BILL ANALYSIS Ó
AB 428
Page 1
GOVERNOR'S VETO
AB
428 (Nazarian)
As Enrolled September 11, 2015
2/3 vote
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|ASSEMBLY: | 78-0 |(June 1, 2015) |SENATE: |38-1 | (September 8, |
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|ASSEMBLY: | 77-0 |(September 9, | | | |
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Original Committee Reference: REV. & TAX.
SUMMARY: Allows a credit equal to 30% of a "qualified
taxpayer's" "qualified costs" incurred for "seismic retrofit
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construction," as specified.
The Senate amendments:
1)Delay operation of the tax credit program by one year.
Specifically, the tax credit shall be allowed for taxable
years beginning on or after January 1, 2017, and before
January 1, 2022.
2)Provide that, to be eligible for the credit, the qualified
taxpayer must 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 the FTB an
application to receive a credit for the seismic retrofit
construction
3)Provide that the total amount of credit that may be allocated
under this program shall not exceed the sum of the following:
a) $12 million for the 2017 calendar year and each calendar
year thereafter; and,
b) The amount of previously unallocated credits.
4)Require the FTB to allocate the credit on a
first-come-first-served basis.
5)Require the taxpayer to claim the credit on a timely filed
original return.
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6)Authorize the FTB to prescribe rules, guidelines, or
procedures necessary to carry out the purposes of the program.
7)Add relevant findings and declarations to comply with Revenue
and Taxation Code (R&TC) Section 41.
8)Make technical corrections.
9)Add coauthors.
AS PASSED BY THE ASSEMBLY, this bill:
1)Allowed the credit for taxable years beginning on or after
January 1, 2016, and before January 1, 2021.
2)Defined 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."
3)Defined "qualified costs" 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:
a) Maintenance, including abatement of deferred or
inadequate maintenance, and correction of violations
unrelated to the "seismic retrofit construction";
b) Repair, including repair of earthquake damage;
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c) "Seismic retrofit construction" required by local
building codes as a result of addition, repair, building
relocation, change of use, or occupancy;
d) Other work or improvement required by local building or
planning codes as a result of the intended "seismic
retrofit construction";
e) Rent reductions or other associated compensation,
compliance actions, or other related coordination involving
the qualified taxpayer and any other party, including a
tenant, insurer, or lender;
f) Replacement of existing building components, including
equipment, except as needed to complete the "seismic
retrofit construction";
g) Bracing or securing nonpermanent building contents;
h) The offset of costs, reimbursements, or other costs
transferred from the qualified taxpayers to others; or,
i) Amounts paid to the jurisdiction with authority for
building code enforcement for issuing the certifications
required by this bill.
4)Defined "seismic retrofit construction" as alteration of a
"qualified building" or its components to substantially
mitigate seismic damage. Seismic retrofit construction shall
be for work performed voluntarily, and for which qualified
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costs were paid or incurred, on or after January 1, 2016.
Seismic retrofit construction shall include the following:
a) Anchoring the structure to the foundation;
b) Bracing cripple walls;
c) Bracing hot water heaters;
d) Installing automatic gas shutoff valves;
e) Repairing or reinforcing the foundation to improve the
foundation's integrity against seismic damage;
f) Anchoring fuel storage; and,
g) Installing an earthquake-resistant bracing system for
mobile homes registered with the Department of Housing and
Community Development.
5)Provided that seismic retrofit construction does not include
construction performed to bring a building into compliance
with local building codes.
6)Defined a "qualified building" as a building that has been
certified as an "at-risk property," as specified. A qualified
building specifically includes a mobile home registered by the
Department of Housing and Community Development.
7)Defined 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, nonductile
concrete residential buildings, and pre-1994 concrete
residential buildings.
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8)Provided that, to be eligible for the credit, the following
must apply:
a) The qualified taxpayer must obtain certification, prior
to construction, that the building is an at-risk property.
b) The qualified taxpayer must obtain certification from
the appropriate jurisdiction with authority for building
code enforcement, upon a review of the building, that the
completed 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. Upon request of the FTB,
the qualified taxpayer must provide a copy of the
certification to the FTB.
c) The jurisdiction with authority for building code
enforcement in which a qualified building is located has
entered into an agreement with the state to provide
certifications and to not seek reimbursement for any costs
incurred in providing those certifications.
9)Required the credit amount allowed to be claimed by a
qualified taxpayer at the rate 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.
10)Provided that, in cases where the credit amount exceeds the
taxpayer's tax liability, the excess credit amount may be
carried over to the following taxable year, and succeeding
four taxable years, until the credit has been exhausted.
11)Provided that, 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.
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12)Provided that this credit shall be in lieu of any other
credit or deduction that the qualified taxpayer may otherwise
claim with respect to qualified costs.
13)Allowed the credit under both the Personal Income Tax Law and
the Corporation Tax Law.
14)Provided that R&TC Section 41 shall not apply to the credit.
15)Took immediate effect as a tax levy.
16)Sunset the credit provisions on December 1, 2021.
FISCAL EFFECT: According to the Senate Appropriations
Committee:
1)The FTB estimates that this 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 this 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.
COMMENTS:
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1)The author has provided the following statement in support of
this bill:
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)Revenue and Taxation Committee Comments:
a) What would this bill do? This bill would allow a credit
equal to 30% of a qualified taxpayer's qualified costs
incurred for seismic retrofit construction. 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. Proponents
note that such action, in turn, 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
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damage; last year, the author noted that recent research
has identified 1,500 concrete buildings that are
seismically vulnerable in the Los Angeles area alone.
GOVERNOR'S VETO MESSAGE:
I am returning the following nine bills without my signature:
Assembly Bill 35
Assembly Bill 88
Assembly Bill 99
Assembly Bill 428
Assembly Bill 437
Assembly Bill 515
Assembly Bill 931
Senate Bill 251
Senate Bill 377
Each of these bills creates a new tax credit or expands an
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existing tax credit.
Despite strong revenue performance over the past few years, the
state's budget has remained precariously balanced due to
unexpected costs and the provision of new services. Now,
without the extension of the managed care organization tax that
I called for in special session, next year's budget faces the
prospect of over $1 billion in cuts.
Given these financial uncertainties, I cannot support providing
additional tax credits that will make balancing the state's
budget even more difficult. Tax credits, like new spending on
programs, need to be considered comprehensively as part of the
budget deliberations.
Analysis Prepared by:
M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0002532