BILL ANALYSIS Ó
AB 54
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Date of Hearing: May 11, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 54
(Olsen) - As Amended April 22, 2015
Majority vote. Fiscal committee. Tax levy.
SUBJECT: Public accommodations: construction-related
accessibility standards: tax credit.
SUMMARY: Modifies the Disability Access for Eligible Small
Business Credit (Disabled Access Credit) to include the amount
paid or incurred for a site to be inspected by a certified
access specialist (CAS). Specifically, this bill:
1)Modifies, for taxable years beginning on or after January 1,
2016, under the Personal Income Tax (PIT) and Corporations Tax
(CT) Law, the Disability Access credit to include the amount
paid or incurred for a site to be inspected by a CAS.
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2)Defines the terms "CAS," "inspected by a CAS," and "site" as
having the same meaning as provided for by Civil Code Section
55.52.
3)Makes findings and declarations.
4)Takes effect immediately as a tax levy.
EXISTING FEDERAL LAW:
1)Allows a credit to eligible small businesses related to costs
paid or incurred for complying with the Americans with
Disabilities Act (ADA). An eligible small business means an
electing taxpayer with either gross receipts for the preceding
taxable year of $1 million or less, or not more than 30
full-time employees during the preceding taxable year. The
credit is computed as 50% of the eligible access expenditures
for the taxable year in excess of $250 but not more than
$10,250.
2)Provides that eligible access expenditures must be made to
enable the qualified small business to comply with the ADA
requirements, including costs to remove the architectural,
communication, physical, or transportation barriers of persons
with disabilities. Costs also include qualified interpreters
or equipment to make materials available to person with
hearing impairments, costs of qualified readers or equipment
to make material available to persons with visual impairments,
and costs to acquire or modify equipment for persons with
disabilities.
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3)Provides that the tax credit may be used against the net tax
of the taxpayer and the excess, while not refundable, is
available for carryback to the immediately preceding tax year
and may be carried forward to the following 20 taxable years
or until exhausted. Taxpayers may not increase the adjusted
basis of property or claim any deduction for eligible access
expenditures that qualify for the credit.
EXISTING STATE LAW:
1)Allows, in modified conformity to federal law, a tax credit
for the amount paid or incurred by eligible small business for
the improvements to the property in order to provide access to
disabled individuals of up to 50% of the eligible access
expenditures for the taxable year, but not to exceed $250.
The maximum allowed to a small business is $125.
2)Defines a "CAS" as a person that has met the certification
requirements as provided for by the State Architect.
FISCAL EFFECT: The Franchise Tax Board (FTB) estimate General
Fund revenue loss of $1,000 in fiscal year (FY) 2015-16, $4,000
in FY 2016-17, and $4,000 in FY 2017-18.
COMMENTS:
1)Arguments in Support : According to the California Chamber of
Commerce, "small businesses have, unfortunately, been targeted
by a limited group of attorneys to leverage extortion-type
settlements for technical construction-related standards,
which do not actually impeded physical access to the facility
for disabled patrons. For example, the California Commission
on Disability Access has a top 10 list of construction-related
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accessibility claims set forth in demand letters or
complaints, which includes alleged violations for failure to
have the appropriate signage or symbol. Such violations do
not necessarily impede physical access to the facility and
could easily be resolved. However, businesses are pressured
into paying settlements for these lawsuits instead of focusing
their financial resources on improving access at their place
of business."
2)Tax Expenditure vs. Direct Expenditure : Existing law provides
various credits, deductions, exclusions, and exemptions for
particular taxpayer groups. In the late 1960s, U.S. Treasury
officials began arguing that these features of the tax law
should be referred to as "expenditures" 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). Former Federal Reserve Chairman Alan
Greenspan has stated that tax expenditures are "misclassified"
because they are identical to outlays. Additionally, Gregory
Mankiw, who led President George W. Bush's Council of Economic
Advisers, calls expenditures "stealth spending implemented
through the tax code."<1>
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. While this affords
taxpayers greater financial predictability, 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
--------------------------
<1> Ezra Klein, Wonkbook: Tax Spending vs. Government Spending,
Washington Post, 2012.
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existing tax expenditure absent a sunset date, effectively
resulting in a "one-way ratchet" whereby tax expenditures can
be conferred by a majority vote, but cannot be rescinded,
irrespective of their cost or efficacy, without a
supermajority vote. This bill creates an appropriation of
funds, in the form of a tax credit, as a way of encouraging
individuals to move forward with a site inspection.
