BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                AB 922
                                                                Page  1

        CONCURRENCE IN SENATE AMENDMENTS
        AB 922 (Maienschein)
        As Amended  June 25, 2014
        Majority vote.  Tax levy
         
         
         ---------------------------------------------------------------------- 
        |ASSEMBLY: |     |(May 29, 2013)  |SENATE: |36-0 |(August 11, 2014)    |
         ---------------------------------------------------------------------- 
             (vote not relevant)


         ------------------------------------------------------------------------ 
        |COMMITTEE VOTE:  |8-0  |(August 27, 2014)   |RECOMMENDATION: |concur    |
        |(Rev. and Tax.)  |     |                    |                |          |
        |                 |     |                    |                |          |
         ------------------------------------------------------------------------ 
        Original Committee Reference:   U. & C.

        SUMMARY  :  Extends specified disaster loss treatment to losses  
        sustained in the County of San Diego as a result of the wildfires  
        that occurred in May 2014.

         The Senate amendments  delete the Assembly version of this bill, and  
        instead:

        1)Provide that Internal Revenue Code (IRC) Section 165(i) shall  
          apply to any losses sustained in the County of San Diego as a  
          result of the wildfires that occurred in May 2014.  

        2)Provide that, for the losses specified above, 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 for the taxable  
          year in which the disaster occurred.  

        3)Provide that, unless specifically provided otherwise, any law  
          that suspends, defers, reduces, or otherwise diminishes the  
          deduction of a net operating loss (NOL) shall not apply to a NOL  
          attributable to a loss described above.  

        4)Contain a legislative finding that this bill fulfills a statewide  
          purpose.  

        5)Provide that this bill shall take immediate effect as a tax levy.  
           








                                                                AB 922
                                                                Page  2


         EXISTING LAW  :  

        1)Provides for a deduction and the carryover to specified taxable  
          years of specified losses sustained as a result of certain  
          disasters occurring in California in an area determined by the  
          United States President to warrant specified federal assistance  
          or proclaimed by the Governor to be in a state of emergency.  

        2)Allows a taxpayer to elect to deduct those disaster losses on the  
          return for the taxable year preceding the taxable year in which  
          the disaster occurred.  

         AS PASSED BY THE ASSEMBLY  , this bill required the California Public  
        Utilities Commission to authorize an electrical or gas corporation  
        to verify, by the submission of proof of income, the continuing  
        eligibility of a participant in the California Alternate Rates for  
        Energy (CARE) program regardless of the means by which the  
        participant was first enrolled in the CARE program.  

         FISCAL EFFECT  :  The Franchise Tax Board estimates that this bill  
        will reduce General Fund revenues by $7,000 in fiscal year (FY)  
        2013-14, by $3,000 in FY 2014-15, and by $3,000 in FY 2015-16.   

         COMMENTS  :  The author has provided the following statement in  
        support of this bill:

             May 5, 2014 marks the beginning of what could possibly  
             be one of the most devastating fire seasons in San  
             Diego County.  In nearly three weeks, roughly 29,000  
             acres burned across the county from 19 separate fires.  
             Conditions were intensified by high temperatures and  
             the Santa Ana winds.  

             It has been estimated that these fires have cost  
             nearly $30 million in damage and destruction to  
             personal and private property and another $30 million  
             to fight the fires. Homes, schools and businesses  
             experienced evacuation, and residents had their lives  
             turned upside down.

             On May 15, 2014 Governor Brown declared a State of  
             Emergency in San Diego County in response to the  
             disastrous string of fires that ripped through the  
             county.       








                                                                AB 922
                                                                Page  3


             AB 922 will allow residents of San Diego County that  
             suffered losses to their homes and businesses during  
             the wildfires of May 2014 to elect to claim a  
             deduction for those losses on the previous year's tax  
             return by filing an amended return of that year's  
             taxes resulting in an expedited payment for their  
             losses.
              
        Assembly Revenue and Taxation Committee comments:

        The San Diego wildfires:  On May 13, 2014, wildfires broke out in  
        the County of San Diego, eventually burning several thousand acres.  
         These fires destroyed structures, including homes, and damaged  
        critical infrastructure, necessitating the evacuation of thousands  
        of residents.  Thus, on
        May 14, 2014, Governor Brown issued a state of emergency  
        proclamation for the County of San Diego.

        Casualty losses vs. disaster losses:  Under both federal and state  
        law, a casualty loss is defined as the damage, destruction, or loss  
        of property resulting from an identifiable event that is sudden,  
        unexpected, or usual.  A disaster loss, on the other hand, occurs  
        when business or personal property is partially or completely  
        destroyed by a fire, storm, flood, or other natural event in an  
        area declared to be a disaster by the President of the United  
        States.  
         
         Special tax treatment provided automatically for disaster losses:   
        In the case of disaster losses, a taxpayer may elect to file an  
        amended return to deduct the loss in the taxable year prior to the  
        taxable year in which the disaster loss actually occurred,  
        resulting in an expedited refund.  This election may be made for  
        any Presidentially-declared disaster prior to passage of any state  
        legislation allowing this treatment because California conforms to  
        federal disaster tax law treatment.  The election is not available,  
        however, for a "Governor-only" declared disaster, unless special  
        state legislation is enacted. 

        For disasters that were the subject of a Governor's proclamation,  
        but not the subject of a presidential disaster declaration,  
        enactment of state law identifying a specific event as a disaster  
        for state tax law purposes authorizes impacted taxpayers to elect  
        to deduct disaster losses on the return for the prior taxable year.  
         








                                                                AB 922
                                                                Page  4

        This bill:  This bill would apply the provisions of IRC Section  
        165(i) to losses sustained in the County of San Diego as a result  
        of the May 2014 wildfires.  IRC Section 165(i), in turn, provides  
        that any loss attributable to a federally declared disaster may, at  
        the taxpayer's election, be taken into account for the taxable year  
        immediately preceding the taxable year in which the disaster  
        occurred.  As the author notes, this would allow for expedited  
        refund payments to impacted taxpayers.  This bill further specifies  
        that this election may be made on a return or amended return filed  
        on or before the due date of the return for the taxable year in  
        which the disaster occurred.  These provisions would apply to  
        taxpayers under both the Personal Income Tax Law and the  
        Corporation Tax Law.       


         Analysis Prepared by  :    M. David Ruff / REV. & TAX. / (916)  
        319-2098                                                


                                                                FN: 0005532