BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 428|
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THIRD READING
Bill No: AB 428
Author: Nazarian (D)
Amended: 8/31/15 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 7/1/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley
NOES: Moorlach
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
ASSEMBLY FLOOR: 78-0, 6/1/15 - See last page for vote
SUBJECT: Income taxes: credit: seismic retrofits
SOURCE: Author
DIGEST: This bill allows a credit equal to 30% of a qualified
taxpayer's qualified costs incurred for seismic retrofit
construction.
ANALYSIS:
Existing law:
1)Allows various income tax credits, deductions, and sales and
use tax exemptions to provide incentives to compensate
taxpayers that incur certain expenses, such as child adoption,
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or to influence behavior, including business practices and
decisions, such as research and development credits.
2)Requires the Department of Finance is required to annually
publish a list of tax expenditures.
3)Requires the reassessment of property, based on the fair
market value, upon a change in ownership, or on new
construction. The determination of fair market value is known
as the base year value and is adjusted annually for inflation,
which may not exceed 2% per year. Newly constructed or new
construction includes additions to the real property, or the
alteration of the real property that amounts to a
rehabilitation or conversion of the property to a different
use since the preceding lien date.
4)Requires assessors to determine the added value of the new
construction when completed and add that amount to the
assessed value of the property. In general, if the new
construction replaces existing improvements, the value
attributable to the existing improvements is deducted from the
base year value of the property.
5)Excludes from the definitions of newly constructed and new
construction, the construction or reconstruction of seismic
retrofitting components of an existing structure.
This bill:
1)Allows a credit equal to 30% of a qualified taxpayer's
qualified costs incurred for seismic retrofit construction.
Allows a credit amount allowed of one-fifth of the credit
amount for the taxable year in which the credit is allowed,
and one-fifth of the credit amount for each of the subsequent
four taxable years. For purposes of computing the credit, the
qualified costs shall be reduced by any grant provided by a
public entity for the seismic retrofit construction.
2)Caps the total credit amount available to $12 million per
year, plus any carryover of unused funds from the prior year.
3)Requires a qualified taxpayer to obtain certification from the
appropriate jurisdiction with authority for building code
enforcement, upon a review of the building, that the completed
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construction satisfies the definition of seismic retrofit
construction. The certification shall identify what part of
the completed construction, if any, is not seismic retrofit
construction. Each jurisdiction with authority for building
code enforcement in which a qualified building is located must
enter into an agreement with the state to provide
certifications and to not seek reimbursement for any costs
incurred in providing those certifications. A taxpayer must
then request and be granted an allocation of the credit from
the Franchise Tax Board (FTB). To request an allocation, the
taxpayer must sign and submit to FTB an application to receive
a credit for the retrofit construction, and provide a copy of
the certification. Upon receipt of the application and
certification, FTB shall notify the taxpayer of the amount of
credit allocated. Upon request of FTB, the qualified taxpayer
must provide a copy of the certification to FTB.
4)Defines a qualified taxpayer as an owner of a qualified
building located in California. A taxpayer that owns a
proportional share of a qualified building may claim the
credit based on the taxpayer's share of the qualified costs.
5)Defines qualified costs are defined as costs paid or incurred
by the qualified taxpayer for any completed seismic retrofit
construction on a qualified building, including any
engineering or architectural design work necessary to permit
or complete the seismic retrofit construction. Qualified
costs shall not include any of the following:
Maintenance, including abatement of deferred or
inadequate maintenance, and correction of violations
unrelated to the seismic retrofit construction;
Repair, including repair of earthquake damage;
Seismic retrofit construction required by local building
codes as a result of addition, repair, building relocation,
change of use, or occupancy;
Other work or improvement required by local building or
planning codes as a result of the intended seismic retrofit
construction;
Rent reductions or other associated compensation,
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compliance actions, or other related coordination involving
the qualified taxpayer and any other party, including a
tenant, insurer, or lender;
Replacement of existing building components, including
equipment, except as needed to complete the seismic
retrofit construction;
Bracing or securing nonpermanent building contents;
The offset of costs, reimbursements, or other costs
transferred from the qualified taxpayers to others; or,
Amounts paid to the jurisdiction with authority for
building code enforcement for issuing the certification
required by this bill.
1)Defines seismic retrofit construction as alteration of a
qualified building or its components to substantially mitigate
seismic damage. Seismic retrofit construction refers only to
work performed voluntarily, and for which qualified costs were
paid or incurred, on or after January 1, 2016. Seismic
retrofit construction shall include the following:
Anchoring the structure to the foundation;
Bracing cripple walls;
Bracing hot water heaters;
Installing automatic gas shutoff valves;
Repairing or reinforcing the foundation to improve the
foundation's integrity against seismic damage;
Anchoring fuel storage; and,
Installing an earthquake-resistant bracing system for
mobile homes registered with the California Department of
Housing and Community Development.