3)Certified Access Specialist Program (CASP) : The CASP was
created by SB 262 (Kuehl), Chapter 872, Statutes of 2003, and
is designed to meet the public's need for experienced,
trained, and tested individuals who can inspect buildings and
sites for compliance with applicable state and federal
construction accessibility standards. Federal and state
disability laws are considered to be complicated and the CASP
helps businesses become aware of potential violations. After
reaching out to several certified specialists, it was found
that a site inspection can cost anywhere between $500 and
$3,000, depending on the workload. Some inspections are
conducted early in the designs and construction process but
others are conducted post-construction because of litigation
or fear of litigation.
4)Encouraging Compliance : It is unclear to Committee staff if a
nominal amount of $125 will have the desired effect of
encouraging compliance with federal and state disability laws.
As noted above, inspections can cost upwards of $3,000, and
several certified specialists cited $1,500 as the average cost
for an inspection. The $125 tax credit would be less than 10%
of the average cost of inspecting a facility. Additionally,
individuals may not be aware that a credit exists. According
to the FTB, in 2012 taxpayers claimed a total of $40,000 in
Disability Access Credits. If awareness is an issue,
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taxpayers may be less likely to be influenced by a tax credit,
irrespective of the amount. Finally, according to several
specialists, conducting a site inspection does not always lead
to greater compliance. The cost may be too expensive for the
owner to comply with recommendations, even though the
modifications could qualify the taxpayer for a maximum federal
Disability Access Credit of $5,125. As a result,
accessibility is not always improved. If anything, having the
site inspected by a CAS may serve only to put the owner on
notice that the property fails to meet disability access
standards.
5)Ignorance of the Law Excuses No One : When opening a business,
an individual must become knowledgeable of extremely
complicated areas of the law: environmental, employment,
privacy, worker safety, health, intellectual property,
advertising, and tax law to name a few. Despite the broad
range of local, state, and federal laws effecting business
owners, the legal system is based on the principle that
ignorance of the law excuses no one. If ignorance was an
excuse, individuals charged with criminal offenses or subject
to civil suits could escape liability by claiming ignorance.
The principal also holds that a person engaged in an activity
outside what is common must make themselves aware of the law
that is necessary to engage in that activity. Furthermore,
the government does not, in general, subsidize a business
owner's education of relevant laws. The government does not
pay for a tax attorney to advise a business owner on how to
properly structure his/her company, nor does the government
pay for a certified public account to certify that a business
owner's financial statements comply with generally accepted
accounting principles. As such, the Committee may wish to
consider whether it is appropriate to subsidize the education
of relevant disability access laws, especially since it may
not actually lead to greater disability access.
6)Double Referral : This bill was double-referred to the
Assembly Committee on Judiciary, which passed this bill on
April 21, 0215, with a vote of 10-0. For additional
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discussion of this bill, please refer to the analysis prepared
by the Assembly Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION:
Support
Auburn Chamber of Commerce
Building Owners and Managers Association California
California Apartment Association
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Restaurant Association
Camarillo Chamber of Commerce
Chamber of Commerce Alliance Ventura and Santa Barbara Counties
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Chamber of Commerce Mountain View
Chamber of the Santa Barbara Region
Civil Justice Association of California
Fairfield-Suisun City Chamber of Commerce
Fullerton Chamber of Commerce
Goleta Chamber of Commerce
Greater Fresno Area Chamber of Commerce
Half Moon Bay Coastside Chamber of Commerce
International Council of Shopping Centers
Lake Tahoe South Shore Chamber of Commerce
Lodi Chamber of Commerce
NAIOP - Commercial Real Estate Development Association
North Lake Tahoe Chamber of Commerce
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Oxnard Chamber of Commerce
Palm Desert Area Chamber of Commerce
Rancho Cordova Chamber of Commerce
Redondo Beach Chamber of Commerce & Visitors Bureau
San Diego County Apartment Association
San Diego Regional Chamber of Commerce
Simi Valley Chamber of Commerce
South Bay Association Chambers of Commerce
Southwest California Legislative Council
Torrance Area Chamber of Commerce
Opposition
None on file
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Analysis Prepared by:Carlos Anguiano / REV. & TAX. / (916)
319-2098