BILL ANALYSIS �
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THIRD READING
Bill No: AB 458
Author: Wieckowski (D)
Amended: As introduced
Vote: 27
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-2, 8/14/13
AYES: Wolk, Beall, DeSaulnier, Hernandez
NOES: Knight, Emmerson
NO VOTE RECORDED: Liu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 54-25, 6/27/13 - See last page for vote
SUBJECT : Income taxes: deductions: punitive damages
SOURCE : Author
DIGEST : This bill prohibits, on or after January 1, 2014,
taxpayers from claiming a deduction for amounts paid for
punitive damages, and provides that no deductions shall be
allowed for any amount paid or incurred for punitive damages in
connection with any judgment in, or settlement of, any action.
ANALYSIS : Existing law authorizes individuals and
corporations to file tax deductions for the payment of monetary
damages in legal cases. Under existing law plaintiffs can seek
"punitive" or "exemplary" damages in legal cases where the
defendant is guilty of "oppression, fraud, or malice."
CONTINUED
AB 458
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This bill:
1. Prohibits, on or after January 1, 2014, taxpayers from
claiming a deduction for amounts paid for punitive damages.
2. Provides that no deductions shall be allowed for any amount
paid or incurred for punitive damages in connection with any
judgment in, or settlement of, any action.
3. Applies to taxable years beginning on or after January 1,
2014, and takes effect immediately as a tax levy.
Comments
California courts hold that punitive damages punish the
defendant and deter similar conduct. The goal of deterrence of
similar conduct is both for the specific defendant who may
repeat or continue offensive behavior and to other potential
parties who may commit similar offenses. Punitive damages are
not intended to compensate a plaintiff unlike compensatory
damages, which are intended for compensation.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/20/13)
AFCME
California Church Impact
California Employment Lawyers Association
California Labor Federation
California Nurses Association
California Professional Firefighters
California School Employees Association, AFL-CIO
California Tax Reform Association
Consumer Federation of California
Disability Rights California
Mexican American Legal Defense and Educational Fund
Public Advocates
SEIU
Western Center on Law and Poverty
OPPOSITION : (Verified 8/20/13)
AB 458
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California Association for Health Services at Home
California Taxpayers Association
Construction Employers' Association
ARGUMENTS IN SUPPORT : According to the author, "Punitive
damage should not be tax-deductible as 'ordinary and necessary'
business expenses. Punitive damages are not like salaries,
equipment or operating expenses. They are penalties for the
most reprehensible violations of our laws, which are neither
ordinary nor necessary. Punitive damages are financial
penalties that are intended to serve the same purpose as
criminal fines and statutory penalties, which are not
deductible. (See 26 U.S.C. �162(f).) No other type of fine or
penalty gets a tax deduction. Punitive damages should not get a
tax break either."
ARGUMENTS IN OPPOSITION : Opponents argue that when businesses
are guilty of fraud, negligence, or malpractice, they should be
held responsible; but when consumers abuse the legal system for
personal profit, the deduction that this bill seeks to eliminate
ensures that businesses are treated equitably and have the
ability to pay their costs. As long as unpredictable punitive
damages can be awarded - without proof beyond a reasonable doubt
of intentional misconduct and without any statutory protection
against excessive or repetitive punishment, the deduction for
punitive damages payments is justified.
ASSEMBLY FLOOR : 54-25, 6/27/13
AYES: Alejo, Ammiano, Atkins, Bloom, Blumenfield, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chesbro, Cooley, Daly, Dickinson, Eggman, Fong,
Fox, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray,
Hall, Roger Hern�ndez, Holden, Jones-Sawyer, Levine,
Lowenthal, Medina, Mitchell, Mullin, Muratsuchi, Nazarian,
Pan, Perea, V. Manuel P�rez, Quirk, Quirk-Silva, Rendon,
Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams,
Yamada, John A. P�rez
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Dahle,
Donnelly, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones,
Linder, Logue, Maienschein, Mansoor, Melendez, Morrell,
Nestande, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Vacancy
AB:d 8/21/13 Senate Floor Analyses
AB 458
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SUPPORT/OPPOSITION: SEE ABOVE
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