1)Defines a qualified building as a building that has been
certified as an at-risk property by the local building code
enforcement for the area within which the building is located.
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A qualified building specifically includes a mobile home
registered by the Department of Housing and Community
Development.
2)Defines an at-risk property as a building deemed hazardous and
in danger of collapse in the event of a catastrophic
earthquake, including soft story buildings, non-ductile
concrete residential buildings, and pre-1994 concrete
residential buildings.
3)Takes effect immediately, and applies to taxable years
beginning on or after January 1, 2017, and before January 1,
2022.
Comments
1)Author's statement. According to the author, "AB 428
accomplishes three goals; it saves lives, protects property,
and creates jobs. The recent earthquakes, which shook
Southern California cities in 2014, remind us that an
earthquake can strike at any given moment and it is imperative
that we ensure our structures are suitable to withstand a
catastrophic earthquake. According to the Southern California
Earthquake Center, California has a 99.7% chance of having a
magnitude 6.7 or larger earthquake during the next 30 years,
and the likelihood of an even more powerful quake of magnitude
7.5 or greater in the next 30 years is 46%. It is imperative
that we take every precaution to make sure that human life and
property is saved in the event of a catastrophic earthquake.
This measure will improve California's resilience against
earthquakes, saving the public money that would otherwise have
been required for disaster relief."
2)Lifesaver. According to the United States Geological Survey,
there is a 99.7% chance that a major earthquake of 6.7 in
scale will strike California in the next 30 years. This
bill's tax credit is designed to lower the overall cost for
property owners to improve the seismic safety of their
buildings. Improving the seismic safety of homes and
apartment buildings could save countless lives in the event of
a catastrophic earthquake, and would reduce the demand for
state and local emergency services by hopefully minimizing
structural damage. Older concrete structures are particularly
vulnerable to earthquake damage; last year, the author noted
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that recent research has identified 1,500 concrete buildings
that are seismically vulnerable in the Los Angeles area alone.
Prior Legislation
AB 1510 (Nazarin), of the 2013-14 Regular Session, would have
allowed a credit equal to 30% of a "qualified taxpayer's"
"qualified costs" incurred for "seismic retrofit construction".
AB 1510 was held on the Assembly Appropriations Committee's
Suspense File.
AB 1756 (Scott), of the 1999-2000 Regular Session, would have
allowed a credit equal to 55% of the amount incurred for seismic
retrofit construction on residential dwellings built prior to
1979. AB 1756 was held on the Assembly Appropriations
Committee's Suspense File.
SB 677 (McPherson), of the 2001-02 Regular Session, would have
allowed a credit equal to an unspecified percentage of the final
cost of seismic retrofitting, as specified. SB 677 was never
heard by the Senate Committee on Revenue and Taxation.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
1)The Franchise Tax Board (FTB) estimates that the bill would
result in General Fund revenue losses of $700,000 in 2016-17,
$2.7 million in 2017-18, and $4.6 million in 2018-19.
2)FTB staff estimate that the bill would result in increased
costs of $255,000 in 2015-16 and $128,000 annually thereafter
(General Fund), resulting from new administration and
information technology workload.
The Senate Appropriations Committee amendments require the bill
to state the specific goals and objectives of the tax credit.
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SUPPORT: (Verified8/28/15)
Apartment Association of Greater Los Angeles
Apartment Association of Orange County
Building Owners and Management Association of Los Angeles
California Apartment Association
California League of Cities
California Southern Cities Apartment Association
City of Berkeley
City of Burbank
City of Long Beach
City of Los Angeles
City of Martinez
City of West Hollywood
Coalition for Economic Survival
East Bay Rental Housing Association
Los Angeles Business Council Institute
League of California Cities
Mayor of Berkeley
Mayor of Los Angeles
Mayor of Oakland
Mayor of San Francisco
Mayor of Santa Monica
Nor Cal Rental Property Association
North Valley Property Owners Association
Rent Stabilization Board of the City of Berkeley
San Diego Apartment Association
Santa Barbara Rental Property Association
Sonoma County Board of Supervisors
State Farm Insurance
Structural Engineers Association of California
Western Center on Law & Poverty
Western Manufacturing Housing Communities Association
OPPOSITION: (Verified8/28/15)
None received
ARGUMENTS IN SUPPORT: The supporters of this bill argue
that this bill will help alleviate the difficulty of making
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seismic improvements to buildings by defraying the cost. Making
seismic improvements to buildings will help save countless lives
when the next earthquake hits California.
ASSEMBLY FLOOR: 78-0, 6/1/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gordon, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NO VOTE RECORDED: Gonzalez, Obernolte
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
8/31/15 15:41:56
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