BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 232
                                                                  Page  1

          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