, and
then claim a $250 tax credit. Assuming that a shotgun is
purchased for $100, if the taxpayer sells the gun to law
enforcement and receives $50, the taxpayer will receive a
net benefit of $200. ($250 tax credit + $50 buyback
consideration - $100 purchase price). AB 232 provides a
credit limitation of $1,000 per taxable year, which would
allow a taxpayer to repeat the process twelve times during
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the course of the program.
f) Lack of Clarity : AB 232 fails to provide definitions
for a handgun, shotgun, rifle, or assault weapon. Though
it may be easy to distinguish between a handgun and a
shotgun, it may not be as easy to distinguish between a
rifle and an assault weapon. The lack of definitions may
cause confusion as to the amount of tax credit a taxpayer
is entitled to claim. Additionally, this bill requires
that the weapon be in working condition. However, it is
unclear as to how law enforcement will verify the working
condition of a firearm when it is surrendered during a
buyback program.
g) Unintended Consequences : The Los Angeles Police
Department held a gun buyback program late last year,
giving $100 for handguns, rifles, and shotguns, and $200
for an assault weapons. One of the best ways of
encouraging criminals to surrender their weapons is by
advertising a "No Questions Asked" policy. This encourages
individuals to turn in weapons that may have been used
during the commission of a crime. Two provisions in this
bill may discourage criminals from coming forward. First,
this bill requires a taxpayer to keep a record of the
weapons surrendered during a gun buyback program. AB 232
also requires a taxpayer to furnish those records to FTB
upon request. Criminals generally do not want to keep a
record of the weapons they have used during the commission
of a crime, much less provide that information to a state
tax agency. Second, criminals are unlikely to file taxes.
This is because stolen money, though income, is not
generally reported to the Internal Revenue Service or the
FTB. As such, criminals may not be able to take advantage
of a tax credit. It seems that under the provisions of
this bill, criminals may be discouraged from surrendering
weapons that have been used during the commission of a
crime.
h) Alternatives : The author states the goal of this bill
is to remove guns from circulation by incentivizing
participation in gun buyback programs. Though this bill's
tax credit attempts to achieve the goal, the revenue loss
associated with this tax credit may be better utilized by
having the state simply appropriate funds directly to the
gun buyback programs.
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i) Double-referral : This bill was double-referred to the
Assembly Committee on Public Safety, and passed out of the
Committee on a 5 - 2 vote on April 16, 2013. For
additional discussion of this bill's provisions, please
refer to that committee's analysis.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Carlos Anguiano / REV. & TAX. / (916)
319-2098